<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2000
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 1-1153
NEWMONT MINING CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2526632
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Denver, Colorado 80203
------------------------------------- ------
(Address of principal executive offices) (Zip Code)
303-863-7414
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] No
There were 168,200,894 shares of common stock outstanding on November 13, 2000.
<PAGE>
PART I - FINANCIAL INFORMATION
-------------------------------
ITEM 1. Financial Statements
------------------------------
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
September 30,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Sales and other income
Sales $362,031 $327,964
Dividends, interest and other 2,210 9,874
-------- --------
364,241 337,838
-------- --------
Costs and expenses
Costs applicable to sales 218,552 206,567
Depreciation and depletion 73,671 60,703
Exploration and research 17,504 14,310
General and administrative 15,849 12,562
Interest, net of capitalized interest of $2,189
and $6,498, respectively 19,246 14,662
Expenses for acquisition settlement 42,181 --
Other 13,306 4,039
-------- --------
400,309 312,843
-------- --------
Operating income (loss) (36,068) 24,995
Unrealized mark-to-market gain (loss) on call options 24,123 (51,343)
-------- --------
Pre-tax loss before minority interest and equity income (loss) (11,945) (26,348)
Income tax benefit 11,524 7,816
Minority interest in income of Minera Yanacocha (18,942) (19,151)
Equity income (loss) of affiliate 666 (1,352)
-------- --------
Net loss $(18,697) $(39,035)
======== ========
Other comprehensive loss, net of tax
Unrealized holding gain (loss) on investment securities 14 (5,484)
-------- --------
Comprehensive loss $(18,683) $(44,519)
======== ========
Net loss per common share, basic and diluted $ (0.11) $ (0.23)
======== ========
Basic and diluted weighted average shares outstanding 168,051 167,523
Cash dividends declared per common share $ 0.03 $ 0.03
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
2000 1999
----------- ----------
<S> <C> <C>
Sales and other income
Sales $ 1,075,928 $ 970,860
Dividends, interest and other 7,743 30,176
----------- ----------
1,083,671 1,001,036
----------- ----------
Costs and expenses
Costs applicable to sales 630,700 601,016
Depreciation and depletion 203,620 180,651
Exploration and research 48,279 40,210
General and administrative 40,736 37,837
Interest, net of capitalized interest of $4,039
and $15,936, respectively 59,834 50,139
Expenses for acquisition settlement 42,181 --
Other 17,878 8,359
----------- ----------
1,043,228 918,212
----------- ----------
Operating income 40,443 82,824
Unrealized mark-to-market gain (loss) on call options 13,054 (51,343)
----------- ----------
Pre-tax income before minority interest and equity loss 53,497 31,481
Income tax benefit 569 102
Minority interest in income of Minera Yanacocha (67,717) (44,273)
Equity loss of affiliate (14,735) (9,333)
----------- ----------
Net loss $ (28,386) $ (22,023)
=========== ==========
Other comprehensive loss, net of tax
Unrealized holding loss on investment securities (32) (198)
----------- ----------
Comprehensive loss $ (28,418) $ (22,221)
=========== ==========
Net loss per common share, basic and diluted $ (0.17) $ (0.13)
=========== ==========
Basic and diluted weighted average shares outstanding 167,874 167,412
Cash dividends declared per common share $ 0.09 $ 0.09
=========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 48,306 $ 55,314
Short-term investments 5,733 9,414
Accounts receivable 48,000 40,553
Inventories 364,763 322,614
Other current assets 81,131 106,158
---------- ----------
Current assets 547,933 534,053
Property, plant and mine development, net 1,940,990 1,972,348
Investment in Batu Hijau 534,137 438,318
Long-term inventory 173,169 171,206
Deferred income tax assets 226,854 197,456
Other long-term assets 41,335 70,001
---------- ----------
Total assets $3,464,418 $3,383,382
========== ==========
Liabilities
Current portion of long-term debt $ 28,328 $ 23,293
Accounts payable 47,501 38,039
Current portion of deferred income tax liabilities 7,380 29,520
Other accrued liabilities 162,367 183,021
---------- ----------
Current liabilities 245,576 273,873
Long-term debt 1,065,280 1,014,193
Reclamation and remediation liabilities 112,496 104,677
Deferred revenue from sale of future production 137,198 137,198
Fair value of written call options 69,380 82,434
Other long-term liabilities 210,789 193,002
---------- ----------
Total liabilities 1,840,719 1,805,377
---------- ----------
Contingencies (Note 8)
Minority interest in Minera Yanacocha 164,852 126,357
---------- ----------
Stockholders' equity
Common stock 269,071 268,262
Additional paid-in capital 1,079,071 1,069,146
Stock to be issued for acquisition settlement 40,000 --
Retained earnings 70,705 114,240
---------- ----------
Total stockholders' equity 1,458,847 1,451,648
---------- ----------
Total liabilities and stockholders' equity $3,464,418 $3,383,382
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Operating activities:
Net loss $ (28,386) $ (22,023)
Adjustments to reconcile net loss to cash provided
by operating activities:
Depreciation and depletion 203,620 180,651
Amortization of capitalized mining costs 62,814 16,188
Amortization of put option premiums 16,842 12,222
Unrealized mark-to-market (gain) loss on call options (13,054) 51,343
Deferred taxes (18,125) (46,462)
Stock to be issued for acquisition settlement 40,000 --
Minority interest, net of dividends 38,495 24,812
Undistributed earnings of affiliates 14,735 9,333
Gain on sale of assets and Other (312) (21,620)
(Increase) decrease in operating assets:
Accounts receivable (3,643) 17,873
Inventories (44,112) (27,099)
Other assets (13,230) (12,027)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 9,945 (298)
Other liabilities 20,504 22,300
--------- ---------
Net cash provided by operating activities 286,093 205,193
--------- ---------
Investing activities:
Additions to property, plant and mine development (236,350) (159,641)
Advances to joint venture and affiliates, net (95,048) (117,971)
Proceeds from sale of future gold production, net -- 137,198
Proceeds from asset sales and other (3,876) 40,081
--------- ---------
Net cash used in investing activities (335,274) (100,333)
--------- ---------
Financing activities:
Proceeds from long-term borrowings 384,000 127,000
Repayments of long-term borrowings (327,890) (274,154)
Dividends paid on common stock (15,118) (15,069)
Other 1,181 (978)
--------- ---------
Net cash provided by (used in) financing activities 42,173 (163,201)
--------- ---------
Net change in cash and cash equivalents (7,008) (58,341)
Cash and cash equivalents at beginning of period 55,314 79,086
--------- ---------
Cash and cash equivalents at end of period $ 48,306 $ 20,745
========= =========
Supplemental information:
Interest paid, net of amounts capitalized of $4,039 and
$15,936, respectively $ 65,043 $ 56,600
Income taxes paid $ 60,614 $ 22,862
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Preparation of Financial Statements
--------------------------------------------
These unaudited interim consolidated financial statements of Newmont Mining
Corporation ("NMC"), formerly Newmont Gold Company, and its subsidiaries
(collectively, the "Company") have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission. Such rules and
regulations allow the omission of certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles as long as the statements are not misleading. In
the opinion of management, all adjustments necessary for a fair presentation of
these interim statements have been included and are of a normal recurring
nature. These interim financial statements should be read in conjunction with
the financial statements of the Company included in its 1999 Annual Report on
Form 10-K.
On May 15, 2000, the Company completed a merger in which its parent holding
company, Newmont Mining Corporation, was merged into Newmont Gold Company,
eliminating the holding company structure. The parent holding company's sole
assets were the shares of Newmont Gold Company common stock. In that merger,
the name of Newmont Gold Company was changed to Newmont Mining Corporation.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
(2) Pending Merger
On June 21, 2000, the Company and Battle Mountain Gold Company, a Nevada
corporation, entered into an Agreement and Plan of Merger. Upon consummation of
the merger, Battle Mountain will become a wholly owned subsidiary of NMC subject
to the satisfaction or waiver of the conditions set forth in the merger
agreement. Each share of Battle Mountain common stock issued and outstanding
immediately prior to the effective time of the Merger will be converted into the
right to receive 0.105 of a share of NMC common stock. Under a separate Canadian
statutory arrangement, each outstanding exchangeable share of Battle Mountain
Canada Ltd., a subsidiary of Battle Mountain, will also be converted into the
right to receive 0.105 of a share of NMC common stock. NMC will also exchange
shares of newly issued $3.25 convertible preferred stock for all outstanding
shares of Battle Mountain $3.25 convertible preferred stock. The transaction
will be accounted for as a pooling of interests, and as such, future
consolidated financial statements will include Battle Mountain's financial data
as if Battle Mountain had always been a part of NMC. The merger transaction is
intended to be completed by the end of 2000 following customary regulatory
approvals and approval of Battle Mountain and Battle Mountain Canada
shareholders subject to the satisfaction or waiver of the conditions set forth
in the merger agreement between the parties.
6
<PAGE>
The following unaudited pro forma combined financial data is presented for
informational purposes only. They are not necessarily indicative of the results
of operations or of the financial position that would have occurred had the
Battle Mountain merger been completed during the periods or as of the date for
which the pro forma data are presented. They are also not necessarily indicative
of the combined company's future results of operations or financial position. In
particular, the Company expects to realize significant operating cost savings as
a result of the merger. No adjustment has been included in the pro forma
combined financial data for these anticipated savings. The Company expects to
incur one-time combined merger expenses of approximately $35 million, of which
$20 million primarily relates to investment advisory and professional fees and
$15 million to employee benefit and severance costs. These expenses will be
charged to income in the period incurred. A provision for $20 million of these
expenses is reflected in the combined balance sheet data. Pro forma per share
amounts for the combined company are based on the exchange ratio of 0.105 of a
share of NMC common stock for each share of Battle Mountain common stock and
each Battle Mountain Canada exchangeable share.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Three Months Nine Months Year Ended
------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Combined Statement of Operations Data Ended September 30, Ended September 30, December 31,
------------------------------------------------------------------------------------------------------------------------------------
(in millions, except per share amounts) 2000 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Sales $ 419.4 $ 1255.0 $ 1,627.1
------------------------------------------------------------------------------------------------------------------------------------
Net loss applicable to common shares $ (34.9) $ (57.3) $ (102.1)
------------------------------------------------------------------------------------------------------------------------------------
Net loss per common share, basic and diluted $ (0.18) $ (0.30) $ (0.53)
------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares and assumed on conversion 192.2 192.0 191.6
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Pro Forma Combined Balance Sheet Data:
-------------------------------------------------------------------------------------
(in millions) At September 30, 2000
-------------------------------------------------------------------------------------
<S> <C>
-------------------------------------------------------------------------------------
Total assets $ 3,895.7
-------------------------------------------------------------------------------------
Total shareholders' equity $ 1,501.7
-------------------------------------------------------------------------------------
Book value per common share $ 7.81
-------------------------------------------------------------------------------------
</TABLE>
(3) Inventories
-----------
<TABLE>
<CAPTION>
At Sept. 30, At December 31,
2000 1999
------------ ---------------
(In thousands)
<S> <C> <C>
Current:
Ore and in-process inventories $ 238,824 $ 190,576
Precious metals 40,497 52,525
Materials and supplies 85,442 78,461
Other -- 1,052
------------ ---------------
$ 364,763 $ 322,614
============ ===============
Non-current:
Ore in stockpiles $ 173,169 $ 171,206
============ ===============
</TABLE>
(4) Batu Hijau
----------
The Company and Sumitomo Corporation ("Sumitomo") are partners in the Nusa
Tengarra Partnership ("NTP") that holds 80% of P.T. Newmont Nusa Tengarra
("PTNNT"), the owner of the Batu Hijau mine in Indonesia. As a result of this
ownership structure, the Company and Sumitomo have an indirect 45% and 35%
interest, respectively, in the Batu Hijau mine. The remaining 20% interest is
held by an unrelated Indonesian company. Because the Company and Sumitomo have
carried the investment of the 20% owner, until recouping its construction
investment, including interest, the Company recognizes 56.25% of Batu Hijau's
net income (loss). The Company accounts for its investment in Batu Hijau as an
equity investment based on each partner's significant participating rights in
the business and the unanimous approval required for major partnership
decisions. At September 30, 2000 and December 31, 1999, the Company's
investment in Batu Hijau was $534.1 million and $438.3 million, respectively,
based on U.S. generally accepted accounting principles. Differences between
56.25% of the partnership's net assets and the Company's investment include (i)
$220 million for the fair market value adjustment recorded by the partnership
(in conjunction with the Company's initial contribution of its investment in
PTNNT), (ii) $19 million for intercompany charges, (iii) $122 million for the
fair market value adjustment recorded by the Company in conjunction with its
acquisition of the minority interest in its subsidiary, and (iv) $160 million
for contributions recorded by the Company that were classified as debt by NTP.
Certain of these amounts are amortized or depreciated on a unit-of-production
basis. The Company's investment also excludes $42 million for exploration
expenses incurred prior to the formation of NTP. The difference between 56.25%
of NTP's net income and Equity in income (loss) of affiliate results from the
elimination of intercompany interest and management fees.
7
<PAGE>
Production at Batu Hijau began in the fourth quarter of 1999. Project
development was funded by $1.0 billion from third party loans and $0.83 billion
from the Company and Sumitomo. The loans were guaranteed by the Company and
Sumitomo, 56.25% and 43.75%, respectively, until project completion tests were
met in October 2000, at which time the loans became non-recourse to the Company
and Sumitomo. Repayment of the loans of $43.5 million semi-annually will be
over a 13-year period beginning April 2001, and will bear interest at blended
fixed and floating rates.
Following is NTP summarized financial information based on U.S. generally
accepted accounting principles (in thousands):
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 111,654 $ -- $ 284,817 $ --
Net loss $ (13,755) $ (3,312) $ (64,103) $ (18,583)
Dividends received $ -- $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
At September 30, At December 31,
2000 1999
---------------- ---------------
<S> <C> <C>
Current assets $ 216,395 $ 137,542
Property, plant and mine development, net $ 2,021,549 $ 1,956,515
Other assets $ 130,560 $ 154,604
Current liabilities $ 214,998 $ 207,645
Long-term debt $ 1,000,000 $ 1,000,000
Debt and related interest to affiliates $ 264,254 $ 195,478
Other liabilities $ 1,495 $ 132
</TABLE>
(5) Acquisition Settlement
----------------------
In the third quarter of 2000, the Company resolved a long-standing legal
dispute regarding the acquisition of an additional interest in Minera Yanacocha,
a gold mining operation located in Peru. The Company will issue $40 million of
NMC common stock under terms of the settlement and, including expenses, $42.2
million was charged to income in the third quarter of 2000. The number of shares
of common stock to be issued will be based on the weighted average stock price
for 20 consecutive trading days ending approximately three trading days prior to
closing, which is anticipated before the end of 2000.
Prior to 1997, the Company's interest in Minera Yanacocha was 38% and was
accounted for on an equity basis. Beginning in 1997, when the additional 13.35%
interest was deemed to be acquired, Minera Yanacocha was consolidated into the
Company's financial statements. The acquisition was disputed as described below.
In November 1993, the French government announced its intention to
privatize the mining assets of Bureau de Recherches Geologiques et Minieres, the
geological and mining bureau of the French government ("BRGM") and in September
1994, BRGM announced its intention to transfer its 24.7% interest in Minera
Yanacocha to a third party. The Company and Compania de Minas Buenaventura, S.A.
("Buenaventura"), then 38.0% and 32.3% owners of Minera Yanacocha, respectively,
filed suit in Peru to seek enforcement of their preemptive rights with respect
to the proposed BRGM transfer. In September 1996, the trial court ruled in favor
of the Company and Buenaventura and held that the preemptive rights were
triggered in November 1993, and that the value of the 24.7% interest was $109.3
million. In June 1998, the Peruvian Supreme Court issued a resolution upholding
the decision.
In spite of the final decision of the Peruvian Supreme Court, in October
1998, BRGM, through its subsidiary Compagnie Miniere International Or S.A.
("Mine Or"), filed with the International Centre for Settlement of Investment
Disputes a request for arbitration against the Republic of Peru. The request
alleged that the decision of the Peruvian courts wrongfully deprived Mine Or of
its shares in Minera Yanacocha (which Mine Or valued at approximately $560
million) and sought restitution and damages from the Republic of Peru.
Under the settlement, all pending litigation and arbitration claims will be
dismissed, including the BRGM's claims against the government of Peru. The
settlement is subject to customary closing conditions and is expected to be
completed late this year.
(6) Comprehensive Income
--------------------
Comprehensive income in the third quarter of 1999 reflected the reversal of
an unrealized holding gain on equity securities in another mining company that
was realized early in the third quarter of 1999 and included in Dividends,
interest and other.
8
<PAGE>
(7) Segment Information
-------------------
The Company predominantly operates in a single industry as a worldwide
corporation engaged in gold production, exploration for gold and acquisition of
gold properties. The Company has operations in the North America, Peru (Minera
Yanacocha), Indonesia (Minahasa) and Uzbekistan (Zarafshan-Newmont) and its
reportable segments are based on the geographic location of these operations.
Earnings from operations do not include general corporate expenses, interest
(except project-specific interest) or income taxes (except for equity
investments).
Financial information relating to the Company's consolidated segments is as
follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended September 30, 2000
---------------------------------------------------------------------------------------
North American Minera Zarafshan
Operations Yanacocha* Minahasa Newmont Other Consolidated
-------------- ---------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 203.1 $ 115.7 $ 26.4 $ 16.8 $ -- $ 362.0
Interest income $ -- $ 0.5 $ -- $ -- $ 0.4 $ 0.9
Interest expense $ -- $ 0.7 $ -- $ 0.4 $ 18.1 $ 19.2
Depreciation and amortization $ 39.9 $ 21.3 $ 6.6 $ 4.4 $ 1.5 $ 73.7
Pre-tax income (loss) before
minority interest and equity loss $ (7.2) $ 45.9 $ 9.1 $ 4.4 $ (64.1) $ (11.9)
Capital expenditures $ 30.4 $ 66.8 $ -- $ 0.7 $ 1.8 $ 99.7
*Not reduced for minority interest
<CAPTION>
Three Months Ended September 30, 1999
---------------------------------------------------------------------------------------
North American Minera Zarafshan
Operations Yanacocha* Minahasa Newmont Other Consolidated
-------------- ---------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 161.5 $ 113.9 $ 32.0 $ 20.6 $ -- $ 328.0
Interest income $ -- $ 1.1 $ -- $ -- $ 1.1 $ 2.2
Interest expense $ 0.1 $ 1.7 $ -- $ 0.7 $ 12.2 $ 14.7
Depreciation and amortization $ 33.1 $ 17.6 $ 5.9 $ 2.8 $ 1.3 $ 60.7
Pre-tax income (loss) before
minority interest and equity loss $ (9.6) $ 49.2 $ 15.5 $ 5.1 $ (86.5) $ (26.3)
Capital expenditures $ 18.4 $ 56.4 $ 4.4 $ 0.7 $ 2.4 $ 82.3
*Not reduced for minority interest
<CAPTION>
Nine Months Ended September 30, 2000
---------------------------------------------------------------------------------------
North American Minera Zarafshan
Operations Yanacocha* Minahasa Newmont Other Consolidated
-------------- ---------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 582.2 $ 356.0 $ 86.5 $ 51.2 $ -- $1,075.9
Interest income $ -- $ 3.0 $ 0.1 $ -- $ 1.8 $ 4.9
Interest expense $ 0.2 $ 4.0 $ -- $ 1.4 $ 54.2 $ 59.8
Depreciation and amortization $ 115.2 $ 54.6 $ 18.3 $ 10.1 $ 5.4 $ 203.6
Pre-tax income (loss) before
minority interest and equity loss $ (7.0) $ 167.7 $ 32.2 $ 17.2 $(156.6) $ 53.5
Capital expenditures $ 70.9 $ 151.5 $ 2.3 $ 3.0 $ 8.7 $ 236.4
*Not reduced for minority interest
<CAPTION>
Nine Months Ended September 30, 1999
---------------------------------------------------------------------------------------
North American Minera Zarafshan
Operations Yanacocha* Minahasa Newmont Other Consolidated
-------------- ---------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 525.2 $ 310.2 $ 81.2 $ 54.3 $ -- $ 970.9
Interest income $ -- $ 3.2 $ 0.1 $ -- $ 3.7 $ 7.0
Interest expense $ 0.3 $ 6.0 $ -- $ 2.1 $ 41.7 $ 50.1
Depreciation and amortization $ 98.3 $ 52.6 $ 17.4 $ 8.4 $ 4.0 $ 180.7
Pre-tax income (loss) before
minority interest and equity loss $ 9.9 $ 117.5 $ 35.4 $ 10.0 $(143.5) $ 31.5
Capital expenditures $ 46.6 $ 90.2 $ 9.1 $ 2.2 $ 11.5 $ 159.6
*Not reduced for minority interest
</TABLE>
9
<PAGE>
The Company operates the Batu Hijau mine in Indonesia that is accounted for as
an equity investment. Batu Hijau financial information, based on U.S. generally
accepted accounting principles, was as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------------------------------------------------------
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 111.6 $ -- $ 284.5 $ --
-------------------------------------------------------------------------------------------------
Interest expense $ 37.7 $ -- $ 93.7 $ --
-------------------------------------------------------------------------------------------------
Depreciation and amortization $ 19.1 $ -- $ 56.0 $ --
-------------------------------------------------------------------------------------------------
Net loss $ (32.6) $ (2.4) $ (92.9) $ (16.1)
-------------------------------------------------------------------------------------------------
Capital expenditures $ 55.4 $ 74.0 $ 124.7 $ 419.8
-------------------------------------------------------------------------------------------------
Total assets, at September 30 $2,230.4 $1,880.6 $2,230.4 $1,880.6
-------------------------------------------------------------------------------------------------
</TABLE>
Equity income (loss) of affiliated company was $0.7 million in the third
quarter of 2000 (based on 56.25% of Batu Hijau's income and elimination of $9.2
million and $2.9 million of intercompany interest and management fees,
respectively, and amortization adjustments of $1.6 million) and a $1.4 million
loss in the comparable 1999 period (based on 56.25% of the Batu Hijau loss and
elimination of $0.1 million intercompany interest). Equity loss of affiliated
company was $14.7 million in the first nine months of 2000 (based on 56.25% of
Batu Hijau's income and elimination of $20.6 million and $8.8 million of
intercompany interest and management fees, respectively, and amortization
adjustments of $2.8 million) and $9.3 million in the comparable 1999 period
(based on 56.25% of the Batu Hijau loss and elimination of $0.2 million
intercompany interest).
(8) Contingencies
(a) Reclamation Obligations
The Company's mining and exploration activities are subject to various
federal and state laws and regulations governing the protection of the
environment.
These laws and regulations are continually changing and are generally
becoming more restrictive. The Company conducts its operations so as to protect
the public health and environment and believes its operations are in compliance
with all applicable laws and regulations. The Company has made, and expects to
make in the future, expenditures to comply with such laws and regulations, but
cannot predict the amount of such future expenditures.
Estimated future reclamation costs are based principally on legal and
regulatory requirements. At September 30, 2000 and December 31, 1999, $77.1
million and $66.9 million, respectively, were accrued for reclamation costs
relating to currently producing mineral properties.
Certain appeals have been filed by third parties with the Department of
Interior Board of Land Appeals in conjunction with the Twin Creeks Environmental
Impact Statement. These appeals seek to impose mitigation and other conditions
on the mine operations. The Company has intervened and does not believe that
such appeals have merit. An unfavorable outcome of such appeals, however, could
result in additional conditions on operations that may have a material adverse
effect on the Company's financial position or results of operations.
In addition, the Company is involved in several matters concerning
environmental obligations associated with former mining activities. Generally,
these matters concern developing and implementing remediation plans at the
various sites involved. The Company believes that the related environmental
obligations associated with these sites are similar in nature with respect to
the development of remediation plans, their risk profile and the compliance
required to meet general environmental standards. Based upon the Company's best
estimate of its liability for these matters, $41.7 million and $43.6 million
were accrued for such obligations at September 30, 2000 and December 31, 1999,
respectively. These amounts are included in Other accrued liabilities and
Reclamation and remediation liabilities. Depending upon the ultimate resolution
of these matters, the Company believes that it is reasonably possible that the
liability for these matters could be as much as 70% greater or 20% lower than
the amount accrued at September 30, 2000. The amounts accrued for these matters
are reviewed periodically based upon facts and circumstances available at the
time. Changes in estimates are charged to Costs and expenses, Other in the
period estimates are revised.
Details about certain of the more significant sites involved are discussed
below.
Idarado Mining Company ("Idarado")-80.1% owned
----------------------------------------------
In July 1992, the Company and Idarado signed a consent decree with the
State of Colorado ("State") that was agreed to by the U.S. District Court of
Colorado to settle a lawsuit brought by the State under the Comprehensive
Environmental Response,
10
<PAGE>
Compensation and Liability Act ("CERCLA"), generally referred to as the
"Superfund Act." Idarado settled natural resources damages and past and future
response costs and provided habitat enhancement work. In addition, Idarado
agreed in the consent decree to undertake specified remediation work at its
former mining site in the Telluride/Ouray area of Colorado. Remediation work at
this property is substantially complete. If the remediation does not achieve
specific performance objectives defined in the consent decree, the State may
require Idarado to implement supplemental activities at the site, also as
defined in the consent decree. Idarado and the Company have obtained a $5.2
million reclamation bond to secure their potential obligations under the consent
decree.
Resurrection Mining Company ("Resurrection")-100% owned
-------------------------------------------------------
The Company, Resurrection and other defendants have been named in lawsuits
filed by the State of Colorado, under the Superfund Act in 1983 and subsequently
consolidated with a lawsuit filed by the U.S. Environmental Protection Agency
("EPA") in 1986. These proceedings seek to compel the defendants to remediate
the impacts of pre-existing, historic mining activities near Leadville, Colorado
that date back to the mid-1800's, which the government agencies claim are
causing substantial environmental problems in the area.
In 1988 and 1989, the EPA issued administrative orders with respect to one
area on the site and the defendants have collectively implemented those orders
by constructing a water treatment plant, which was placed in operation in early
1992. Remaining remedial work for this area primarily consists of environmental
monitoring and maintenance activities.
The parties have entered into a consent decree with respect to the
remaining areas that apportions liabilities and responsibilities for the site
among the various parties. The EPA has approved remedial actions for selected
components of Resurrection's portion of the site, which were initiated in 1995.
The EPA has not yet selected the final remedy for the site. Accordingly, the
Company cannot yet determine the full extent or cost of its share of the
remedial action that will be required. The government agencies may also seek to
recover for damages to natural resources. In March 1999, the parties entered
into a Memorandum of Understanding ("MOU") to facilitate the settlement of
natural resources damages claims under CERCLA for the upper Arkansas River
Basin. The MOU provides a structure for evaluation of damages and possible
restoration activities that may be required if it is concluded such damages have
occurred.
Dawn Mining Company LLC ("Dawn")-51% owned
------------------------------------------
Dawn leased an open-pit uranium mine, currently inactive, on the Spokane
Indian Reservation in the State of Washington. The mine is subject to regulation
by agencies of the U.S. Department of Interior, the Bureau of Indian Affairs and
the Bureau of Land Management, as well as the EPA. Dawn also owns a nearby
uranium millsite facility that is subject to federal and state regulation.
In 1991, Dawn's lease was terminated. As a result, Dawn was required to
file a formal mine closure and reclamation plan. The Department of Interior has
commenced an Environmental Impact Study to analyze Dawn's proposed plan and to
consider alternate closure and reclamation plans for the mine. Dawn cannot
predict at this time what type of mine reclamation plan may be selected by the
Department of Interior. Dawn does not have sufficient funds to pay for the
reclamation plan it proposed, for any alternate plan, or for the closure of its
mill.
The Department of Interior previously notified Dawn that when the lease was
terminated, it would seek to hold Dawn and the Company (as Dawn's 51% owner)
liable for any costs incurred as a result of Dawn's failure to comply with the
lease and applicable regulations. Other government agencies have asserted that
the Company is liable for future reclamation or remediation work at the mine or
millsite. In mid-2000, the mine was included on the National Priorities List
under CERCLA. The Company will vigorously contest any claims as to its
liability. The Company cannot reasonably predict the likelihood or outcome of
any future action against Dawn or the Company arising from this matter.
In late 1999, Dawn initiated state approval for a revised mill closure plan
that, if implemented, would expedite the reclamation process at the mill. The
State of Washington has approved this revised plan, subject to concurrence from
the U.S. Department of Energy. The currently approved clean fill plan for the
mill is secured by a $19.9 million bond that is 50% secured by a letter of
credit and is guaranteed by the Company.
11
<PAGE>
(b) Other
In June 2000, a transport contractor of Minera Yanacocha spilled
approximately eleven liters (330 pounds) of mercury near the town of Chorapampa,
Peru, which is located 53 miles southwest of the mine. Mercury is a byproduct of
gold mining and was sold to a Lima firm for use in medical instrumentation and
industrial applications. A comprehensive health and environmental remediation
program is being implemented by Minera Yanacocha. In August 2000, Minera
Yanacocha paid under protest a fine in the amount of 1,740,000 soles
(approximately US$500,000) to the Peruvian government. Minera Yanacocha entered
into agreements with three of the communities impacted by this incident to
provide a variety of public works as compensation for the disruption and
inconvenience caused by the incident. Estimated costs of $9.5 million for these
improvements, other remediation efforts and the fine were included in Other
expense in the third quarter of 2000. The Company cannot reasonably predict the
likelihood of any additional expenditures related to this matter.
The Company has forward sales contracts to deliver 31,250 ounces of gold
through December 2000, from its Minahasa property in Indonesia, at an average
price of $454 an ounce. At September 30, 2000 the fair value of these contracts
was $5.5 million.
In July 1999, the Company entered into a prepaid forward sale contract for
approximately 483,333 ounces of gold, with initial proceeds of $137.2 million,
for delivery in June 2005, 2006 and 2007. Such proceeds were recorded as
deferred revenue and will be recognized in income when the related gold is
delivered. Additional proceeds will be determined at each delivery date based
on the excess of the then existing market price (not to exceed $380 per ounce)
over $300 per ounce. The prepaid forward sale contract also included semi-
annual delivery requirements of approximately 17,950 ounces beginning June 2000
through June 2007. The Company entered into forward purchase contracts at
prices increasing from $263 per ounce in 2000 to $354 per ounce in 2007 to
coincide with these delivery commitments.
In late July and early August 1999, the Company purchased put option
contracts for 2.85 million ounces of gold, with a strike price of $270 per
ounce. This purchase was paid for by selling call options contracts for 2.35
million ounces at the strike prices noted below. Call options in 2004 and 2005
terminate if the market price is $240 per ounce or lower at any time prior to
expiration. As of September 30, 2000, the following contracts were outstanding:
Purchased Put Options Sold Call Options
------------------------------------------------------------------------
Ounces Price Ounces Price
------------------------------------------------------------------------
2000 150,000 $ 270 -- --
------------------------------------------------------------------------
2004 -- -- 250,000 $ 350
------------------------------------------------------------------------
2005 -- -- 250,000 $ 350
------------------------------------------------------------------------
2009 -- -- 1,000,000 $ 386
------------------------------------------------------------------------
2009 -- -- 850,000 $ 385
------------------------------------------------------------------------
At September 30, 2000, the fair value of the put option contracts was $0.7
million and the fair value of the call options contracts was $69.4 million. The
call option contracts are marked to market at each reporting date. At September
30, 2000, a one- dollar increase in the gold price would result in a $0.32 per
ounce decrease in the fair value of put option contracts and a $0.49 per ounce
increase in the fair value of the call option contracts.
(9) Supplementary Data
------------------
The ratio of earnings to fixed charges for the nine months ended September
30, 2000 was 1.6. The ratio of earnings to fixed charges represents income
before income taxes and interest expense divided by interest expense. Interest
expense includes amortization of capitalized interest and the portion of rent
expense representative of interest. The Company guarantees certain third party
debt; however, it has not been and does not expect to be required to pay any
amounts associated with such debt. Therefore, related interest on such debt has
not been included in the ratio of earnings to fixed charges.
12
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operations and
--------------------------------------------------------------------------
Financial Condition
-------------------
The following provides information that management believes is relevant to
an assessment and understanding of the consolidated results of operations and
financial condition of Newmont Mining Corporation ("NMC") and its subsidiaries
(collectively, "Newmont"). The discussion should be read in conjunction with
Management's Discussion and Analysis included in Newmont's Annual Report on Form
10-K.
Pending Merger. As described in Note (2), on June 21, 2000, NMC and Battle
--------------
Mountain Gold Company entered into an Agreement and Plan of Merger. Upon
consummation of the merger, Battle Mountain will become a wholly owned
subsidiary of NMC subject to the satisfaction or waiver of the conditions set
forth in the merger agreement. Each share of Battle Mountain common stock and
each Battle Mountain Canada Ltd. exchangeable share will be converted into the
right to receive 0.105 of a share of NMC common stock. NMC will also exchange
shares of a new $3.25 convertible preferred stock for all outstanding shares of
Battle Mountain $3.25 convertible preferred stock. The transaction will be
accounted for as a pooling of interests and is intended to be completed by the
end of 2000, following customary regulatory approvals and approval of Battle
Mountain and Battle Mountain Canada shareholders subject to the satisfaction or
waiver of the conditions set forth in the merger agreement between the parties.
SUMMARY
Newmont reported a net loss of $18.7 million ($0.11 per share) and $28.4
million ($0.17 per share) in the third quarter and first nine months of 2000,
respectively, compared with a net loss of $39.0 million ($0.23 per share) and
$22.0 million ($0.13 per share) in the same 1999 periods, respectively.
The third quarter of 2000 included, net of tax:
. $27.4 million ($0.16 per share) for expenses associated with an
acquisition settlement
. $3.2 million ($0.02 per share), also net of minority interest, for
expenses associated with the mercury spill at Minera Yanacocha
. $2.4 million ($0.01 per share) for non-cash amortization of put option
premiums, and
. $15.7 million ($0.09 per share) for a non-cash unrealized mark-to-market
gain on call option contracts.
The first nine months of 2000 included, net of tax, (1) $27.4 million
($0.16 per share) for the acquisition settlement, (2) $10.9 million ($0.07 per
share) for non-cash amortization of put option premiums, (3) $3.2 million ($0.02
per share), also net of minority interest, for expenses associated with the
mercury spill at Minera Yanacocha and (4) $8.5 million ($0.05 per share) for the
mark-to-market gain on call options.
The third quarter of 1999 included, net of tax, (1) $33.4 million ($0.20
per share) for the mark-to-market loss on call options, (2) $7.9 million ($0.05
per share) for put option premium amortization, and (3) $5.2 million ($0.03 per
share) for a gain an asset sale. The first nine months of 1999 included these
same items and an additional $8.4 million ($0.05 per share) for a gain on asset
sales.
Total equity gold production, production costs and average realized gold
prices were as follows:
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended September 30,
-------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
Equity gold production ounces 1,140,600 1,043,000 3,297,100 2,951,600
-------------------------------------------------------------------------------------------------------
Total cash costs per ounce $175 $174 $175 $179
-------------------------------------------------------------------------------------------------------
Total costs per ounce $235 $228 $233 $234
-------------------------------------------------------------------------------------------------------
Average price realized per ounce $277 $271 $282 $281
-------------------------------------------------------------------------------------------------------
</TABLE>
MARKET CONDITIONS AND RISKS
METAL PRICE
Changes in the market price of gold significantly effect Newmont's
profitability and cash flow. Gold prices can fluctuate widely and are affected
by numerous factors, such as demand; forward selling by producers; central bank
sales, purchases and lending; investor sentiment and global mine production
levels. The gold price fell to a 20-year low of $253 in July 1999, periodically
recovered
13
<PAGE>
moderately, but declined to a $265-to-$270 per-ounce-range in October 2000.
Changes in the market price of copper also affect Newmont's profitability and
cash flow from its Batu Hijau mine in Indonesia.
Newmont generally sells its production at market prices, but has forward
sales contracts for 31,250 ounces for the remainder of 2000 from its Minahasa
mine in Indonesia at an average price of $454 per ounce. Following the July 1999
decline in gold spot market prices, Newmont entered into two put and call option
contracts to provide a measure of price protection. As described in Note 8 (b),
the purchase of near-term put option contracts at a strike price of $270 per
ounce was paid for by selling call option contracts for 2.35 million ounces,
with strike prices between $350 and $392 per ounce, expiring in 2004 through
2009. The call options are marked to market at each quarter-end and the
resulting gains or losses may fluctuate significantly, primarily depending upon
gold spot market prices and volatility. At September 30, 2000, the fair value of
the 150,000 put option contracts outstanding was $0.7 million and the fair value
of the 2.35 million call option contracts was $69.4 million. A one-dollar
increase in the gold price would result in a $0.32 per ounce decrease in the
fair value of the put option contracts and a $0.49 per ounce increase in the
fair value of the call options as of September 30, 2000.
FOREIGN CURRENCY
In addition to the U.S., Newmont conducts operations in Peru, Uzbekistan
and Indonesia. Gold produced at these operations is sold in the international
markets for U.S. dollars. The cost and debt structures at these operations are
also primarily U.S. dollar denominated. To the extent that there are
fluctuations in local currency exchange rates against the U.S. dollar, the
devaluation of a local currency is generally economically neutral or beneficial
to the operation since local salaries and supply contracts will decrease against
the U.S. dollar revenue stream.
RESULTS OF OPERATIONS
PRODUCTION
<TABLE>
<CAPTION>
Three Monthe Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity gold production ozs. (000):
Nevada operations 726.0 597.4 2,007.7 1,789.6
Mesquite 28.8 42.0 91.1 123.6
La Herradura 13.2 10.0 37.0 25.6
Minera Yanacocha 214.8 217.5 646.6 578.2
Zarafshan-Newmont 61.2 77.8 182.2 199.6
Minahasa 76.1 98.3 249.1 235.0
Batu Hijau 38.5 -- 101.4 --
Prepaid forward ounces (18.0) -- (18.0) --
-------- -------- -------- --------
Total 1,140.6 1,043.0 3,297.1 2,951.6
======== ======== ======== ========
Total cash costs per equity ounce:
Nevada operations $ 211 $ 218 $ 212 $ 214
Mesquite 213 189 203 165
La Herradura 109 131 133 165
Minera Yanacocha 76 96 85 106
Zarafshan-Newmont 132 153 125 168
Minahasa 139 99 143 115
Weighted average $ 175 $ 174 $ 175 $ 179
</TABLE>
Total cash costs include charges for mining ore and waste associated with
current period gold production, processing ore through milling and leaching
facilities, production taxes, royalties and other cash costs. Batu Hijau costs
are reported per pound of copper, with gold revenue as an offsetting by-product
credit.
14
<PAGE>
NORTH AMERICAN OPERATIONS
Newmont's Nevada operations are along the Carlin Trend near Elko and in the
Winnemucca Region, where the Twin Creeks and the Lone Tree Complex mines are
located.
Production in the third quarter and first nine months of 2000 increased 22%
to 726,000 ounces and 12% to 2,007,700 ounces, respectively, from the comparable
1999 periods. Total cash costs per ounce for the first nine months were slightly
lower than those in the same 1999 period as the mix of refractory to oxide ores
increased to 63% from 49%. Nevada production in 2000 is expected to total
approximately 2.9 million ounces with total cash costs under $208 per ounce.
Production at the Mesquite mine, a heap-leach operation in southern
California, decreased 31% to 28,800 ounces and 26% to 91,100 ounces,
respectively, from the prior year quarter and first nine months with higher
total cash costs per ounce as the mine approaches the end of its economic life.
Production in 2000 is expected at approximately 125,000 ounces with total cash
costs about $205 per ounce.
La Herradura, a 44%-owned non-operated joint venture in Mexico, produced
37,000 equity ounces in the first nine months of 2000 at a total cash cost of
$133 per ounce.
OVERSEAS OPERATIONS
Production at Minera Yanacocha in Peru decreased slightly in the third
quarter of 2000 to 214,800 equity ounces compared with the third quarter of 1999
as a result of lower average ore grades and above-average rainfall in September
2000. September year-to-date production increased 12% to 646,600 equity ounces
from the same 1999 period. Higher production reflected an increase in ore tons
mined that more than offset decreased average ore grades. Total cash costs
declined to $85 per ounce from $106 per ounce in the first nine months of 1999
with higher production and productivity and assumption of owner mining.
Estimated gold production for 2000 is expected at approximately 925,000 equity
ounces at a total cash cost below $90 per ounce.
In the first nine months of 2000, production from Zarafshan-Newmont, a 50%-
owned joint venture in the Central Asian Republic of Uzbekistan, was 9% below
that in the same 1999 period reflecting lower average ore grades. Total cash
costs per ounce of $125 in the year-to-date 2000 period were significantly below
those in the same 1999 period. Production in 2000 is expected to exceed 230,000
equity ounces with total cash costs below $140 per ounce.
In Indonesia, at Newmont's 80%-owned Minahasa property, production
increased 6% in the first nine months of 2000 over the comparable 1999 period
with the commencement of leach operations late in the third quarter of 1999.
Total cash costs were $143 per ounce for the first nine months of 2000.
Production is expected to approximate 350,000 ounces in 2000 with total cash
costs of approximately $135 per ounce.
The Batu Hijau mine in Indonesia, which commenced production in the fourth
quarter of 1999, produced 70.5 million and 198.2 million equity pounds of copper
and 38,500 and 101,400 equity ounces of gold during the third quarter and first
nine months of 2000, respectively. Copper sales totaled 67.2 million and 188.1
million equity pounds for the 2000 periods presented. Total cash costs were
$0.60 and $0.63 per pound, after gold sales credits, for the third quarter and
first nine months of 2000. Copper production in 2000 is expected at 278 million
equity pounds at a cash cost under $0.60 per pound, with gold production of
approximately 160,000 equity ounces.
15
<PAGE>
FINANCIAL RESULTS
Consolidated sales include 100% of Minera Yanacocha production and Newmont
equity production elsewhere, but exclude Batu Hijau, which is accounted for as
an equity investment. The increase in consolidated sales revenue in the second
quarter and first half of 2000 from the comparable 1999 periods primarily
resulted from higher production as shown in the following table:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Consolidated sales (in millions) $ 362.0 $ 328.0 $1,075.9 $ 970.9
Consolidated production ozs. (000) 1,305.6 1,249.1 3,808.3 3,499.4
Average price realized per consolidated ounce $ 277 $ 271 $ 282 $ 281
Average spot price received per ounce $ 276 $ 255 $ 283 $ 276
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 VS. 1999 2000 VS. 1999
------------------ -----------------
<S> <C> <C>
Increase in consolidated sales due to (in millions):
Consolidated production $ 16.1 $ 90.0
Average gold price received 17.9 15.0
------------------ -----------------
Total $ 34.0 $ 105.0
================== =================
</TABLE>
Costs applicable to sales include total cash costs and provisions for
estimated final reclamation expenses related to consolidated production.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Costs applicable to sales (in millions):
North American operations:
Nevada $155.8 $131.9 $432.2 $386.6
Mesquite 6.3 7.9 18.7 20.4
La Herradura 1.4 1.4 5.0 4.2
Minera Yanacocha 36.3 43.5 115.6 128.5
Zarafshan-Newmont 8.1 12.0 23.2 33.7
Minahasa 10.7 9.9 36.0 27.6
------ ------ ------ ------
Total $218.6 $206.6 $630.7 $601.0
====== ====== ====== ======
</TABLE>
Depreciation and depletion
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Depreciation and depletion (in millions):
North American operations:
Nevada operations $ 36.8 $ 30.8 $105.2 $ 91.5
Mesquite 2.3 1.8 7.7 5.3
La Herradura 0.8 0.5 2.3 1.4
Minera Yanacocha 21.3 17.6 54.6 52.6
Zarafshan-Newmont 4.4 3.1 10.1 8.7
Minahasa 6.6 5.9 18.3 17.4
Other 1.5 1.0 5.4 3.7
------ ------ ------ ------
Total $ 73.7 $ 60.7 $203.6 $180.6
====== ====== ====== ======
</TABLE>
Interest expense, net of capitalized interest was $19.2 million and $59.8
million for the third quarter and first nine months of 2000, respectively, and
$14.7 million and $50.1 million for the same periods in 1999, respectively. The
2000 increase reflected a lower proportion of capitalized interest associated
with Newmont's investment in Batu Hijau.
Expenses for acquisition settlement of $42.2 million in the 2000 periods
were related to an additional 13.35% interest in Minera Yanacocha that had been
subject to dispute as described in Note (5). Under the settlement, Newmont will
issue $40 million of its common stock to third parties and all pending
litigation and claims related to the acquisition will be dismissed. The
settlement is subject to customary closing conditions and is expected to close
late this year. The number of shares of common stock to be issued will be based
on the weighted average stock price for 20 consecutive trading days ending
approximately three trading days prior to closing, which is anticipated before
the end of 2000.
Income tax benefit in the first nine months of 2000 and 1999 was $0.6
million and $0.1 million, respectively. The income tax benefit primarily related
to the expenses for acquisition settlement in 2000 and to non-cash charges for
the unrealized mark-to-market loss in 1999.
16
<PAGE>
Other expenses included $9.5 million in the 2000 periods presented for
community improvements, remediation efforts and a fine related to the Minera
Yanacocha mercury spill described in Note (8) (b).
Equity in income (loss) of affiliate of $0.7 million and ($14.7 million)
for the third quarter and first nine months of 2000, respectively, reflected the
ramp up in production that commenced in December 1999 at Batu Hijau. In 1999,
start-up losses of $1.4 million and $9.3 million occurred in the third quarter
and first nine months.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 2000, a portion of existing cash balances,
cash flow from operations ($286.1 million) and net borrowings ($56.1 million)
funded capital expenditures ($236.4 million), net advances to joint ventures and
affiliates ($95.0 million) and dividends ($15.1 million). Newmont expects that
operating cash flows for the 2000 year will fund capital expenditures, advances
to affiliates, dividends and consolidated debt reduction, assuming gold price
realizations comparable to those in the first nine of 2000.
INVESTING ACTIVITIES AND CAPITAL EXPENDITURES
Capital expenditures were as follows:
Nine Months
Ended
September 30,
----------------------
2000 1999
------ ------
Capital expenditures (in millions):
North American operations $ 70.9 $ 46.6
Overseas operations 156.8 101.5
Other projects and capitalized interest 8.7 11.5
------ ------
Total $236.4 $159.6
====== ======
Expenditures for U.S. operations during the first nine months of 2000
primarily related to activities in Nevada for mine development ($21.5 million),
capitalized mining costs ($22.3 million) and mining equipment ($6.5 million).
Overseas capital expenditures were primarily at Minera Yanacocha ($151.5
million) for development of the La Quinua project and other ongoing expansion
work. Capital expenditures in the 1999 period were primarily for Nevada and
Minera Yanacocha leach pad expansion projects and Nevada capitalized mining.
Batu Hijau
At September 30, 2000 and December 31, 1999, Newmont's investment was
$534.1 million and $438.3 million, respectively. Funding of $111.5 million in
the first nine months of 2000 was included in Advances to joint ventures and
affiliates for ongoing capital expenditures and working capital requirements
during the production ramp-up period.
Construction of the mine, completed in the fourth quarter of 1999, was
funded through third party project loans of $1.0 billion and partner
contributions of $0.83 billion. The loans were guaranteed by Newmont and its
partner, Sumitomo Corporation ("Sumitomo"), 56.25% and 43.75%, respectively,
until project completion tests were met in October 2000, at which time the loans
became non-recourse (except for a $125 million contingent support facility that
Newmont and Sumitomo will provide on a pro rata basis). The lenders carry all
political risk on their investment. Debt repayments of $43.5 million semi-
annually will begin in April 2001.
FINANCING ACTIVITIES
During the first nine months of 2000, net borrowings of $76 million were
made under Newmont's $1.0 billion credit facility, with $286.0 million
outstanding at September 30, 2000, and repayments of $11.5 million occurred
under project financings for Minera Yanacocha. Lease obligations were reduced by
$8.4 million during the first nine months of 2000.
DEVELOPMENTS IN INDONESIA
Newmont operates the Minahasa mine on the island of Sulawesi and the Batu
Hijau mine on the island of Sumbawa. Both are in remote locations and have been
largely unaffected by civil unrest coinciding with the recent period of
political and social change in Indonesia. Both mines operate under Contracts of
Work issued by the central government. Indonesia's new government has publicly
expressed its intention to uphold existing Contracts of Work. At Minahasa, a
small group of protestors have demonstrated near the mine, shutting down
production for intermittent periods during the second and third quarters of
2000. Protestors have been led by former landowners seeking additional
compensation for property sold to Minahasa over six years ago. Minahasa had
previously
17
<PAGE>
reviewed the compensation process and determined that procedures were proper.
Compensation amounts had been set by the Indonesian government.
SAFE HARBOR STATEMENT
The foregoing discussion and analysis, as well as certain information
contained elsewhere in this Quarterly Report, contain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and are intended to be covered by the safe harbor created
thereby. Such forward-looking statements include, without limitation, (i)
estimates of future gold production for specific operations and on a
consolidated basis, (ii) estimates of future production costs and other expenses
for specific operations and on a consolidated basis, (iii) estimates of future
capital expenditures and other cash needs for specific operations and on a
consolidated basis and expectations as to the funding thereof, (iv) estimates of
future costs and other liabilities for certain environmental and related health
matters and (v) estimates of reserves.
Where Newmont expresses an expectation or belief as to future events or
results, such expectation or belief is expressed in good faith and believed to
have a reasonable basis. However, such forward-looking statements are subject to
risks, uncertainties and other factors, which could cause actual results to
differ materially from such forward-looking statements. Important factors that
could cause actual results to differ materially from such forward-looking
statements ("cautionary statements") are disclosed under "Risk Factors" in the
Newmont Annual Report on Form 10-K for the year ended December 31, 1999, as well
as other filings with the Securities and Exchange Commission. Many of these
factors are beyond Newmont's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking statements.
All subsequent written and oral forward-looking statements attributable to
Newmont or to persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements. Newmont disclaims any intent or
obligation to update publicly any forward-looking statements set forth in this
Report, whether as a result of new information, future events or otherwise.
18
<PAGE>
PART II - OTHER INFORMATION
----------------------------
ITEM 4. Submission Of Matters To A Vote Of Security Holders
------------------------------------------------------------
None.
ITEM 6. Exhibits and Reports on Form 8-K
-------------------------------------------
(a) The exhibits to this report are listed in the Exhibit Index on Page 21
hereof.
(b) Reports filed on Form 8-K during the quarter ended September 30, 2000:
A report was filed on Form 8-K, Items 5 and 7 on September 6, 2000.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWMONT MINING CORPORATION
(Registrant)
Date: November 13, 2000 /s/ BRUCE D. HANSEN
-------------------
Bruce D. Hansen
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 13, 2000 /s/ LINDA K. WHEELER
--------------------
Linda K. Wheeler
Vice President and Controller
(Principal Accounting Officer)
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Newmont Mining Corporation
EXHIBIT INDEX
Exhibit
Number Description
------- ----------------------------------------------------------------------
10 - Newmont Mining Corporation 2000 Non-Employee Directors Stock Plan
As Amended and Restated as of May 17, 2000.
12 - Statement re Computation of Ratio of Earnings to Fixed Charges.
27 - Financial Data Schedule.
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