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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
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, 1999
OR
[_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-1153
NEWMONT MINING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-1806811
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1700 LINCOLN STREET
DENVER, COLORADO 80203
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
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
------------------- -----------------------------------------
<S> <C>
Common Stock, $1.60 par Value New York Stock Exchange
Paris Bourse
Swiss Stock Exchange
Brussels 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 2, 2000 was approximately $3,619,800,000.
The number of shares of Registrant's common stock outstanding on March 2,
2000 was 167,789,621.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's annual report to Stockholders for the year ended
December 31, 1999 are incorporated by reference into Parts I, II and IV of
this report and portions of Registrant's definitive proxy statement submitted
to the Registrant's stockholders in connection with its 2000 Annual Meeting to
be held on May 4, 2000 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 of some of these factors see ITEM 1A of
this report.
PART I
ITEM 1. BUSINESS
INTRODUCTION
Newmont Mining Corporation was incorporated in 1921 under the laws of
Delaware and maintains its corporate headquarters in Denver, Colorado. We are
engaged in the production of gold, the exploration for gold and the
acquisition and development of gold properties worldwide. We currently produce
gold from mines in Nevada and California, and, outside of the United States,
from operations in Peru, Indonesia, Mexico and Uzbekistan. In 1999, we also
began production of copper concentrates from a copper/gold deposit at a second
location in Indonesia. See Item 2. Properties for detailed descriptions of
these properties.
We had revenues from gold sales of $1.4 billion in 1999 and $1.45 billion in
1998. Our 1999 net income was $24.8 million, after a non-cash unrealized loss
of $29.1 million for the mark-to-market adjustment on call option contracts.
In 1998, we recorded a net loss of $393.4 million as a result of a $424.7
million write-down of assets impaired at the prevailing low gold prices and a
$32.9 million charge for the effect of an accounting change.
Including our subsidiaries, partnerships and joint ventures, we produced
4.18 million equity ounces of gold in 1999 and 4.07 million equity ounces in
1998. Throughout this report we will use the term "equity ounces" to mean that
portion of gold produced, or included in proven and probable reserves, which
is attributable to our ownership interest.
Approximately 64% of our gold production in 1999 came from U.S. operations
and 36% from foreign operations. In 1999, 55% of our foreign production, or
20% of our total production, was attributable to Minera Yanacocha in Peru. In
1998, 72% of our gold production came from U.S. operations and 28% from
foreign operations. At December 31, 1999, approximately 38% of our total long-
lived assets were related to our foreign operations, with 20% of that total in
Indonesia and 15% in Peru. See Note 17 to the financial statements in the 1999
Annual Report to Stockholders on page 42.
GOLD
Product
Gold has two main categories of use--product fabrication and bullion
investment. Fabricated gold has a variety of end uses, including jewelry,
electronics, dentistry, industrial and decorative uses, medals, medallions and
official coins. End purchasers of official coins and high-karat jewelry
frequently are motivated by investment considerations, so that net private
bullion purchases alone do not represent the total private investment activity
in gold.
Most of our revenue comes from the sale of refined gold into the
international market. The end product at each of Newmont's gold operations,
however, is dore bars. Because dore is an alloy consisting mostly of gold but
also containing silver, copper and other impurities, the dore bars are sent to
refiners to produce bullion that meets the required market standard of 99.95%
pure gold. We have refining agreements with six foreign refiners and no U.S.
refiners. Under the terms of these agreements, the dore bars are refined for a
fee and our share of the refined gold and the separately recovered silver are
credited to our accounts or delivered to third parties, except in the case of
the dore gold produced in Uzbekistan, which is refined at a local refinery and
physically returned to us for shipment to London and sale in the international
markets. If we lost the services of any of our refiners we do not believe that
there would be any adverse effect due to the availability of alternative
refiners, each able to supply all services that we need.
2
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Gold and copper are commingled in the concentrates produced at Batu Hijau in
Indonesia. The gold contained in the concentrates is determined by assay, and
its value is applied against the cost of smelting and refining the copper. The
gold itself is ultimately recovered as the copper is electrolytically refined.
Gold Price
The gold market is characterized by price volatility as illustrated in the
following table of annual high, low and average late fixing prices for gold
per ounce on the London Bullion Market:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
---- ---- ---- -------
<S> <C> <C> <C>
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...................................................... $326 $253 $279
2000 (through March 2).................................... $313 $279 $292
</TABLE>
--------
Source of Data: Metals Week and Reuters.
On March 2, 2000, the late fixing price for gold on the London Bullion
Market was $290 per ounce and the spot market price of gold on the New York
Commodity Exchange was $288 per ounce.
The supply of gold consists of a combination of new production from mining
and stocks of bullion and fabricated gold held by governments, financial
institutions, industrial organizations and private individuals. In recent
years, mine production has accounted for 60%-65% of the total supply of gold.
The price of gold is affected by numerous factors beyond our control. Factors
tending to put downward pressure on the price of gold include:
. sales and leasing of gold reserves by governments and central banks,
.a low rate of inflation and a strong U.S. dollar,
.global and regional depression or reduced economic activity and
.speculative trading.
In the second half of 1997 the price of gold fell sharply, to below $300 per
ounce. The price remained low during 1998 and the first eight months of 1999.
It reached a 20 year low in the summer of 1999 at which time the gold price
was 30% below the average gold price over the three-year period 1994-1996. The
principal reason for the price declines was the 1997 sale by the Australian
Government of gold reserves, followed by the announcement of a proposed large
sale by the Swiss Government of its gold holdings. In addition, in May 1999
Great Britain announced its intention to sell 415 metric tons of gold
(approximately 13.3 million ounces) over a period of years. Extensive producer
hedging during this period, coupled with speculative short selling of the
metal further depressed the price.
On September 26, 1999, fifteen European central banks agreed to limit the
quantity of gold they would sell or lease over the next five years. The
previously announced sales by Great Britain, Switzerland and the Netherlands
were covered by this agreement. The price of gold immediately began a partial
recovery from its 1999 low of $253 per ounce and briefly reached $326 per
ounce in October 1999.
3
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Gold Sales
Our gold sales are generally made at the average 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 17 to the financial statements in the 1999 Annual Report to
Stockholders on page 42 for information regarding major customers and export
sales.
COPPER
Product
Late 1999 saw the first sale of copper concentrates from our Batu Hijau
joint venture in Indonesia. The concentrates, which have the consistency of
fine sand, contain about 30% copper and about 0.42 ounce per ton of gold.
While the revenue from our initial concentrate sale was not significant in
1999, we expect such sales will contribute materially to our cash flow once
the project reaches full production in 2002. We deliver and sell the
concentrates to smelters in Japan, Korea, Australia and Europe. In 2000,
approximately 85% of our production will be sold under long-term contracts,
and the balance on the spot market.
Refined copper, the final product from the treatment of concentrates, is
incorporated into wire and cable products for use in the construction,
electric utility, communication and transportation industries. Copper is also
used in industrial equipment and machinery, consumer products and a variety of
other electrical and electronic applications and is used to make brass.
Materials that compete with copper include aluminum, plastics, stainless steel
and fiber optics.
Copper Price
Refined, or cathode, copper is also an internationally traded commodity. The
price of copper is quoted on the London Metal Exchange in terms of dollars per
metric ton of high grade copper and on the Comex in terms of dollars per pound
of high grade copper. The copper market differs from the gold market in that
copper prices tend to be cyclical and more directly affected by the worldwide
balance of supply and demand. The volatility of the copper market is
illustrated by the following table showing the dollar per pound equivalent of
the high, low and average price of high grade copper on the London Metal
Exchange in each of the last ten years:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
---- ----- ----- -------
<S> <C> <C> <C>
1990.................................................... $1.47 $1.02 $1.21
1991.................................................... $1.20 $0.92 $1.05
1992.................................................... $1.21 $0.89 $1.04
1993.................................................... $0.91 $0.72 $0.81
1994.................................................... $1.40 $0.78 $1.05
1995.................................................... $1.47 $1.23 $1.33
1996.................................................... $1.29 $0.83 $1.04
1997.................................................... $1.23 $0.77 $1.03
1998.................................................... $0.85 $0.65 $0.75
1999.................................................... $0.84 $0.61 $0.71
2000 (through March 2).................................. $0.86 $0.78 $0.82
</TABLE>
--------
Source of Data: Metal Bulletin
On March 2, 2000, the closing spot price of high grade copper on the London
Metal Exchange was equivalent to $0.78 per pound.
4
<PAGE>
HEDGING
Newmont generally sells its production at market prices; however, from time
to time it has used commodity instruments to protect the selling price of
certain anticipated gold production. While Newmont is not currently engaged in
an active hedging program, the Company monitors the market on an ongoing basis
and may periodically elect to enter into hedging transactions. However, the
hedging policy authorized by Newmont's Board of Directors limit total hedging
activity to sixteen million ounces. Forward sales contracts have been utilized
for a portion of its gold production from its Minahasa mine in Indonesia and
from its Nevada operations. Sales of gold under forward sales contracts
represented 3%, 18% and 30% of Newmont's total equity production in 1999, 1998
and 1997, respectively. Sales of gold under forward contracts in 2000 is
expected to be approximately 3% of total equity production. No costs were
incurred for forward sales contracts and there are no margin requirements
related to these contracts. The use of forward sales contracts has protected
against declining gold prices over the past three years, with respect to the
covered ounces. If gold prices rise above $454 per ounce in 2000, Newmont will
not benefit from such higher prices on the 125,000 ounces covered by forward
sales contracts.
Following a decline in gold market prices to $253 per ounce in July 1999,
Newmont entered into two put and call transactions to provide a measure of
price protection. At December 31, 1999, put option contracts on 1.2 million
ounces of gold were outstanding at a strike price of $270 per ounce. Put
option contracts provide Newmont the right, but not the obligation to sell
gold at the specified strike price. Therefore, if the price of gold declines
below $270 per ounce on the contract expiration date, Newmont will have the
right to sell the contracted ounced at $270 per ounce. These contracts were
paid for by selling call option contracts on 2.35 million ounces in 2004
through 2009 at strike prices ranging between $350 and $392 per ounce. Call
option contracts provide the holder the right, but not the obligation to buy
gold from Newmont at the specified strike price. Therefore, if the gold price
is above the strike price on the contract expiration date, the holder may buy
gold from Newmont at the lower strike price. The fair value of the put option
contracts of $37.2 million is amortized over the term on the contracts,
reducing sales revenue. The fair value of the call option contracts, initially
$37.2 million is recorded on the balance sheet, is marked to market each
quarter-end and may fluctuate significantly, primarily depending upon gold
market prices and volatility. If the call option contracts are held to the
expiration date, their fair value will be zero and any prior year unrealized
gains or losses will be reversed. In addition, the initial fair value of $37.2
million will be recognized in sales revenue as the call option contracts
expire, offsetting the cost of the put option contracts. There are no margin
requirements related to these put and call option contracts.
As of December 31, 1999, the following contracts were outstanding:
<TABLE>
<CAPTION>
PURCHASED PUT SOLD CALL
OPTIONS OPTIONS
--------------- ---------------
OUNCES PRICE OUNCES PRICE
--------- ----- --------- -----
<S> <C> <C> <C> <C>
2000............................................ 1,183,333 $270 -- --
2004............................................ -- -- 250,000 $350
2005............................................ -- -- 250,000 $350
2008............................................ -- -- 1,000,000 $386
2009............................................ -- -- 850,000 $385
</TABLE>
Based on estimated annual production of four million ounces, ounces subject
to call option contracts represent approximately 6% of production in each of
2004 and 2005 and 25% and 21% of production in 2008 and 2009, respectively. At
December 31, 1999, the fair value of the put option contracts was $6.0 million
and the fair value of the call option contracts was $82.4 million. At December
31, 1999, a one dollar per ounce increase in the gold price would result in a
$0.23 per ounce decrease in the fair value of put option contracts and a $0.48
per ounce increase in the fair value of the call options contracts.
LICENSES AND CONCESSIONS
Other than operating licenses for our mining and processing facilities,
there are no patents, licenses or franchises material to Newmont's business.
In many foreign countries, however, we conduct our mining and
5
<PAGE>
exploration activities pursuant to concessions granted by, or under contract
with, the host government. These countries include, among others, Indonesia,
Peru and Mexico. The concessions and contracts are subject to the usual
political risks associated with foreign operations. For a more detailed
description of our Indonesian Contracts of Work see page 13 of this report.
CONDITION OF PHYSICAL ASSETS; INSURANCE AND FOREIGN INVESTMENT RISKS
Ours is a capital intensive business, requiring capital investment for the
replacement, modernization or expansion of equipment and facilities, and for
regular maintenance. See "Liquidity and Capital Resources" in Management's
Discussion and Analysis in the 1999 Annual Report to Stockholders on page 23.
We maintain insurance against property loss and business interruption and
insure against risks that are typical in the operation of business in amounts
that we believe to be reasonable. Such insurance, however, contains exclusions
and limitations on coverage, particularly with respect to liability for
environmental impairment.
Some concern always exists with respect to investment in less developed
countries and countries with emerging economies where civil unrest,
nationalist movements, political violence or economic crises are endemic.
These countries may also pose heightened risks of expropriation of assets,
increased taxation and a unilateral modification of concessions and contracts.
We have obtained political risk insurance to cover portions of our investments
in Peru, Indonesia and Uzbekistan against the risk of expropriation, war,
civil unrest and political violence. This insurance is limited to particular
risks 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 any of these countries.
EMPLOYEES
There were 9,300 persons employed by Newmont and its affiliates worldwide at
December 31, 1999 and 5,700 persons employed by Newmont and its affiliates
worldwide at December 31, 1998.
EXPLORATION
We spent $61.8 million in 1999 for exploration and reserve development and
$68.5 million in 1998. For 2000, $69 million is budgeted for exploration.
Exploration work is regularly conducted in areas surrounding our existing
mines for the purpose of locating additional deposits and determining mine
geology. In 1999, nearly one-half of the exploration budget was allocated for
work around existing mine sites.
Our exploration staff consists of 192 geologists, geochemists and
geophysicists employing state-of-the-art technology, including airborne
geophysical data acquisition systems, satellite location devices and field-
portable imaging systems to aid in the location of prospective targets.
We conduct extensive exploration in Nevada where we own or otherwise control
the mineral assets on approximately 1.9 million acres. In 1999, we drilled on
39 distinct targets on 21 separate properties. Exploration efforts in the
Carlin area have been focused on high-grade refractory targets near existing
deposits. Also in 1999, mine geology programs extended the size and quality of
open pit and underground reserves at Carlin.
In Peru, 1999 exploration led to a 60% increase to reserves at Minera
Yanacocha where we have a 51.35% interest. In addition, exploration work on
the Minas Conga project to the northeast of Yanacocha, in which we have a 40%
interest, continued throughout 1999 with an aggressive drilling campaign.
Encouraging porphyry gold-copper mineralization has been identified on two
separate targets. Separately, the Northern Peru Joint Venture, 65% owned by
Newmont, 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, we are active in Southern Peru. Initial exploration work is
underway in these prospective areas and a number of targets have been
outlined.
6
<PAGE>
Elsewhere in South America in 1999, drilling was conducted at the 60% owned
Cangrejos project in Equador to determine the potential of a located deposit
and investigate its metallurgical characteristics. In Brazil, the Gurupi
project, a 50% joint venture, has identified 66.6 million tons of mineralized
gold material at an average grade of 0.041 ounce per ton. Targets were also
being explored in Paraguay.
Newmont's exploration in the Western Pacific focused exclusively on
Indonesia in 1999, within Contract of Work areas on the islands of Sumbawa and
Lombok and the North Lanut project near Minahasa on the island of Sulawesi.
A new area of exploration for Newmont in 1999 was Tanzania, where we
undertook a joint venture in a prospective area near Lake Victoria.
In Uzbekistan, we have a 40% interest in the Angren project. Pre-feasibility
technical studies and negotiations with the Uzbekistan government were
conducted in 1998 but were suspended in late 1999 due to the low price of
gold. Elsewhere in Central Asia work continued on prospects in Kyrgyzstan and
Kazakhstan.
Gold exploration is highly speculative in nature, involves many risks and
frequently is nonproductive. Success in finding new 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 many 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 result in new gold
producing operations.
From time to time we locate a gold deposit which, while economic, does not
meet our investment criteria due to size or location. In 1999, we sold our
interest in the True North exploration property near Fairbanks, Alaska, and
our shareholding in Argentina Gold Corporation, which held a property in the
exploration stage, for an aggregate net gain of $13.6 million.
With respect to development projects that have no operating 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. Feasibility studies are used to
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 and 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 our original estimates. Also,
it is not unusual in new mining operations to experience unexpected problems
and delays during the start-up phase.
ENVIRONMENTAL MATTERS
Domestic Operations
Our 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. We strive to
set industry standards of excellence for our enviromental practices and do not
believe that ongoing compliance with current regulations will have a material
adverse effect on our competitive position. We do not expect any material
impact on our future costs of compliance by reason of existing environmental
regulations. Ongoing costs to comply with environmental obligations have not
been significant to our total operating costs. Since we are not able to pass
on any increases in costs to our customers, new laws and regulations resulting
in higher compliance costs could have an adverse effect on our future
profitability.
7
<PAGE>
We estimate that compliance with federal, state and local regulations
relating to the protection of the environment required capital expenditures of
approximately $2.1 million in 1999 at our domestic operations. We estimate
that we will require approximately $1.6 million of capital expenditures for
environmental compliance in the U.S. in 2000 and annually thereafter.
Our Nevada and California gold mining and processing operations generate
solid waste that is subject to regulation under the federal Resource
Conservation and Recovery Act ("RCRA") and similar laws 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. We are participating in that process. Currently, there is
not a sufficient basis to predict the potential impact on us of such
regulations. Wastes from the "processing" of ores and minerals (including
refining wastes) at our Nevada and California operations are subject to
regulation under Subtitle C of RCRA. We recycle 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 our operations.
Our Nevada and California operations are subject to stringent state
permitting regulations for protection of surface and ground water, as well as
wildlife. Compliance with existing state regulations has not had, and is not
expected to have, a material adverse impact on our 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,
however, 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
future regulations promulgated under the Clean Air Act could increase our
compliance costs for air pollution control.
Reclamation and Remediation of Inactive Sites within the U.S.
We are involved in environmental cleanup obligations arising from past
mining activities at three separate locations. We agreed in a 1992 consent
decree with the State of Colorado to undertake specific remediation work in
the Telluride/Ouray area of Colorado. Remediation work there was completed in
1998 and has met all enviromental standards. If in the future the remediation
work, as completed, does not achieve specific performance objectives, as
defined in the consent decree, the State of Colorado may require us to do
additional work, as specified in the consent decree. We are also defendants in
lawsuits brought by the State of Colorado and the U.S. for environmental
remediation in the Leadville, Colorado area and, since 1995, we have been
engaged in reclamation and remediation activities there pursuant to a partial
consent decree. Dawn Mining Company LLC, 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. At December 31, 1999 on a consolidated basis we
had an aggregate $43.6 million accrued for remediation of these and other
sites, a decrease of $1.3 million accrued at the end of 1998 as a result of
1999 expenditures and changes in estimated future remediation costs. See
"Environmental" in Management's Discussion and Analysis in the 1999 Annual
Report to Stockholders on page 24 and Note 19 to the financial statements in
the 1999 Annual Report to Stockholders on page 44.
Foreign Operations
Our 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 our operations
or our competitive position. We have successfully obtained all permits for all
new mine and processing operations required under regulations promulgated by
the respective national governments in Peru, Uzbekistan and Indonesia.
Nevertheless, the adoption of new laws or regulations, or amendments to
current laws or regulations, by any of these countries regarding the
operations and activities of mining companies could have a material adverse
impact by increasing our capital expenditures and operating costs.
8
<PAGE>
Minera Yanacocha has an advisory role on the Peruvian Ministry of Energy and
Mines environmental affairs group to provide technical assistance with the
development of achievable environmental strategies for Peru's mining industry.
We require that all facilities constructed and operated outside of the U.S.
comply with a level of environmental protection that is equivalent to that for
our U.S. operations. All of the international projects managed by us have
adopted and implemented environmental policies and procedures developed by us.
We are committed to educating and training mine operators and exploration and
environmental personnel to meet the highest levels of environmental standards.
We maintain an international environmental compliance program which utilizes
state of the art compliance monitoring protocols.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report (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. Our forward-looking
statements include, without limitation, (i) estimates of future gold
production for specific operations and on a consolidated basis, (ii) estimates
of future production costs, exploration expenditures and other expenses for
specific operations and on a consolidated basis, (iii) estimates of future
capital expenditures and other cash needs for specific operations and on a
consolidated basis and expectations as to the funding thereof, (iv) statements
as to the projected development of certain ore deposits, including estimates
of development and other capital costs, financing plans with respect thereto
and expected production commencement dates, (v) estimates of future costs and
other liabilities for certain environmental matters and (vi) estimates of
reserves.
Where we express 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, our 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 those forward-
looking statements. Cautionary statements setting forth important factors that
could cause actual results to differ materially from our forward-looking
statements are described below in Item 1A and elsewhere throughout this
report. Given these uncertainties, readers are cautioned not to place undue
reliance on our forward-looking statements. See "Safe Harbor Statement" in
Management's Discussion and Analysis in the 1999 Annual Report to Stockholders
on page 25.
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. We disclaim 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.
ITEM 1A. RISK FACTORS
EVERY INVESTOR OR POTENTIAL INVESTOR IN NEWMONT SHOULD CONSIDER THE FOLLOWING
RISKS:
DEPRESSED GOLD PRICE
Any drop in the price of gold adversely impacts our revenues, profits and
cash flows. In addition, sustained low prices can
. reduce revenues further by production cutbacks due to cessation of the
mining of deposits or portions of deposits that have become uneconomic at
the then prevailing gold price,
. halt the development of new projects,
. reduce funds available for exploration, with the result that depleted
reserves are not replaced,
. reduce the existing reserves by removing ore from reserves that cannot be
economically mined or treated at prevailing prices or
. result in the write-off of assets whose value is impaired by low gold
prices.
See the discussion under the heading "Gold Price" in Item 1 of this report.
9
<PAGE>
RISK OF LOSSES FROM HEDGING
We sometimes use commodity market instruments to protect the selling price
of a portion of our future production. We also sometimes contract to sell
future production at an agreed price. Our net income in 1999 was materially
reduced by the recognition of an unrealized non-cash mark-to-market loss on
call options we sold in 1999. Similar losses may recur in the future. An
increase in the price of gold will likely increase the fair value of such
options resulting in non-cash charges against our quarterly income consisting
of an "unrealized mark-to-market loss on call options" equal to the difference
between the fair value of the options on the date of sale and at the end of a
particular quarter. However, over the life of the options, any charges would
be restored to income. If the gold price rises above the price for which
future production has been sold, we will have an opportunity loss. See "Market
Conditions and Risks - Metal Price" in Management's Discussion and Analysis in
the 1999 Annual Report to Stockholders on page 19; "Results of Operations -
Financial Results" in Management's Discussion and Analysis in the 1999 Annual
Report to Stockholders on page 21 (last paragraph on page 22); and Notes 2 and
10 to the financial statements in the 1999 Annual Report to Stockholders on
pages 30 and 37, respectively.
RISK THAT ORE RESERVES WILL NOT BE REPLACED
We produce over four million ounces of gold annually resulting in depletion
of over five million ounces from our reserves. The depleted reserves must be
replaced by expanding known orebodies or by locating new deposits in order for
us to maintain our production levels over the long term. Success in
exploration for gold is very uncertain, however, and there is the risk that
depletion of reserves will not be offset by discoveries. See page 6 of this
report (sixth full paragraph).
RISKS RELATING TO REMEDIATION COSTS
We have conducted remediation work on two sites as a result of liability
under the federal Superfund Law. At one of these two sites, remediation
requirements have not been finally determined and the ultimate cost cannot be
estimated with certainty. At a third site, an inactive uranium mine and mill,
significant remediation has not begun due to the failure to date of federal
agencies either to agree on a plan which was submitted or to propose a
remediation plan of their own. The environmental standards that may ultimately
be imposed remain uncertain and there is a risk that the costs of the
remediation may exceed the provision we have made for such remediation by
amounts which could materially reduce net income in future periods. See also
pages 7 and 18 of this report.
RISK FROM INDONESIAN UNREST
We have substantial investments in Indonesia, a nation that since 1997 has
undergone financial crises and devaluation of its currency, outbreaks of
political and religious violence, changes in national leadership and the
secession of East Timor, one of its former provinces. Despite recently held
democratic elections, civil unrest, religious and ethnic violence,
independence movements and tensions between the civilian government and the
military continue to plague the country. These problems heighten the risk of
abrupt changes in leadership or in the national policy toward foreign
investors, which in turn could result in unilateral modification of
concessions or contracts, increased taxation or expropriation of assets. We
are currently involved in a dispute over a tax imposed by a governmental
subdivision of an Indonesian province, which is described under Item 3. Legal
Proceedings, and we have been engaged in exploration activity under a Contract
of Work on the island of Lombok, where in January 2000 serious violence broke
out, destroying much property and forcing ethnic Chinese inhabitants and
foreign tourists to leave the island. Except for these two matters, we are not
currently experiencing any significant difficulties as a result of Indonesia's
internal problems, but problems could arise in the future that would have a
material adverse effect on our cash flow or assets. We have assurances from
the Indonesian government that our Contracts of Work will be upheld.
RISK OF LOSS FROM MINING ACCIDENT OR OTHER ADVERSE EVENT AT A MINING LOCATION
At any of our operations, production may fall below historic or estimated
levels as a result of mining accidents such as pit wall failure in an open pit
mine, cave-ins and flooding. In addition, production may be
10
<PAGE>
unexpectedly reduced at a location if, during the course of mining,
unfavorable ground conditions are encountered, ore grades are lower than
expected or the physical or metallurgical characteristics of the ore are less
amenable to mining and treatment than expected or planned.
ITEM 2. PROPERTIES
TABLES PRESENTING MINE, MILL AND LEACH PRODUCTION DATA FOR EACH OF THE
PROPERTIES DESCRIBED IN THIS ITEM 2 ARE SET FORTH ON PAGES 52 TO 53 IN THE
1999 ANNUAL REPORT TO STOCKHOLDERS.
NEVADA
Production
Our Nevada operations include Carlin, located west of Elko on the geological
feature known as the Carlin Trend which we discovered in 1961, and operations
in the Winnemucca Region which were acquired in the 1997 merger with Santa Fe
Pacific Gold Corporation. The Carlin Trend is the largest gold district
discovered in North America in the last 50 years. The Winnemucca region
includes (i) the Twin Creeks mine located near Winnemucca, (ii) the Lone Tree
Complex located near Battle Mountain and (iii) a 50% interest in The Rosebud
Mining Company, L.L.C. 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.
Gold production in Nevada totaled 2,498,700 equity ounces in 1999 at a total
cash cost of $211 per ounce and 2,769,600 equity ounces in 1998 at a cash cost
of $209 per ounce.
In 1999, ore was mined from nine open-pit deposits and four underground
mines. The Deep Post open pit 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.
Some production initially scheduled for 1998 at Deep Post was deferred due to
a pit wall failure that occurred in mid-1997. During 1999, mining resumed 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.
Processing Facilities
Our operations in Nevada have a number of different ore types and
processing techniques. A computerized optimization model is used to determine
the best mix of ore types for each processing facility in order to obtain the
maximum ounces of gold at the lowest cost from the ores. Gold is extracted
from ores that are naturally oxidized by either heap leaching or milling,
generally depending on the amount of gold (grade) contained in the ore. Gold
contained in ores that are not naturally oxidized, known as refractory or
sulfide ores, require more complex processing techniques that are more costly
than processing oxide ore. Approximately 71% of Nevada's 1999 year-end proven
and probable gold reserves were refractory and the balance were oxide.
Nevada's production has increasingly come from higher-cost refractory ores
from both deep open pits and underground mines as lower-cost, near-surface
oxide ores have been depleted. Refractory ore treatment facilities are
expected to generate approximately 58% of Nevada's gold production in 2000,
compared with 54% in 1999 and 42% in 1998.
Higher-grade oxide ores are processed at three oxide mills at Carlin, two
at Twin Creeks and one at Lone Tree. The ore is ground into a fine powder and
mixed with water in slurry, which then passes through a cyanide leaching
circuit where gold is separated. Lower-grade oxide ores are processed using
heap leaching where ore is crushed and stacked on impermeable pads. A weak
cyanide solution is applied to the top surface of the heaps and dissolves the
gold. The gold-bearing solution is collected and pumped to mill facilities to
remove the gold by electrowinning or zinc precipitation.
Higher-grade refractory ores are processed through either a roaster at
Carlin or through autoclaves at Twin Creeks or Lone Tree. The roaster heats
finely ground ore to a high temperature and burns off the carbon and
11
<PAGE>
sulfide minerals that encase the gold. Autoclaves use heat, oxygen and
pressure to remove sulfide minerals from the ore. Lower-grade sulfide ores are
processed through a flotation plant at Lone Tree or by bio-milling at Carlin.
In flotation, ore is finely ground, turned into slurry, then placed in a tank
known as a flotation cell. Chemicals are added to the slurry causing the gold-
containing sulfides to float in air bubbles to the top of the cell where they
can be separated from waste particles that sink to the bottom. The sulfides
are removed from the cell and form a concentrate that can then be processed in
an autoclave or roaster. Bio-milling incorporates patented technology referred
to as bio-oxidation. Bio-oxidation involves inoculation of ore with naturally
occurring bacteria that oxidize the sulfides encasing the gold. The ore is
then processed through an oxide mill.
Gold-bearing activated carbon from Carlin's milling and leaching facilities
is processed on site at a central carbon processing plant and adjacent
smelting facilities. Separate carbon processing facilities are located in the
North and South Areas at Twin Creeks with one smelter in the North Area. Lone
Tree has two carbon processing facilities. Material from the Lone Tree carbon
processing facilities is smelted at Carlin.
Other Facilities
Analytical laboratories, maintenance facilities and administration offices
are located at Carlin, Twin Creeks and the Lone Tree Complex. We also have 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.
Mineral Rights
We own, or control through long-term mining leases and unpatented mining
claims, all of the minerals and surface area within the boundaries of the
present Carlin and Winnemucca Region mining operations areas other than the
Rosebud mine. The long-term leases extend for at least the anticipated mine
life of those deposits. With respect to a significant portion of the Gold
Quarry Mine at Carlin, we own a 10% undivided interest in the mineral rights
and lease the remaining 90% on which we pay a royalty equivalent to 18% of the
mineral production. The remainder of the Gold Quarry mineral rights are wholly
owned or controlled by Newmont, in some cases subject to additional royalties.
With respect to certain smaller deposits in the Winnemucca Region, we are
obligated to pay royalties on production to third parties that vary from 3% to
5% of production.
In February 1999, we signed an agreement with Barrick Goldstrike Mines, Inc.
to exchange approximately two million ounces of reserves and various land
rights on the north Carlin Trend that consolidated our respective land
positions in the area. The exchange was completed in May 1999. See "Results of
Operations--North American Operations" in Management's Discussion and Analysis
in the 1999 Annual Report to Stockholders on page 20.
CALIFORNIA
We have one mine in California, Mesquite, that was acquired in the 1997
merger with Santa Fe Pacific Gold Corporation. 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
164,600 ounces in 1999 and 154,000 ounces in 1998. Total cash costs per ounce
were $167 and $176 for 1999 and 1998, respectively.
Gold-bearing activated carbon from leaching facilities is processed at an
on-site carbon processing plant and smelter. Maintenance facilities and
administration offices are also located at Mesquite. Electric power is
supplied by a local utility.
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<PAGE>
Mesquite is in its last year of full production and operations will
transition to shutdown and reclamation after 2000. Low grade mineralization
near existing pits could potentially extend the mine life with a substantial
increase in gold prices.
We own, or control 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 the Mesquite deposits. The long-term leases extend for
at least the anticipated mine life of those deposits.
PERU
Introduction
We produce gold in Peru through Minera Yanacocha S.R.L., whose properties
are located approximately 375 miles north of Lima and 28 miles north of the
city of Cajamarca. In 1986, we 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, we owned a 38% equity interest in
Minera Yanacocha. In 1997, we consolidated Minera Yanacocha in our financial
statements following the acquisition of an additional 13.35% interest. The
remaining interest is held by Compania de Minas Buenaventura, S.A.A. (43.65%)
and the International Finance Corporation (5%). A description of such
acquisition is set forth in Note 19 to the financial statements in the 1999
Annual Report to Stockholders on page 44. We operate Minera Yanacocha.
Minera Yanacocha has mining rights with respect to a large land position,
which includes multiple 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.
Production
Four open-pit mines and three leach pads are in operation at Minera
Yanacocha. In late 1999, Minera Yanacocha terminated its contract mining
agreement and, as a result, anticipates improved productivity and efficiency
by conducting mine operations with its own employees. In 1999, production was
1,655,800 ounces of gold (850,300 equity ounces) at a total cash cost of $103
per ounce as compared to 1998 production of 1,335,800 ounces of gold (685,900
equity ounces) at a total cash cost of $95 per ounce.
The ore at Minera Yanacocha is not crushed, but transported directly to
impermeable leach pads where it is treated with a weak cyanide solution that
dissolves the gold. The gold bearing leach solution is collected and pumped
through one of two Merrill-Crowe plants 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 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.
UZBEKISTAN
Introduction
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 guaranteed to furnish
Zarafshan-Newmont with 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.
At December 31, 1999, approximately 185 million tons of stockpiled ore and ore
in process remained at an average grade of 0.033 ounces of gold per ton,
containing approximately six million ounces of gold.
13
<PAGE>
Production
In 1999, total production was 543,000 ounces of gold (271,500 equity ounces)
at a total cash cost of $161 per ounce. In 1998, total production was 374,600
ounces of gold (187,300 equity ounces) at a total cash cost of $207 per ounce.
Ore from the existing stockpiles is crushed in four stages. The crushed
material is transported via conveyor 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 refined gold. Power
for the project is provided pursuant to a contractual arrangement with Navoi,
which acquires such power from a local plant.
INDONESIA
Introduction
We have two operating properties in Indonesia--Minahasa, a gold operation,
and Batu Hijau which produces copper/gold concentrates. We own 80% of
Minahasa. The remaining 20% interest is a carried interest held by P.T.
Tanjung Serapung, an Indonesian company. Because we funded 100% of the
construction costs, we are entitled to 100% of the gold production until we
recover the bulk of our investment, including interest. We have a 45% interest
in Batu Hijau which we own through a partnership with an affiliate of Sumitomo
Corporation. Sumitomo holds a 35% interest, and the remaining 20% is a carried
interest held by P.T. Pukuafu Indah, an Indonesian company. As a result of
this ownership structure, we are accounting for our investment in Batu Hijau
as an equity investment. We are entitled to 56.25% of the concentrate
production until we recover the bulk of our investment, including interest.
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, we entered into fourth
generation Contracts of Work with the government covering Minahasa and Batu
Hijau. Under the Contracts of Work, we were granted the exclusive right to
explore the contract area, construct any required facilities, 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. We have the right to continue operating the
projects for 30 years, or longer, if approved by the Indonesian government.
Under our Contracts of Work, beginning in the sixth year after mining
operations commenced (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, thereby potentially
reducing our 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, we entered into a Contract of Work granting us rights to
explore an area located near the Minahasa contract area through a new company,
P. T. Newmont Mongondow Mining. We have 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.
Minahasa
Our first project in Indonesia, Minahasa, on the island of Sulawesi, is a
Newmont discovery and consists of a multi-deposit operation. Production began
in August 1996. It is approximately 1,500 miles northeast of Jakarta.
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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 336,800 ounces of gold in 1999 at a total cash cost of
$103 per ounce as compared to 261,000 ounces of gold in 1998 at a total cash
cost of $127 per ounce.
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 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
Our 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 which we discovered 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 has been developed for transportation
of materials, equipment and copper concentrate. Other facilities at the
operation include a coal-fired electrical generating plant, a townsite for the
workforce and other ancillary facilities. The total cost of the project was
approximately $1.83 billion including capitalized interest during construction
and working capital.
In July 1997, agreements for $1 billion in financing for the Batu Hijau
project were signed. The financing is guaranteed by Newmont and Sumitomo
Corporation, 56.25% and 43.75%, respectively, until project completion tests
are met, and will be non-recourse to Newmont and Sumitomo thereafter. See also
Note 3 to the financial statements in the 1999 Annual Report to Stockholders
on page 32.
Development and construction activities began in 1997 and start-up took
place in late 1999. See " Results of Operations--Overseas Operations"
discussion in Managements's Discussion and Analysis in the 1999 Annual Report
to Stockholders on page 21. The mined ore is transported by truck to a primary
crusher. A 4.3 mile conveyer belt carries ore from the primary crusher to a
mill complex where it is crushed, ground and mixed in tanks with saltwater and
continuously agitated with air. During this process the copper and gold
bearing particles rise to the top of the tanks and leave the mill complex as a
thickened concentrate slurry which is pumped through a pipeline to a port
facility where it is filtered, dried to the consistency of wet sand and stored
for shipping.
MEXICO
In Mexico, we have a 44% interest in La Herradura which is located in
northwest Sonora, Mexico. It commenced production in June 1998. The Penoles
group, Mexico's largest silver producer, holds a 56% interest and is the
operator. Mining is conducted in two open pits and the ore is processed by
run-of-mine heap-leaching. In 1999, La Herradura produced 91,000 ounces of
gold, 40,200 ounces attributable to our interest at a total cash cost of $159
per ounce. In 1998, La Herradura produced 29,200 ounces of gold, 12,900 ounces
attributable to our interest at a total cash cost of $115 per ounce.
PROVEN AND PROBABLE RESERVES
Our equity in proven and probable gold reserves was 56.6 million ounces (of
which approximately 753,000 ounces have been committed under a prepaid forward
sales contract) at December 31, 1999 and 52.6 million ounces at December 31,
1998. In addition, our equity in proven and probable copper reserves was 5.7
billion pounds at December 31, 1999 and 4.8 billion pounds at December 31,
1998. Our equity in proven and probable silver reserves was 182.8 million
ounces at December 31, 1999.
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, 1999 and 1998 were based on a gold
price of $325 per ounce and
15
<PAGE>
$350 per ounce, respectively. We believe that if reserve estimates were based
on a gold price of $300 per ounce, 1999 year-end proven and probable gold
reserves could decrease by approximately 5%.
The proven and probable reserves figures presented herein are estimates, and
no assurance can be given that the indicated levels of recovery of gold,
copper and silver will be realized. Ounces of gold and silver or pounds of
copper in our proven and probable reserves are prior to any losses during
mining or metallurgical treatment. Reserve estimates may require revision
based on actual production experience. Market price fluctuations of gold,
copper and silver, as well as increased production costs or reduced recovery
rates, could render our proven and probable reserves containing relatively
lower grades of mineralization uneconomic to exploit and might result in a
reduction of reserves.
16
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NEWMONT MINING CORPORATION PROVEN AND PROBABLE RESERVES
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
-------------------------------------------- -------------------------------------------
(100%) (100%) NEWMONT
---------------------------------- NEWMONT --------------------------------- EQUITY
DEPOSITS/DISTRICTS WITH NEWMONT CONTAINED EQUITY CONTAINED CONTAINED
PROVEN AND PROBABLE EQUITY TONNAGE(/2/) GRADE OUNCES(/3/) OUNCES TONNAGE(/2/) GRADE OUNCES(/3/) OUNCES
RESERVES(/1/) (%) (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(/4/)
Nevada
Nevada Open Pit
Carlin North--
Post.............. 100 1,317 0.501 660 660 9,680 0.180 1,747 1,747
Carlin North--
Genesis Complex... 100 19,844 0.029 571 571 20,306 0.033 665 665
Carlin North--
Other............. 100 26,077 0.046 1,188 1,188 26,382 0.050 1,324 1,324
Carlin South
(includes Gold
Quarry)........... 100 78,428 0.059 4,621 4,621 102,638 0.051 5,261 5,261
Carlin Rain
District.......... 100 13,467 0.026 345 345 14,320 0.025 352 352
Twin Creeks........ 100 87,112 0.079 6,857 6,857 96,175 0.078 7,484 7,484
Lone Tree
Complex........... 100 36,564 0.063 2,321 2,321 54,883 0.059 3,221 3,221
--------- ----- ------- ------- --------- ----- ------ ------
Total Nevada Open
Pit.............. 262,809 0.063 16,563 16,563 324,384 0.062 20,054 20,054
Nevada Underground
Carlin North
Area.............. 100 8,525 0.495 4,223 4,223 2,551 1.000 1,634 1,634
Post District...... 100 3,043 0.769 2,341 2,341 2,391 1.000 1,943 1,943
Goldbug-Barrel..... 100 2,917 0.391 1,140 1,140
Carlin North JV
(High Desert)..... 60 7,050 0.424 2,993 1,796
Carlin Rain
District.......... 100 411 0.316 130 130 374 0.270 101 101
Rosebud............ 50 216 0.323 70 35 484 0.392 190 95
--------- ----- ------- ------- --------- ----- ------ ------
Total Nevada
Underground...... 12,195 0.555 6,764 6,729 15,767 0.507 8,001 6,709
Stockpiles and In-
Process........... 100 99,080 0.048 4,745 4,745 77,147 0.053 4,115 4,115
--------- ----- ------- ------- --------- ----- ------ ------
Nevada Totals(/5/)... 374,084 0.075 28,072 28,037 417,298 0.077 32,170 30,878
Mesquite,
California.......... 100 26,231 0.019 488 488 29,007 0.021 595 595
Penoles JV, La
Herradura,
Mexico(/6/)......... 44 47,745 0.032 1,504 662 52,890 0.031 1,638 721
--------- ----- ------- ------- --------- ----- ------ ------
Total North
American......... 448,060 0.067 30,064 29,187 499,195 0.069 34,403 32,194
Overseas
Minera Yanacocha,
Peru
Carachugo........... 51 139,310 0.028 3,907 2,006 55,691 0.027 1,491 766
Maqui Maqui......... 51 5,379 0.033 180 92 9,789 0.041 400 205
San Jose............ 51 45,878 0.023 1,041 535 37,367 0.031 1,154 593
Yanacocha........... 51 575,063 0.024 13,794 7,083 290,028 0.032 9,227 4,738
La Quinua (and
Tapado)............ 51 400,828 0.023 9,285 4,768 273,061 0.026 7,128 3,660
Cerro Negro......... 51 22,511 0.030 667 342 23,943 0.027 657 337
Cerro Qulish........ 51 110,951 0.028 3,132 1,608
In-Process.......... 51 20,105 0.043 856 440 12,370 0.045 558 287
--------- ----- ------- ------- --------- ----- ------ ------
Total Minera
Yanacocha(/7/)... 1,320,025 0.025 32,862 16,874 702,249 0.029 20,615 10,586
Zarafshan-Newmont,
Uzbekistan(/8/)..... 50 185,198 0.033 6,059 3,029 202,381 0.034 6,845 3,422
Minahasa,
Indonesia(/9/)...... 80 6,582 0.168 1,104 1,052(/9/) 7,207 0.189 1,364 1,091
Batu Hijau,
Indonesia(/10/)..... 45 1,001,044 0.012 11,823 6,426(/9/) 1,008,036 0.012 11,849 5,332
--------- ----- ------- ------- --------- ----- ------ ------
Total Overseas.... 2,512,849 0.021 51,848 27,381 1,919,873 0.021 40,673 20,431
Total Worldwide... 2,960,909 0.028 81,912 56,568 2,419,068 0.031 75,076 52,625
========= ======= ======= ========= ====== ======
Ounces committed
under prepaid
forward sales
contract............ (753)
-------
Total after Deduction
of Prepaid Ounces... 55,815
=======
<CAPTION>
NEWMONT
SILVER NEWMONT SILVER EQUITY
CONTAINED EQUITY CONTAINED CONTAINED
TONNAGE(/2/) GRADE OUNCES(/3/) OUNCES TONNAGE(/2/) GRADE OUNCES(/3/) OUNCES
(000 TONS) (OZ/TON) (000) (000) (000 TONS) (OZ/TON) (000) (000)
------------ -------- ------------ --------- ------------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SILVER
Minera Yanacocha,
Peru(/7/)
Yanacocha........... 51 575,063 0.543 312,796 160,621
La Quinua........... 51 400,828 0.108 43,236 22,202
--------- ----- ------- -------
Total............. 975,891 0.365 356,032 182,823
========= ===== ======= =======
<CAPTION>
NEWMONT NEWMONT
COPPER EQUITY COPPER EQUITY
(MILLION (MILLION (MILLION (MILLION
TONNAGE(/2/) GRADE CONTAINED CONTAINED TONNAGE(/2/) GRADE CONTAINED CONTAINED
(000 TONS) (CU%) POUNDS)(/3/) POUNDS) (000 TONS) (CU%) POUNDS) POUNDS)
------------ -------- ------------ --------- ------------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COPPER
Batu Hijau,
Indonesia(/11/)..... 45 1,001,044 0.524% 10,481 5,697(/9/) 1,008,036 0.525% 10,580 4,761
========= ===== ======= ======= ========= ===== ====== ======
</TABLE>
Numbers may differ slightly from those reported previously as a result of
different deposit groupings yielding different rounding of totals.
17
<PAGE>
--------
(/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/)Tonnages are after allowances for losses resulting from mining methods.
(/3/)Contained ounces or pounds are estimates of metal contained in ore
tonnages and are before allowances for processing losses. Estimated
losses from processing are expressed as recovery rates and represent the
estimated amount of metal to be recovered through metallurgical
extraction processes.
Estimated gold recovery rates at December 31, 1999 were 77% for Nevada open
pit operations, 90% for Nevada underground operations, 65% for Mesquite,
72% for La Herradura, 69% for Minera Yanacocha, 61% for Zarafshan-Newmont,
83% for Minahasa and 89% for Batu Hijau.
Estimated silver recovery rates at December 31, 1999 were 30% for Minera
Yanacocha.
The estimated copper recovery rate at December 31, 1999 for Batu Hijau was
93%.
(/4/)Proven and probable reserves in North America were calculated using
different cutoff grades depending on each deposit's properties. 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. The cutoffs utilized in 1999 were as
follows: oxide leach material not less than 0.004 ounce per ton; oxide
mill cutoffs varied; refractory leach materials between 0.013 and 0.060
ounce per ton; refractory mill material not less than 0.039 ounce per
ton.
(/5/)These reserves are approximately 71% refractory in nature and are not
amenable to the direct cyanidation recovery processes currently used for
oxide material. Such ore must be oxidized before it is subjected to the
normal recovery processes.
(/6/)Calculated using a cut-off grade of 0.01 ounce per ton and a leach
recovery of 72%. All ore is oxidized.
(/7/)Calculated using a cut-off grade not less than 0.006 ounce of gold per
ton. The cutoff grade is a function of both gold and silver content. The
gold leach recoveries ranged from 67% to 82%, depending on each
deposit's metallurgical properties. Silver recoveries were estimated at
30%. All ore is oxidized.
(/8/)Material available to Zarafshan-Newmont for processing from designated
stockpiles or from other specified sources. 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 to liberate the gold
and leached. Ore reserves calculated using 61% leach recoveries.
(/9/)Calculated using a cut-off grade of 0.113 ounce per ton and a mill
recovery of 90% for refractory material. For oxide material a cut-off
grade not less than 0.024 ounce per ton was used and a leach recovery of
62%.
(/10/)Based on a feasibility study completed in 1996 and updated in 1998 and
1999. Operations commenced in late 1999. Production is in the form of a
copper-gold 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.
(/11/)Reflects Newmont's economic interest in the underlying reserves of
95.35% with respect to Minahasa and 54.35% with respect to Batu Hijau.
18
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
In 1998, the government of the Minahasa regency, which is within the
Indonesian province of North Sulawesi, purported to enact a tax on overburden
removed at our Minahasa mining operation. This local government then asserted
a claim against us in a local court for approximately $3 million in taxes and
$5 million in consequential damages and counsel fees. We have not paid these
fees because we believe the taxes are not valid. In January of 2000, the local
court ruled that the mine should be closed pending the final outcome of the
case and on March 6, 2000 a higher court affirmed this provisional ruling. The
closure ruling is not effective unless formal service is made. We are
continuing to operate and have been advised by our Indonesian counsel and the
Indonesian Department of Mines that the closure ruling and related claims are
without basis under applicable law and in contradiction of our Contract of
Work. We will continue to pursue all legal alternatives to oppose this tax and
related fees.
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, 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
other 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 developed
feasibility studies which were sent to the EPA for approval in 1997. Remedial
activities were conducted in 1999 and will continue in 2000. 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. The Partial Consent Decree does not resolve certain other potential
liabilities, including liability for any natural resource damage and any
groundwater or surface water contamination. See Note 19 to the financial
statements in the 1999 Annual Report to Stockholders on page 44.
For a description of the litigation relating to Newmont's ownership interest
in Minera Yanacocha see Note 19 to the financial statements in the 1999 Annual
Report to Stockholders on page 44.
Certain appeals have been filed with the Department of Interior Board of
Land Appeals in connection with an approved Environmental Impact Statement for
the Twin Creeks Mine in Nevada. These appeals seek to impose mitigation and
other conditions on the mine operations. We have intervened and do not feel
that such appeals have merit. An unfavorable outcome of these appeals,
however, could result in additional conditions on operations that may have a
material adverse effect on our financial position or results of operations.
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,
1999.
19
<PAGE>
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Newmont's executive officers as of March 2, 2000 were:
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
Ronald C. Cambre........... 61 Chairman and Chief Executive Officer
Wayne W. Murdy............. 55 Director and President
John A. S. Dow............. 54 Executive Vice President, Exploration
David H. Francisco......... 50 Executive Vice President, Operations
Bruce D. Hansen............ Senior Vice President and Chief Financial
42 Officer
Lawrence T. Kurlander...... Senior Vice President and Chief Administrative
60 Officer
W. James Mullin............ 54 Senior Vice President, North American Operations
David A. Baker............. Vice President, Environmental and Government
45 Affairs
Patricia A. Flanagan....... Vice President, Treasurer and Assistant
41 Secretary
Joy E. Hansen.............. 54 Vice President and General Counsel
Donald G. Karras........... 46 Vice President, Taxes
Linda K. Wheeler........... 46 Vice President and Controller
</TABLE>
There are no family relationships by blood, marriage or adoption among any
of the above executive officers of Newmont. All executive officers are elected
annually by the Board of Directors of Newmont 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 executive officer.
Mr. Cambre was elected Chairman of Newmont in November 1994 (effective
January 1995) and Chief Executive Officer in September 1993 (effective
November 1993). He served as President of Newmont from June 1994 through July
1999.
Mr. Murdy was elected a director of Newmont in September 1999 and President
of Newmont in July 1999. He served as Executive Vice President of Newmont from
July 1996 to July 1999 and Chief Financial Officer from December 1992 through
July 1999. He served as a Senior Vice President of Newmont from December 1992
to July 1996.
Mr. Dow was elected Executive Vice President, Exploration of Newmont in July
1999. He served as Senior Vice President, Exploration of Newmont from July
1996 through July 1999 and Vice President, Exploration from April 1992 to July
1996.
Mr. Francisco was elected Executive Vice President, Operations of Newmont in
July 1999. He served as Senior Vice President, International Operations of
Newmont from May 1997 to July 1999. Previously, he served as Vice President,
International Operations of Newmont from July 1995 to May 1997.
Mr. Hansen was elected Senior Vice President and Chief Financial Officer of
Newmont in July 1999. He served as Vice President, Project Development of
Newmont from May 1997 to July 1999. Previously, he served as Senior Vice
President, Corporate Development of Santa Fe Pacific Gold Corporation, a
natural resources company, from April 1994 to May 1997.
Mr. Kurlander was elected Senior Vice President and Chief Administrative
Officer of Newmont in May 1997. Previously, he served as Senior Vice
President, Administration of Newmont from March 1994 to May 1997.
Mr. Mullin was elected Senior Vice President, North American Operations of
Newmont in May 1997. Previously, he served as Vice President and Regional
Director, Nevada Operations of Newmont from May 1994 to May 1997.
Mr. Baker was elected Vice President, Environmental and Government Affairs
of Newmont in November 1998. He also has served as Vice President,
Environmental Affairs of Newmont since 1991.
20
<PAGE>
Ms. Flanagan was elected a Vice President of Newmont in March 1995 and was
elected Treasurer in December 1992. She was appointed Assistant Secretary in
June 1992.
Ms. Hansen was elected Vice President and General Counsel of Newmont in
September 1996. Previously, she served as Vice President and Associate General
Counsel of Newmont from March 1995 to September 1996.
Mr. Karras has served as Vice President, Taxes of Newmont since November
1992.
Ms. Wheeler was elected Vice President of Newmont in November 1998 and
Controller of Newmont in May 1997. Previously, she served as Controller of
Santa Fe Pacific Gold Corporation, a natural resources company, from May 1994
to May 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Newmont'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 and the Swiss Stock Exchange. The
following table sets forth, for the periods indicated, the high and low sales
prices per share of Newmont's common stock as reported on the New York Stock
Exchange Composite Tape.
<TABLE>
<CAPTION>
1999 1998
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
First quarter.................................... $21.25 $16.63 $31.63 $23.75
Second quarter................................... $26.44 $16.63 $34.88 $21.75
Third quarter.................................... $30.00 $16.38 $25.25 $13.25
Fourth quarter................................... $30.06 $20.38 $30.31 $16.25
</TABLE>
On March 2, 2000, there were 23,727 stockholders of record of Newmont's
common stock. A dividend of $0.03 per share of common stock outstanding was
declared in each quarter of 1999 and 1998, or a total of $0.12 per share for
each such year. The determination of the amount of future dividends, however,
will be made by Newmont's Board of Directors from time to time and will depend
on Newmont's future earnings, capital requirements, financial condition and
other relevant factors.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
DECEMBER 31,
Sales......................... $1,398.9 $1,453.9 $1,572.8 $1,105.7 $ 981.6
Income (loss) before
cumulative effect of change
in accounting principle...... $ 24.8 $ (360.5) $ 68.4 $ 98.6 $ 147.7
Net income (loss)(/1/)........ $ 24.8 $ (393.4) $ 68.4 $ 98.6 $ 147.7
Income (loss) per common
share:
Before cumulative effect of
change in accounting
principle.................... $ 0.15 $ (2.27) $ 0.44 $ 0.63 $ 0.95
Net income(/1/)............... $ 0.15 $ (2.47) $ 0.44 $ 0.63 $ 0.95
Dividends declared per common
share........................ $ 0.12 $ 0.12 $ 0.39 $ 0.48 $ 0.48
AT DECEMBER 31,
Total assets.................. $3,383.4 $3,235.4 $3,614.0 $3,282.1 $2,710.0
Long-term debt, including
current portion.............. $1,037.5 $1,248.7 $1,222.7 $1,059.1 $ 808.5
Stockholders' equity.......... $1,451.6 $1,439.5 $1,591.1 $1,562.8 $1,267.3
</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.
21
<PAGE>
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 1999 Annual Report to Stockholders on pages 19 through 25
therein is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the captions "Market Conditions and Risks",
"Results of Operations - Financial Results", Note 2 and Note 10 in the 1999
Annual Report to Stockholders on pages 19 and 20, page 21 (last paragraph on
page 22), page 30 and 37, respectively, therein is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth in the 1999 Annual Report to Stockholders on pages
25 through 48, 52 and 53 therein is incorporated herein by reference.
<TABLE>
<S> <C>
Consolidating Financial Statements of Newmont Mining Corporation........... CS-1
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Newmont Mining Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Newmont Mining Corporation
and subsidiaries' annual report to shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated January 21, 2000. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The Consolidating Financial Statements of Newmont Mining
Corporation listed in the index above are the responsibility of the company's
management and are presented for purposes of complying with Rule 3-10 of
Regulation S-X and SAB Topic 1:G.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Consolidating Financial Statements
of Newmont Mining Corporation listed in the index of financial statements are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
Consolidating Financial Statements have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the information required to be
set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Denver, Colorado,
January 21, 2000
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with Arthur Andersen LLP, Newmont's
independent public accountants, regarding any matter of accounting principles
or practices or financial statement disclosure.
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Newmont's directors will be contained in Newmont's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934 for the 2000 annual meeting of
stockholders and is incorporated herein by reference. Information concerning
Newmont's executive officers is set forth under Item 4A in Part I of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning this item will be contained in Newmont's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 2000 annual meeting of stockholders
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning this item will be contained in Newmont's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 2000 annual meeting of stockholders
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning this item will be contained in Newmont's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 2000 annual meeting of stockholders
and is incorporated herein by reference.
23
<PAGE>
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 21, 2000, included as part of Exhibit 13, are incorporated by
reference in this Form 10-K Annual Report.
<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........................... *
</TABLE>
--------
* See Exhibit 13.
2. FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidating Financial Statements of Newmont Mining Corporation.... CS-1
Financial Statements of Nusa Tenggara Partnership, V. O. F. ........ NT-1
</TABLE>
3. EXHIBITS
Reference is made to the Exhibit Index beginning on page E-1 hereof.
(a) No current reports on Form 8-K were filed by us during the quarter ended
December 31, 1999.
24
<PAGE>
CONSOLIDATING STATEMENTS
OF
NEWMONT MINING CORPORATION
On July 12, 1999, Newmont Mining Corporation and its wholly owned
subsidiary, Newmont Gold Company, filed with the SEC, a registration statement
on Form S-3 (the "Registration Statement") providing for the issuance by
Newmont Mining from time to time of up to $500 million aggregate offering
price of securities, consisting of common stock, preferred stock, common stock
warrants, debt securities and warrants for debt securities. The debt
securities will be fully and unconditionally guaranteed by Newmont Gold. As a
result of this guarantee by Newmont Gold of the debt securities of Newmont
Mining that may be issued from time to time, the SEC requires the inclusion in
this Annual Report certain condensed consolidating financial statements
depicting Newmont Mining (carrying its investment in subsidiaries under the
equity method), Newmont Gold (carrying its investment in subsidiaries under
the equity method) and any other subsidiaries of Newmont Mining (on a combined
basis). Such financial statements for the three-year period ended December 31,
1999 are shown below.
The following condensed consolidating financial statements of Newmont Mining
Corporation should be read in conjunction with the consolidated financial
statements and the notes for the year ended December 31, 1999. Certain assets
previously held by other subsidiaries are held by Newmont Gold Company in
1999.
<TABLE>
<CAPTION>
NEWMONT NEWMONT NEWMONT
MINING GOLD OTHER MINING CORP.
CORP. COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATING STATEMENT
OF OPERATIONS:
YEAR ENDED DECEMBER 31,
1999
Sales and other income
Sales.................. $ -- $ 730.0 $668.9 $ -- $1,398.9
Dividends, interest and
other--intercompany... -- 18.2 -- (18.2) --
Dividends, interest and
other................. -- 3.5 29.2 -- 32.7
----- ------- ------ ------- --------
-- 751.7 698.1 (18.2) 1,431.6
----- ------- ------ ------- --------
Costs and expenses
Costs applicable to
sales................. -- 561.2 270.8 -- 832.0
Depreciation, depletion
and amortization...... -- 134.1 105.5 -- 239.6
Exploration and
research.............. -- 25.9 31.6 -- 57.5
General and
administrative........ -- 52.3 0.4 -- 52.7
Interest expense--
intercompany.......... -- -- 18.2 (18.2) 0.0
Interest, net of
capitalized interest.. -- 36.3 26.2 -- 62.5
Write-down of assets... -- 3.5 -- -- 3.5
Other.................. -- 4.3 12.3 -- 16.6
----- ------- ------ ------- --------
-- 817.6 465.0 (18.2) 1,264.4
----- ------- ------ ------- --------
Unrealized mark-to-
market loss on call
options................ -- (44.8) -- -- (44.8)
----- ------- ------ ------- --------
Pre-tax income (loss)
before minority
interest and equity
loss................... -- (110.7) 233.1 -- 122.4
Operating income
(loss)................. -- (65.9) 233.1 -- 167.2
Minority interest in
income of Minera
Yanacocha.............. -- -- (72.5) -- (72.5)
Equity in income of
subsidiaries........... 24.8 96.8 -- (121.6) 0.0
Equity in loss of
affiliated company..... -- -- (10.7) -- (10.7)
----- ------- ------ ------- --------
Income tax (expense)
benefit................ -- 38.7 (53.1) -- (14.4)
Net loss................ $24.8 $ 24.8 $ 96.8 $(121.6) $ 24.8
===== ======= ====== ======= ========
</TABLE>
CS-1
<PAGE>
<TABLE>
<CAPTION>
NEWMONT NEWMONT NEWMONT
MINING GOLD OTHER MINING CORP.
CORP. COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATING STATEMENT
OF OPERATIONS:
YEAR ENDED DECEMBER 31,
1998
Sales and other income
Sales.................. $ -- $ 483.0 $ 970.9 $ -- $1,453.9
Dividends, interest and
other--intercompany... -- 24.8 -- (24.8) --
Dividends, interest and
other................. -- 10.2 11.8 (1.0) 21.0
------- ------- -------- ------- --------
-- 518.0 982.7 (25.8) 1,474.9
------- ------- -------- ------- --------
Costs and expenses
Costs applicable to
sales................. -- 366.9 459.0 (1.0) 824.9
Depreciation, depletion
and amortization...... -- 90.2 198.9 -- 289.1
Exploration and
research.............. -- 15.3 53.1 -- 68.4
General and
administrative........ -- 47.7 2.0 -- 49.7
Interest expense--
intercompany.......... -- -- 24.8 (24.8) 0.0
Interest, net of
capitalized interest.. -- 47.6 31.2 -- 78.8
Write-down of assets... -- 111.3 503.6 -- 614.9
Other.................. -- 5.0 6.0 -- 11.0
------- ------- -------- ------- --------
-- 684.0 1,278.6 (25.8) 1,936.8
------- ------- -------- ------- --------
Pre-tax loss before
minority interest,
equity loss and
cumulative effect of a
change in accounting
principle.............. -- (166.0) (295.9) -- (461.9)
Minority interest in
income of Minera
Yanacocha.............. -- -- (66.2) -- (66.2)
Minority interest in
income of Newmont Gold
Company................ (4.1) -- -- -- (4.1)
Equity in loss of
subsidiaries........... (391.5) (306.5) -- 698.0 0.0
Equity in loss of
affiliated company..... -- -- (9.2) -- (9.2)
------- ------- -------- ------- --------
Net loss before
cumulative effect of a
change in accounting
principle.............. (395.6) (392.3) (270.6) 698.0 (360.5)
Income tax benefit...... -- 80.2 100.7 -- 180.9
Cumulative effect of a
change in accounting
principle.............. 2.2 0.8 (35.9) -- (32.9)
------- ------- -------- ------- --------
Net loss................ $(393.4) $(391.5) $ (306.5) $ 698.0 $ (393.4)
======= ======= ======== ======= ========
YEAR ENDED DECEMBER 31,
1997
Sales and other income
Sales.................. $ -- $ 609.6 $ 963.1 $ -- $1,572.7
Dividends, interest and
other--intercompany... -- 8.8 -- (8.8) --
Dividends, interest and
other................. -- 12.7 46.4 (3.8) 55.3
------- ------- -------- ------- --------
-- 631.1 1,009.5 (12.6) 1,628.0
------- ------- -------- ------- --------
Costs and expenses
Costs applicable to
sales................. -- 375.1 419.2 (3.8) 790.5
Depreciation, depletion
and amortization...... -- 94.9 170.9 -- 265.8
Exploration and
research.............. -- 19.2 79.2 -- 98.4
General and
administrative........ -- 56.9 9.5 -- 66.4
Interest expense--
intercompany.......... -- -- 8.8 (8.8) 0.0
Interest, net of
capitalized interest.. -- 43.2 33.9 -- 77.1
Merger and related
expenses.............. -- 29.3 133.4 -- 162.7
Write-down of assets... -- 9.5 -- -- 9.5
Other.................. -- (0.1) 25.8 -- 25.7
------- ------- -------- ------- --------
-- 628.0 880.7 (12.6) 1,496.1
------- ------- -------- ------- --------
Pre-tax income before
minority interest and
equity income.......... -- 3.1 128.8 -- 131.9
Income tax benefit...... -- 7.9 -- -- 7.9
Minority interest in
income of Minera
Yanacocha.............. -- -- (66.9) -- (66.9)
Minority interest in
income of Newmont Gold
Company................ (4.5) -- -- -- (4.5)
Equity in income of
subsidiaries........... 72.9 61.9 -- (134.8) 0.0
------- ------- -------- ------- --------
Net income.............. $ 68.4 $ 72.9 $ 61.9 $(134.8) $ 68.4
======= ======= ======== ======= ========
</TABLE>
CS-2
<PAGE>
<TABLE>
<CAPTION>
NEWMONT NEWMONT NEWMONT
MINING GOLD OTHER MINING CORP.
CORP. COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATING BALANCE
SHEETS
AT DECEMBER 31, 1999
Cash and cash
equivalents.......... $ -- $ 2.5 $ 52.8 $ -- $ 55.3
Short-term
investments.......... -- -- 9.4 -- 9.4
Accounts receivable... 9.0 3.3 223.0 (194.7) 40.6
Inventories........... -- 185.2 137.4 -- 322.6
Other current assets.. -- 35.7 70.5 -- 106.2
-------- -------- -------- --------- --------
Current assets...... 9.0 226.7 493.1 (194.7) 534.1
-------- -------- -------- --------- --------
Property, plant and
mine development,
net.................. -- 1,326.2 646.1 -- 1,972.3
Investment in
subsidiaries......... 1,442.7 1,898.1 -- (3,340.8) --
Investment in Batu
Hijau................ -- -- 438.3 -- 438.3
Long-term inventory... -- 171.2 -- -- 171.2
Other long-term
assets............... -- 216.5 1,010.5 (959.5) 267.5
-------- -------- -------- --------- --------
Total assets........ $1,451.7 $3,838.7 $2,588.0 $(4,495.0) $3,383.4
======== ======== ======== ========= ========
Liabilities
Current portion of
long-term debt....... $ -- $ 8.4 $ 14.9 $ -- $ 23.3
Accounts payable...... -- 221.6 11.1 (194.7) 38.0
Other accrued
liabilities.......... -- 98.0 114.5 -- 212.5
-------- -------- -------- --------- --------
Current
liabilities........ -- 328.0 140.5 (197.7) 273.8
-------- -------- -------- --------- --------
Long-term debt........ -- 719.1 295.1 -- 1,014.2
Reclamation and
remediation
liabilities.......... -- 48.7 56.0 -- 104.7
Other long-term
liabilities.......... -- 1,300.2 71.9 (959.5) 412.6
-------- -------- -------- --------- --------
Total liabilities... -- 2,396.0 563.5 (1,154.2) 1,805.3
-------- -------- -------- --------- --------
Minority interest....... -- -- 126.4 -- 126.4
-------- -------- -------- --------- --------
Stockholders' Equity
Common stock.......... 268.3 -- 56.6 (56.6) 268.3
Additional paid-in
capital.............. 1,069.2 601.6 1,357.7 (1,959.3) 1,069.2
Retained earnings..... 114.2 841.1 483.8 (1,324.9) 114.2
-------- -------- -------- --------- --------
Total stockholders'
equity............. 1,451.7 1,442.7 1,898.1 (3,340.8) 1,451.7
-------- -------- -------- --------- --------
Total liabilities
and stockholders'
equity............. $1,451.7 $3,838.7 $2,588.0 $(4,495.0) $3,383.4
======== ======== ======== ========= ========
</TABLE>
CS-3
<PAGE>
<TABLE>
<CAPTION>
NEWMONT NEWMONT NEWMONT
MINING GOLD OTHER MINING CORP.
CORP. COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATING BALANCE
SHEETS:
AT DECEMBER 31, 1998
Cash and cash
equivalents........... $ -- $ 21.6 $ 57.5 $ -- $ 79.1
Short-term
investments........... -- 11.8 -- -- 11.8
Accounts receivable.... -- 445.6 30.0 (423.6) 52.0
Inventories............ -- -- 122.1 158.3 280.4
Other current assets... -- -- 33.0 56.8 89.8
-------- -------- -------- --------- --------
Current assets......... -- 622.3 314.4 (423.6) 513.1
-------- -------- -------- --------- --------
Property, plant and
mine development,
net................... -- 856.5 1,192.2 -- 2,048.7
Investment in
subsidiaries.......... 1,444.6 2,817.9 -- (4,262.5) --
Investment in Batu
Hijau................. -- -- 277.2 -- 277.2
Long-term inventory.... -- 143.3 16.4 -- 159.7
Other long-term
assets................ -- 168.2 2,094.8 (2,026.3) 236.7
-------- -------- -------- --------- --------
Total assets........... $1,444.6 $4,608.2 $3,895.0 $(6,712.4) $3,235.4
======== ======== ======== ========= ========
Liabilities
Current portion of
long-term debt........ $ -- $ 17.8 $ 29.8 $ -- $ 47.6
Accounts payable....... 5.1 17.2 439.2 (423.6) 37.9
Other accrued
liabilities........... -- 64.4 69.6 -- 134.0
-------- -------- -------- --------- --------
Current liabilities.... 5.1 99.4 538.6 (423.6) 219.5
-------- -------- -------- --------- --------
Long-term debt......... -- 902.5 298.6 -- 1,201.1
Reclamation and
remediation
liabilities........... -- 26.3 68.5 -- 94.8
Other long-term
liabilities........... -- 2,135.4 78.6 (2,026.3) 187.7
-------- -------- -------- --------- --------
Total liabilities...... 5.1 3,163.6 984.3 (2,449.9) 1,703.1
-------- -------- -------- --------- --------
Minority interest....... -- -- 92.8 -- 92.8
-------- -------- -------- --------- --------
Stockholders' Equity
Common stock........... 267.5 56.5 (56.5) 267.5
Additional paid-in
capital............... 1,060.8 592.1 2,154.3 (2,746.4) 1,060.8
Retained earnings...... 111.2 852.5 607.1 (1,459.6) 111.2
-------- -------- -------- --------- --------
Total stockholders'
equity................ 1,439.5 1,444.6 2,817.9 (4,262.5) 1,439.5
-------- -------- -------- --------- --------
Total liabilities and
stockholders' equity.. $1,444.6 $4,608.2 $3,895.0 $(6,712.4) $3,235.4
======== ======== ======== ========= ========
<CAPTION>
NEWMONT NEWMONT NEWMONT
MINING GOLD OTHER MINING CORP.
CORP. COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- -------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
CONSOLIDATING CASH
FLOWS:
YEAR ENDED DECEMBER 31,
1999
Operating activities
Net income............. $ 24.8 $ 24.8 $ 96.8 $ (121.6) $ 24.8
Adjustments to
reconcile net income
to net cash provided
by operating
activities............ 0.3 80.0 122.6 96.5 299.4
Change in working
capital............... (5.1) 37.8 45.1 -- 77.8
-------- -------- -------- --------- --------
Net cash provided by
operating activities.. 20.0 142.6 264.5 (25.1) 402.0
-------- -------- -------- --------- --------
Investing activities
Additions to property,
plant and mine
development........... -- (80.4) (140.6) -- (221.0)
Proceeds from sale of
future production..... -- 137.2 -- -- 137.2
Investments in
affiliates and Other.. -- -- ( 97.1) -- ( 97.1)
-------- -------- -------- --------- --------
Net cash provided by
(used for) investing
activities............ -- 56.8 (237.7) -- (180.9)
-------- -------- -------- --------- --------
Financing activities
Net repayments......... -- (192.9) (30.7) -- (223.6)
Dividends paid......... (20.1) (25.1) -- 25.1 (20.1)
Other.................. 0.1 (1.2) (0.1) -- (1.2)
-------- -------- -------- --------- --------
Net cash used for
financing activities... (20.0) (219.2) (30.8) 25.1 (244.9)
-------- -------- -------- --------- --------
Net decrease in cash and
cash equivalents....... 0.0 (19.8) (4.0) 0.0 (23.8)
Cash and cash
equivalents at
beginning of period.... -- 22.3 56.8 -- 79.1
-------- -------- -------- --------- --------
Cash and cash
equivalents at end of
period................. $ -- $ 2.5 $ 52.8 $ -- $ 55.3
======== ======== ======== ========= ========
</TABLE>
CS-4
<PAGE>
<TABLE>
<CAPTION>
NEWMONT NEWMONT NEWMONT
MINING GOLD OTHER MINING CORP.
CORP. COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------- ------------ ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
CONSOLIDATING CASH
FLOWS
YEAR ENDED DECEMBER 31,
1998
Operating activities
Net loss.............. $(393.4) $(391.5) $(306.5) $ 698.0 $(393.4)
Adjustments to
reconcile net loss to
net cash provided by
operating
activities........... 407.1 537.9 582.7 (713.0) 814.7
Change in working
capital.............. 5.1 (196.8) 143.9 -- (47.8)
------- ------- ------- ------- -------
Net cash provided by
(used for) operating
activities........... 18.8 (50.4) 420.1 (15.0) 373.5
------- ------- ------- ------- -------
Investing activities
Additions to property,
plant and mine
development.......... -- (61.3) (154.7) -- (216.0)
Investments in
affiliates and
Other................ -- -- (204.8) -- (204.8)
------- ------- ------- ------- -------
Net cash used for
investing
activities........... -- (61.3) (359.5) -- (420.8)
------- ------- ------- ------- -------
Financing activities
Net borrowings
(repayments)......... -- 63.2 (63.0) -- 0.2
Dividends paid........ (19.1) (15.0) -- 15.0 (19.1)
Other................. 0.3 -- (1.2) -- (0.9)
------- ------- ------- ------- -------
Net cash provided by
(used for) financing
activities............. (18.8) 48.2 (64.2) 15.0 (19.8)
------- ------- ------- ------- -------
Net decrease in cash and
cash equivalents....... 0.0 (63.5) (3.6) 0.0 (67.1)
Cash and cash
equivalents at
beginning of period.... -- 85.1 61.1 -- 146.2
------- ------- ------- ------- -------
Cash and cash
equivalents at end of
period................. $ -- $ 21.6 $ 57.5 $ -- $ 79.1
======= ======= ======= ======= =======
YEAR ENDED DECEMBER 31,
1997
Operating activities
Net income............ $ 68.4 $ 72.9 $ 61.9 $(134.8) $ 68.4
Adjustments to
reconcile net income
to net cash provided
by operating
activities........... (13.9) 45.1 217.3 76.6 325.1
Change in working
capital.............. -- (401.1) 291.4 -- (109.7)
------- ------- ------- ------- -------
Net cash provided by
(used for) operating
activities........... 54.5 (283.1) 570.6 (58.2) 283.8
------- ------- ------- ------- -------
Investing activities
Additions to property,
plant and mine
development.......... -- (78.8) (336.3) -- (415.1)
Investments in
affiliates and
Other................ (12.6) -- (10.0) 12.6 (10.0)
------- ------- ------- ------- -------
Net cash used for
investing
activities........... (12.6) (78.8) (346.3) 12.6 (425.1)
------- ------- ------- ------- -------
Financing activities
Net borrowings
(repayments)......... -- 316.0 (210.8) -- 105.2
Dividends paid........ (54.5) (58.2) -- 58.2 (54.5)
Other................. 12.6 12.6 (2.8) (12.6) 9.8
------- ------- ------- ------- -------
Net cash provided by
(used for) financing
activities............. (41.9) 270.4 (213.6) 45.6 60.5
------- ------- ------- ------- -------
Net increase (decrease)
in cash and cash
equivalents............ 0.0 (91.5) 10.7 0.0 (80.8)
Cash and cash
equivalents at
beginning of period.... -- 176.7 50.3 -- 227.0
------- ------- ------- ------- -------
Cash and cash
equivalents at end of
period................. $ -- $ 85.2 $ 61.0 $ -- $ 146.2
======= ======= ======= ======= =======
</TABLE>
CS-5
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of United States dollars)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Sales and other income
Copper sales.................................... $ 15,213 $ -- $ --
Interest income................................. 11 93 540
-------- -------- -------
<CAPTION>
15,224 93 540
<S> <C> <C> <C>
-------- -------- -------
Costs and expenses
Costs applicable to sales....................... 15,618 -- --
Depreciation, depletion and amortization........ 9,310 120 95
Exploration..................................... 24 1,471 2,233
General and administrative...................... 59 194 765
Interest expense................................ 11,967 -- --
Other........................................... 14,071 14,231 45
-------- -------- -------
<CAPTION>
51,049 16,016 3,138
<S> <C> <C> <C>
-------- -------- -------
Net loss before tax and cumulative effect of a
change
in accounting principle........................ (35,825) (15,923) (2,598)
Income tax benefit (expense)...................... 47,671 (3,361) --
-------- -------- -------
Net income (loss) before cumulative effect of a
change
in accounting principle........................ 11,846 (19,284) (2,598)
Cumulative effect of a change in accounting
principle...................................... -- (50,126) --
-------- -------- -------
Net income (loss)................................. $ 11,846 $(69,410) $(2,598)
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
NT-1
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of United States dollars)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1999 1998
---------- ----------
ASSETS
<S> <C> <C>
Assets
Cash and cash equivalents................................ $ 3,407 $ 5,694
Accounts receivable from affiliates...................... 62 159
Metal sales receivables.................................. 2,252 --
Value added taxes receivable............................. 35,000 --
Inventories.............................................. 94,744 8,181
Other.................................................... 2,077 3,542
---------- ----------
Current assets.......................................... 137,542 17,576
---------- ----------
Non-current assets
Ore inventory............................................ 14,417 --
Property, plant and mine development--net................ 1,948,398 1,430,260
Capitalized mining costs................................. 8,117 --
Debt issuance costs...................................... 26,849 25,446
Value added taxes receivable............................. 62,500 61,572
Deferred tax asset....................................... 50,738 --
Other.................................................... 100 100
---------- ----------
Non-current assets...................................... 2,111,119 1,517,378
---------- ----------
Total assets............................................ $2,248,661 $1,534,954
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses.................... $ 139,099 $ 110,045
Accounts payable affiliates.............................. 53,024 37,236
Deferred revenue......................................... 6,198 --
Taxes payable............................................ 4,906 5,785
Other.................................................... 4,418 --
---------- ----------
Current liabilities..................................... 207,645 153,066
Senior Debt.............................................. 1,000,000 640,000
Loans and accrued interest to partners................... 195,478 --
Reclamation liabilities.................................. 132 --
---------- ----------
Total liabilities....................................... 1,403,255 793,066
---------- ----------
Commitments and contingencies (Notes 12, 13 and 14)..... -- --
Minority interest in P.T. Newmont Nusa Tenggara........... -- --
---------- ----------
Partners' Equity
Capital account--Newmont Indonesia Limited............... 475,541 417,312
Capital account--Nusa Tenggara Mining Corporation........ 369,865 324,576
---------- ----------
Total partners' equity.................................. 845,406 741,888
---------- ----------
Total liabilities and partners' equity.................. $2,248,661 $1,534,954
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NT-2
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
CONSOLIDATED 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 part-
nership 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
Cash contributions............................... 51,566 40,106 91,672
Net income for the year.......................... 6,663 5,183 11,846
-------- -------- --------
Balance at December 31, 1999..................... $475,541 $369,865 $845,406
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NT-3
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of United States dollars)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities
Net income (loss)............................ $ 11,846 $ (69,410) $ (2,598)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation................................ 9,310 120 95
Deferred tax benefit........................ (50,738) -- --
Cumulative effect of a change in an account-
ing principle.............................. -- 50,126 --
(Increase) decrease in operating assets:
Accounts and other receivables............. (2,155) 9 --
Inventory.................................. (100,980) 8,181 --
Other assets............................... 177 (27,942) --
Increase (decrease) in operating liabili-
ties:
Accounts payable........................... 78,310 14,763 --
Other liabilities.......................... 13,725 3,628 --
--------- --------- ---------
Net cash used in operating activities........ (40,505) (20,525) (2,503)
--------- --------- ---------
Investing Activities
Taxes receivable............................ (35,928) (54,077) (7,494)
Additions to property, plant and mine devel-
opment..................................... (567,950) (806,597) (249,913)
--------- --------- ---------
Net cash used in investing activities........ (603,878) (860,674) (257,407)
--------- --------- ---------
Financing Activities
Equity contributions from Newmont Indonesia
Limited.................................... 51,566 130,838 42,581
Equity contributions from Nusa Tenggara Min-
ing Corporation............................ 40,106 101,763 272,412
Proceeds from short-term loan............... -- -- 79,765
Repayments of short-term loan............... -- -- (100,000)
Proceeds from senior debt................... 360,000 640,000 --
Proceeds from Partners (NIL & NTMC)......... 191,827 -- --
Debt issuance costs......................... (1,403) (1,390) (22,559)
--------- --------- ---------
Net cash provided by financing activities.... 642,096 871,211 272,199
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (2,287) (9,988) 12,289
Cash and cash equivalents at beginning of
year......................................... 5,694 15,682 3,393
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 3,407 $ 5,694 $ 15,682
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NT-4
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED 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 ("NMTC"), 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 that, with proven and probable
reserves of 10.5 billion pounds of copper and 11.8 million ounces of gold, has
a projected mine life in excess of 20 years. Operations commenced in the
fourth quarter of 1999, with initial sales of concentrate in December 1999.
The 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 was approximately US$1.83 billion.
NTP holds an 80% interest in P. T. Newmont Nusa Tenggara ("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
mine. 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 share of capital
contributions to PTNNT. Contributions made on behalf of PTPI are recoverable
by NTP from 70% of PTPI's share of future dividends from PTNNT. (See Note 9)
Substantially all Partnership transactions relate to its 80% interest in
PTNNT. Certain NTP and PTNNT actions and transactions require unanimous
approval of NTP partners.
Copper and gold mining requires the use of specialized facilities and
technology. PTNNT relies heavily on such facilities to reach and maintain
designed production levels. Also, the cash flow and profitability of PTNNT's
operations are 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 three years, Indonesia has experienced significant devaluation
of its currency, the Rupiah, with partial recovery during 1999. 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, PTNNT's activities have not been materially
affected by the economic, social and political situation in Indonesia,
primarily because they are located in a remote location.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENTS
The financial statements have been prepared using generally accepted
accounting principles of the United States ("U.S. GAAP").
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.
NT-5
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
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
reflected in current earnings.
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.
TAXES RECEIVABLE
PTNNT pays value added taxes ("VAT") on its purchases of goods and services.
VAT paid while in the "development stage" is statutorily refundable within a
twelve-month period from submission of a formal refund claim to the Indonesian
tax authorities. Beginning December 1999, VAT is refundable each month, up to
a maximum amount equal to 7% of the total concentrate export value. If the VAT
refund exceeds 7% of total concentrate export value, such excess is carried
forward to the next month and the cumulative unrecovered VAT refund is subject
to that month's maximum.
VAT payments and refunds are local currency transactions, 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 and are
classified as current or long-term based on expected refund date.
INVENTORIES
Current and noncurrent ore inventory and inventory in concentrate are stated
at the lower of average cost or net realizable market value. Included in the
valuation of these inventories are all direct cost associated with the mining
of the ore as well as an allocable portion of mine support costs. Depreciation
and amortization costs are not included in the valuation. The carrying value
for inventory in concentrate also includes related processing costs. Materials
and supplies inventories are valued at cost including tax and inland flight.
PROPERTY, PLANT AND MINE DEVELOPMENT
Expenditures for new facilities or expenditures that extend the useful lives
of existing facilities are capitalized at historical cost. Depreciation for
mining and milling life of mine assets is determined using unit-of-production
method based on useful life and estimated life of mine tonnage. Other assets
are depreciated on a straight-line basis over the estimated productive 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 a project are expensed
as incurred. (Note 5). This change resulted in expensing certain start-up
costs that totaled US$14.2 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.
The excess of the agreed fair 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 are amortized during the production life
of the Batu Hijau mine.
NT-6
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
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. NTP determines that a
mineral property can be economically developed only when proven and probable
reserves have been established. 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 assets carrying value exceeds its 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 pounds and 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, 1999, NTP
does not believe that impairment has occurred.
DEBT ISSUANCE COSTS
Costs incurred to arrange the third party senior debt for development of
PTNNT's Batu Hijau mine, including financial advisory fees, legal fees, loan
origination and commitment fees, accounting and tax advisory services, etc.,
were capitalized as deferred debt issuance costs. Such costs will be amortized
over the term of the loan when commercial production (as defined by the senior
debt agreement) begins using the effective interest method. Amortization of
debt issuance costs are included as a component of interest expense.
REVENUE RECOGNITION
Copper sales are recognized when the title to the concentrates is transferred
to the buyer which coincides with the transfer of the risk of loss that passes
to the buyer when the concentrates are moved over the vessel's rail at the
Port. Certain conditions are met prior to recognizing revenue. Such conditions
are (1) issuance of an initial assays and weight certificate, (2) issuance of
a provisional invoice and (3) loading of concentrates. Concentrate sales are
recorded based on 100% of a provisional sales price that is in accordance with
terms specified in customer contracts. Factors entering into the calculation
of the provisional sales price are (1) metals prices, pursuant to the terms of
related contracts, calculated using the price from the second calendar week
prior to shipment and based on the latest London Metals Exchange prices and
(2) treatment and refining charges. In accordance with contract terms, 90% of
the revenue is collected within three business days after concentrate arrive
at the smelter. The balance is received at final settlement and is based on
the average copper price in the third month after the month of arrival. Until
final settlement occurs, adjustments to the provisional sales price are made
to take into account metal price changes, based upon month-end market prices,
and metal quantity upon receipt of the final assay and weight certificate, if
different from the initial certificate. Final delivery to purchasers in Japan,
Korea and Australia takes approximately 14 days and to purchasers in Europe,
approximately 30 days. During the periods presented, the maximum price
adjustment was 5% for copper and 2% for gold. Risks associated with
recognition of sales on a provisional basis include metal price fluctuations
between the date recorded and the date of final settlement.
NT-7
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
DEFERRED REVENUE
Cash has been received by NTP on certain concentrates prior to shipment.
Proceeds received from such advance sales are recorded as deferred revenue and
are recognized in income when shipped.
MINING COSTS
Because of the diverse grade and waste-to-ore ratios over the mine life,
mining costs are capitalized and are charged to operations on the basis of the
average life-of-mine grade and waste-to-ore ratios per equivalent unit of
copper recovered.
RECLAMATION COSTS
Estimated future reclamation costs are based principally on legal, regulatory
and contractual requirements and are accrued and charged to operating expense
over the expected mine life using the unit-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 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.
PTNNT's deferred income tax assets include certain future tax benefits. PTNNT
records a valuation allowance against any portion of those deferred income tax
assets that it believes may more likely than not fail to be realized.
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. NTP is
subject to withholding taxes on certain payments made from Indonesia. Such
withholding taxes are included in income tax expense (benefit).
HEDGING
PTNNT does not acquire, hold or issue commodity instruments for trading or
speculative purposes. Financial instruments are used to manage copper price
risk. Copper is an internationally traded commodity, and its prices are
effectively determined by the LME. On a limited basis, PTNNT hedges sales
commitments by entering into copper swap contracts. Swap contracts are settled
at the LME average monthly price in accordance with the terms of the
contracts. Gains or losses on these contracts are recognized in income when
the hedged transaction occurs.
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," establishes accounting and reporting
standards for derivative instruments and hedging activities. SFAS No. 133 is
effective for quarters in all fiscal years beginning after June 15, 2000. SFAS
No. 133 requires recognition of derivative instruments on the balance sheet as
either assets or liabilities and measurement at fair market value. Changes in
the derivative's fair value will be recognized currently in earnings unless
specific hedge accounting criteria are met. Gains and losses must be recorded
in either other comprehensive income or current earnings, depending on the
nature of the instrument. Upon adoption of FAS 133, planned for January 2001,
PTNNT will record the fair value of its swap contracts qualifying as cash flow
hedges on the balance sheet and adjustments to such fair value at each
reporting date will be recorded in comprehensive income.
NT-8
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
COMPREHENSIVE INCOME
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 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 amount of revenues and
expenses during the reporting period. Actual amounts could differ from these
estimates.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform to the 1999
presentations.
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 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 fair value of NIL's
contributions over such historical cost, US$219.5 million, recorded as
deferred mineral rights.
4. INVENTORIES
<TABLE>
<CAPTION>
AT DECEMBER
31,
--------------
1999 1998
------- ------
(IN THOUSANDS
OF US$)
<S> <C> <C>
CURRENT:
Ore inventory................................................... $13,685 $ --
Inventory in concentrate........................................ $19,861 $ --
Materials and supplies.......................................... 61,198 8,181
------- ------
Total inventories............................................. $94,744 $8,181
------- ------
NON-CURRENT:
Ore inventory................................................... $14,417 $ --
------- ------
</TABLE>
NT-9
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
5. PROPERTY, PLANT AND MINE DEVELOPMENT
Property, plant and mine development consisted of the following (in thousands
of US$):
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Deferred mineral rights... $ 219,509 $ 219,509
Machinery and equipment... 269,059 22,715
Buildings and infrastruc-
ture..................... 1,018,047 --
Mine development.......... 157,871 140,006
Capitalized interest...... 66,545 27,116
Construction-in-progress.. 240,870 1,024,245
---------- ----------
1,971,901 1,433,591
Accumulated depreciation
and amortization......... (23,503) (3,331)
---------- ----------
Property, plant and mine
development--net......... $1,948,398 $1,430,260
========== ==========
Construction-in-progress primarily consisted of engineering, design and
construction-related costs for development of the Batu Hijau copper/gold
project.
6. ACCOUNTS PAYABLE AFFILIATES
Accounts payable affiliates was comprised of the following amounts (in
thousands of US$) and are described in Note 12.
<CAPTION>
AT DECEMBER 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Technology and Know How
Agreement Royalties--
NNHI..................... $ 26,272 $ 18,339
Technology and Know How
Agreement Royalties--
Sumitomo................. 20,434 14,264
Consulting Services Agree-
ment--NISL............... 2,316 1,254
Payroll Agency Agree-
ments--NIIL and NGELP.... 3,230 2,937
Other..................... 772 442
---------- ----------
Total................... $ 53,024 $ 37,236
========== ==========
</TABLE>
7. INCOME TAXES
NTPs Indonesian income tax (benefit) expense consisted of (in thousands US$):
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
---------------------
1999 1998 1997
-------- ------ ----
<S> <C> <C> <C>
Current................................................. $ 3,067 $3,361 $--
Deferred................................................ (50,738) -- --
-------- ------ ----
Total (benefit) expense............................... $(47,671) $3,361 $--
======== ====== ====
</TABLE>
NT-10
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NTP's income tax (benefit) differed from the amounts computed by applying the
Indonesian Contract of Work ("CoW") corporate income tax statutory rate for
the following reasons (in thousands of US$):
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER
31,
-------------------------
1999 1998 1997
-------- -------- -----
<S> <C> <C> <C>
Indonesian corporate income tax (benefit) at COW
rate.............................................. $(14,162) $ (9,392) $(829)
Valuation allowance on deferred tax assets......... (36,576) 9,392 829
-------- -------- -----
Income tax (benefit) expense....................... (50,738) -- --
-------- -------- -----
Income withholding tax............................. 3,067 3,361 --
======== ======== =====
Total (benefit) expense.......................... $(47,671) $ 3,361 $ --
======== ======== =====
Components of NTP's deferred income tax assets are as follows (in thousands of
US$):
<CAPTION>
AT DECEMBER 31,
------------------
1999 1998
-------- --------
<S> <C> <C> <C>
Deferred tax assets
Capitalized start-up costs......................... $ 19,198 $ 17,256
Exploration costs.................................. 15,467 15,464
Capitalized interest............................... 5,956 3,856
Net operating loss carry forward................... 9,793 4,211
Book depreciation.................................. 8,007 1,166
Other.............................................. 535 --
-------- --------
Gross deferred tax assets.......................... 58,956 41,953
Valuation allowance for deferred tax assets........ (5,377) (41,953)
-------- --------
Net deferred tax assets............................ 53,579 --
Deferred tax liabilities
Capitalized mining cost............................ (2,841)
-------- --------
Net deferred tax assets............................ $ 50,738 $ --
======== ========
</TABLE>
Primarily based on estimates of future sources of taxable income, PTNNT
believes that it, more likely than not, will utilize US$53.6 million of the
US$59.0 million of deferred income tax assets at December 31, 1999. This
estimate reflects a valuation allowance of US$5.4 million.
8. DEBT
SENIOR DEBT
On July 30, 1997, PTNNT entered into a US$1.0 billion project financing
facility for the Batu Hijau project ("Senior Debt"), of which US$1.0 billion
and US$640 million was outstanding as of December 31, 1999 and 1998,
respectively. The Senior Debt includes commitments from three export-credit
agencies with participation by various commercial banks. An NMC subsidiary and
Sumitomo Corporation ("Sumitomo") guarantee the Senior Debt, 56.25% and 43.75%
respectively, until certain operational completion tests are met at which time
the Senior Debt becomes non-recourse to the NMC subsidiary and Sumitomo. The
fair value cannot be practicably determined due to the lack of available
market information for this type of debt.
Repayment of borrowings under the Senior debt will be in semi-annual
installments of US$43.5 million over a 13-year period beginning the earlier of
six months after operational completion tests are met or June 15, 2001.
NT-11
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Completion tests are expected to be met during 2000. The interest rate is
based on blended fixed and floating rates and at current market rates on
December 31, 1999, the weighted average interest rate would be approximately
7.4% post-completion. The weighted average interest rates were 6.4% and 6.2 %
during 1999 and 1998, respectively, and 6.6% and 5.5% at December 31, 1999 and
December 31, 1998, respectively.
Senior Debt covenants, conditions, warranties and representations 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 $1 billion Senior Debt, except for "Permitted Indebtedness", which
includes subordinated debt from NTP, unsecured working capital debt with
maturity not in excess of one year and not exceeding $35 million, and other
indebtedness with aggregate principal not to exceed $5 million at any one
time.
c. Senior Loans/Sponsor Funding Ratio--The ratio of outstanding funds under
the Senior Debt to the aggregate Sponsor Funding shall not exceed 55:45.
"Restricted Payments"--Prior to the later of operational completion and the
first scheduled principal repayment date of the Senior Debt, PTNNT is
prohibited from making any 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, Restricted Payments can be made provided certain
conditions and financial ratios are met.
LOANS AND ACCRUED INTEREST TO PARTNERS
On April 19, 1999, amended on November 1, 1999, PTNNT entered into separate
shareholder subordinated loan agreements with NIL and NTMC ("Sponsor Loans")
under which $191.8 million of principal and $3.7 million of accrued interest
was outstanding at December 31, 1999. Borrowings under Sponsor Loans are
guaranteed by NTP and are payable on demand, subject to Senior Debt
subordination terms. The interest rate is based on SIBOR and the interest rate
on any unpaid interest is based on SIBOR plus 1%. The weighted average
interest rate during 1999 was 5.83% and at December 31, 1999 was 6.13%.
Payments of Sponsor Loan principal and interest are Restricted Payments under
provisions of the Senior Debt.
9. 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$177.3
million and US$85.6 million at December 31, 1999 and 1998, respectively.
PTPI's share of such capital was funded with loans from NIL and NTMC, through
NTP, and totaled US$35.5 million and US$17.1 million at December 31, 1999 and
1998, respectively. These loans are subject to interest at the six-month 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 Acknowledgement
of Indebtedness and Assignment of Dividends agreement with NIL. Interest
accrued under these loans are fully reserved until recoverability of such
interest is determined.
10. MAJOR CUSTOMERS AND EXPORT SALES
PTNNT sells its concentrates primarily pursuant to long-term sales agreements.
As a percentage of total sales, 100% were pursuant to such contracts during
1999, and two Japanese customers accounted for $13.8 million, and $4.0 million
of total sales, each of which accounted for more than 10% of total sales, and
together accounted for 96% of total sales.
NT-12
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
11. SUPPLEMENTAL CASH FLOW INFORMATION
Excluded from the consolidated statements of cash flows were the effects of
non-cash transactions wherein PTNNT purchased spare parts inventory, but
defers payment until such inventory is used. The amount so purchased was
US$12.5 million at December 31, 1999 and was US$6.8 million at December 31,
1998.
Interest paid net of amounts capitalized totaled US$6.1 million in 1999. All
interest incurred during 1998 and 1997 was capitalized as property, plant and
mine development.
Taxes paid consisting of withholding taxes on interest earned, was US$3.1
million, $3.4 million and none in 1999, 1998 and 1997 respectively.
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 affiliate 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.
A similar Technology and Know-How Agreement was executed with Sumitomo
Corporation 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$17.3 million, US$25.5 million
and US$9.9 million during 1999, 1998 and 1997, respectively. The associated
liabilities at December 31, 1999 and 1998 were US$46.7 million and US$32.6
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 the
Republic 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$6.1 million in 1999, US$4.6 million in
1998 and US$14.5 million in 1997 and Accounts payable affiliates included
US$2.3 and US$1.3 million at December 31, 1999 and 1998, respectively (Note
6).
PTNNT has a similar Consulting Services Agreement with NTMC. Pursuant to this
agreement, charges totaled US$0.7 million in 1999, US$1.2 million in 1998 and
US$1.4 million in 1997, and no amounts were payable at December 31, 1999 and
1998 (Note 6).
PAYROLL AGENCY AGREEMENTS
PTNNT entered into Payroll Agency Agreements with Newmont Indonesia Investment
Limited ("NIIL") and Newmont Global Employment Limited Partnership ("NGELP"),
wholly-owned subsidiaries of NMC, whereby
NT-13
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NIIL and NGELP agreed to act as agents of PTNNT to handle 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 the agents for salaries,
related employee benefits and other reasonable expenses and pays a fee of
US$20 for each salary payment made. Agency payments totaled US$15.1 million in
1999 and US$9.0 million in 1998 and US$3.3 million in 1997, and Accounts
payable affiliates included US$3.2 and US$2.9 million at December 31, 1999 and
1998, respectively (Note 6).
BATU HIJAU PROJECT ENGINEERING AND CONSTRUCTION AGREEMENTS
PTNNT 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 1999, 1998 and 1997, US$301 million, US$437 million and US$121 million,
respectively, were charged for such services and accounts payable and accrued
liabilities included US$18 million and US$72 million at December 31, 1999 and
1998, respectively.
PTNNT entered into an Off-Shore Agreement with Fluor Daniel Engineers and
Constructors, Ltd. ("FDEC") whereby FDEC agreed to perform the engineering
design and procurement of equipment for PTNNT's processing facilities and
related infrastructure, and provide project management, procurement,
engineering and construction management. Such services were 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 1999, 1998 and 1997, US$91 million, US$609 million and US$174 million,
respectively, were charged for such services and accounts payable and accrued
liabilities included US$6 million and US$37 million at December 31, 1999 and
1998, respectively.
MAINTENANCE AND REPAIR COST AGREEMENTS
During 1999, PTNNT entered into a long term Maintenance and Repair Cost
agreements ("MARC") with PT Trakindo Utama ("Trakindo"), an Indonesian
company, to provide maintenance on PTNNT's Caterpillar equipment at a fixed
cost per operating hour. Under the terms of the MARC agreements, Trakindo will
provide all normal "wear and tear" parts and labor necessary to perform
maintenance and repairs on such equipment. Either party can cancel the
contracts with one year written notice.
13. HEDGING PROGRAMS
In September 1999, PTNNT entered into a hedging transaction, referred to as a
swap contract, for 12,000 metric tonnes (MT) of copper, or 1,000 MT per month
beginning March 2000. This contract allows PTNNT to realize US$2,000 per MT
(about $91 cents per pound), if the LME copper price is at or above a stated
reference level US$1,600 per MT (about 73 cents per pound). The fair value of
the contract at December 31, 1999 was a negative US$47 thousand.
14. 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 operations 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.
NT-14
<PAGE>
NUSA TENGGARA PARTNERSHIP V.O.F.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
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 proceedings 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.
15. SUBSEQUENT EVENTS
On January 5, 2000, PTNNT entered into separate shareholder subordinated loan
agreements ("Second Sponsor Loans") with NIL and NTMC aggregating
US$29,812,500 and US$23,187,500, respectively. The terms of the Second Sponsor
Loans are similar to the Sponsor Loans described in Note 8 where; (i)
borrowings are guaranteed by NTP and are payable on demand, subject to Senior
Debt subordination terms, (ii) interest rates are based on SIBOR for principal
and SIBOR plus 1% for unpaid accrued interest and (iii) loan repayments and
interest are Restricted Payments under provisions of the Senior.
NT-15
<PAGE>
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
/s/ Timothy J. Schmitt
By: _________________________________
TIMOTHY J. SCHMITT
Vice President, Secretary and
Assistant General Counsel
November 21, 2000
S-1
<PAGE>
NEWMONT MINING CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3(a) --Restated Certificate of Incorporation. Incorporated by reference to
Exhibit 3.1 to registrant's Registration Statement on Form S-4 filed
on November 21, 2000.
3(b) --By-Laws as amended through September 15, 1999 and adopted September
15, 1999. Incorporated by reference to Exhibit 3(a) to registrant's
current report on Form 8-K filed on September 6, 2000.
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 31, 2000 between registrant and Chase
Mellon Shareholder Services LLC, as Rights Agent. Incorporated by
reference to Exhibit 4.1 to registrant's Registration Statement on
Form 8-A dated September 6, 2000.
4(b) --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(c) --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(d) --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(e) --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(f) --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).
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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. Incorporated by reference to Exhibit 10(d) to registrant's
Annual Report on Form 10-K for the year ended December 31, 1998.
10(e) --1999 Employees Stock Plan. Incorporated by reference to Exhibit 10(e)
to registrant's Annual Report on Form 10-K for the year ended December
31, 1998.
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.
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) --Agreement dated as of February 1, 1999 among registrant, Newmont Gold
Company and Ronald C. Cambre. Incorporated by reference to Exhibit
10(b) to registrant's Current Report on Form
8-K, dated July 12, 1999.
10(m) --Annual Incentive Compensation Plan dated as of January 1, 1999.
Incorporated by reference to Exhibit 10(a) to registrant's Current
Report on Form 8-K, dated July 12, 1999.
10(n) --Newmont Gold Company Intermediate Term Incentive Compensation Plan
amended and restated as of January 1, 1998. Incorporated by reference
to Exhibit 10(l) to registrant's Annual Report on Form 10-K for the
year ended December 31, 1998.
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10(o) --Executive Change of Control Severance Plan dated as of February 1,
1999. Incorporated by reference to Exhibit 10(n) to registrant's Annual
Report on Form 10-K for the year ended December 31, 1998.
10(p) --Directors' Stock Award Plan. Incorporated by reference to Exhibit
10(o) to registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.
10(q) --Certificate of Ownership and Merger dated as of October 6, 1998,
merging NGC Acquisition Co. into Newmont Gold Company. Incorporated by
reference to Exhibit 10(p) to registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.
10(r) --Agreement dated September 15, 1999 among registrant, Newmont Gold
Company and Bruce D. Hansen. Incorporated by reference to Exhibit 10(a)
to registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999.
10(s) --Agreement dated August 20, 1999 with respect to estate tax
equalization between Newmont Gold Company and John A. S. Dow, as
Executive, and Executive's Spouse. Incorporated by reference to Exhibit
10(b) to registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999.
10(t) --Agreement dated February 1, 1999 among registrant, Newmont Gold
Company and Lawrence T. Kurlander. Incorporated by reference to Exhibit
10(a) to registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999.
10(u) --Agreement dated February 1, 1999 among registrant, Newmont Gold
Company and certain executive officers. Incorporated by reference to
Exhibit 10(b) to registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.
10(v) --Letter Agreement dated August 1, 1999 between Wayne W. Murdy and
registrant.*
12 --Statement re Computation of Ratio of Earnings to Fixed Charges.*
13 --Those portions of registrant's 1999 Annual Report to Stockholders that
are incorporated herein by reference.*
21 --Subsidiaries of registrant.*
23 --Consent of Arthur Andersen LLP.
27 --Financial Data Schedules.*
99 --Consulting Agreement dated April 1, 1999 between Newmont International
Services Limited and Robert J. Miller. Incorporated by reference to
Exhibit 99 to registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.*
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* Filed with Form 10-K on March 28, 2000
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