Filed by Newmont Mining Corporation
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Battle Mountain Gold Company
Commission File No. 1-9666
NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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NEWMONT MINING CORPORATION
June 21, 2000
1:00 p.m. CDT
Coordinator Good afternoon, and welcome to the Newmont/Battle Mountain
conference call. Beginning today's call is Mr. Jack Morris, Vice
President of Investor Relations for Newmont Mining Corporation.
Mr. Morris, you may begin.
J. Morris Thank you very much, and I appreciate everybody taking the time
to join us this afternoon. It's always a pleasure to host a
conference call like this when we have good news. Ron Kembley,
Chairman of Newmont Mining; and Carl Ellers, Chairman and acting
CEO of Battle Mountain Gold, are going to be conducting this
conference call.
Just a couple of housekeeping measures before we get started.
This is being done simultaneously on our Web site. If you're
close to a computer, I think you have the number to log in. If
you are not, you can retrieve this information later on our Web
site.
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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I think the comments we'll be making today will be clear enough
if you're in a listen only mode. We will certainly fax you
material if you don't get it at this time, just let us know after
the call and we'll take care of that.
With that Ron, why don't you start off and let the people know
what we're all about today.
R. Kembley Thank you, Jack. Thanks for joining us this afternoon on short
notice. Carl and I are here in Denver, and Carl has with him John
Keys and Joe Baliss, who will be available for Q&A. Wayne Murty
is here and Bruce Hanson are here with me; that's the Newmont
team, and they'll go through the part of the discussion.
But I'd just like to start by saying that we're very pleased to
have announced this morning the definitive merger transaction of
Newmont and Battle Mountain. We think the combination creates a
stronger company with an excellent strategic fit of assets, and
the resulting cash synergies will increase shareholder value.
Battle Mountain will become a wholly-owned subsidiary of Newmont.
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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Before going any further, I'd like Carl to make a few comments
relative to the Battle Mountain perspective.
C. Ellers Thank you, Ron. Good afternoon, ladies and gentlemen. I think
you'll see in this presentation today that Ron and Wayne will be
giving, that this merger from Battle Mountain shareholders'
perspective, which I represent, does present an outstanding
opportunity for our shareholders to participate in becoming one
of the strongest, largest precious metals companies in precious
metals industry.
Both of our companies are low cost producers. We have natural
reserves and most particularly a very synergistic relationship in
Nevada with our mines and plants and ore bodies, as well as
global reach in our... during ...
So with that, Ron and his colleagues will be presenting the slide
show... following ... all of us will be available ... . Ron?
R. Kembley Thank you, Carl. Next slide. This slide indicates that obviously
this is a negotiated transaction with an exchange ratio of 0.105
share of Newmont for each share of Battle Mountain. Newmont
shareholders receive 9.9
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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million ounces of reserves, 760,000 ounces a year of low cost
production, plus the highly prospective Phoenix property in
Nevada.
I would say, obviously, from the Newmont standpoint, the Phoenix
property was the driving factor in this transaction. Battle
Mountain shareholders receive a 25% premium based on the share
prices at the close of yesterday's market, and will own
approximately 13% of a stronger, more liquid company.
Next slide. Newmont strategy reflected here, and our strategy is
fairly basic. We want to build our company on world-class mining
districts, and certainly the Battle Mountain merger strengthens
our base in Nevada. We get to utilize the infrastructure there
for the development of the Phoenix property.
We also, as part of our strategy, want to grow primarily through
exploration, technology, and synergistic acquisitions. Again, we
think that the Battle Mountain merger complements this part of
the strategy.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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We're committed to low cost operation, and Battle Mountain really
is one of the lowest cost producers in our industry and again,
meets our criteria for enhancing shareholder value.
Finally, we want to maintain a high leverage to the gold price.
As we continue to believe that coal option on gold is the primary
reason for owning a gold stock. Battle Mountain maintains our
largely unhedged position.
Next slide. The merger creates a stronger company. It increases
our year-end 1999 reserves by 17%, 66.5 million ounces of gold,
giving Newmont the third largest reserve position in the world.
It will immediately add 15% to production as we retain our rank
as the world's second largest producer. Next, that the merger
will help reduce total cash cost and generate strong cash flow
after the Phoenix property starts up.
Next slide. Battle Mountain is an excellent strategic fit, it
brings synergies similar to the Santa Fe acquisition of 1997, as
the proximity to our properties allows utilization of our
existing facilities and a good fit with technology. It provides
the platform to further optimize on Nevada assets and strengthen
geographic quality of our reserve base.
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Post merger, 56% of our reserves will be in North America versus
52% today. We also pick up quality reserves in South America and
Australia.
Next slide. The merger generates immediate operating and
administrative synergies by integrating Phoenix into our Nevada
operations and reducing pro forma G&A and exploration expenses.
In addition, we expect to realize savings in purchasing as well
as adopting best practices from our gold metal performance
program. ...annual cash savings of approximately $30 million a
year are expected, making the transaction accretive to Newmont in
terms of earnings and NAV immediately and accretive in cash flow
after Phoenix starts up. At tails end it is cash flow neutral. It
also maintains our leverage to rising gold price as only 5.5% of
the combined companies reserve are hedged.
Next slide. I think that it's clear to everyone that this
industry needs consolidation. Our transaction with Battle
Mountain may step in that direction. To deliver shareholder
value, we think we must, as gold producers, exert greater
discipline in investments and have the capability of reducing
production, prices are low.
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We must also provide marketing support for our product; an area
where we've all been quite lax. We must also have managerial and
geographic depth to take advantage of the world's best
exploration targets. And the industry needs greater visibility in
the investment community. All of this can only come as more
production moves into the hands of fewer financially stronger
companies.
With that, I'd like to turn it over to Wayne for a discussion of
the Phoenix project and other operations and then Bruce Hanson
will follow up with some financial information.
W. Murty Next slide. Thank you, Ron. I'm going to start with a quick
overview of operations and our expected synergies. The combined
company will have 19 open pits and seven underground mines, eight
countries stretching from Canada to Bolivia and the Western
Hemisphere and from the Uzbekistan in central Asia to Australia.
You will see on the slide here that the company in Papua, New
Guinea, as indicated, that the Battle Mountain share of its
reserves of approximately one million ounces is not reflected in
the total 66.5 million ounces of reserves that we've talked
about, as their interest is being held for resale.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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Next slide. Canada sold a giant in Holloway at nearly 2.5 million
ounces of gold reserves, 425,000 ounces of annual production.
April, as many of you are aware, our custom milling agreement at
Holloway was...procurement ...that will lower operating costs by
$15 an ounce. The estimated total cash cost per ounce for 2000
Canada is estimated at $165.
Next slide. ... property in Bolivia is performing well, with
expected production this year 225,000 ounces and an estimated
total cash cost of $665 per ounce. Reserves are 1.3 million
ounces. In addition, ...what Battle Mountain has done; they're a
social program through the Interaini Foundation. We think that
will help us in defining programs for our community efforts in
other third world countries.
Next slide. Australia the ... property comes with growing
reserves and production. While small by Newmont standards their
end reserves are 440,000 ounces, and production this year of
115,000 ounces Battle Mountain ... share. The mine is operated by
Normandy and thus will not require a lot of our management's
time. Elsewhere, as we noted earlier, Battle Mountain has a 9.7%
interest in Lahere. It also has promising
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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exploration projects in Argentina and Mexico, in addition to
those around the Phoenix ... project ... .
Next slide. That brings me back in Phoenix, which as Ron
indicated is the primary reason we are interested in doing this
transaction. The project is for the Battle Mountain complex in
Nevada, that includes a now depleted Fortitude mine; the historic
mining area that has hosted gold and base metal production since
the 1860's. Some 3.5 million ounces of gold were produced from
those mines over the years.
The Phoenix project will essentially encompass those old mines,
apply new mining recovery and reclamation technology, and revive
low cost mining in the area.
Since 1996, Battle Mountain has drilled over 500,000 feet of
exploration holes and development holes. Year-end 1999, reserves
were 5.7 million ounces of gold with an additional non-reserve
mineralization. We believe very significant upside potential to
add to that reserve position ... . The project also has copper
reserves of 430 million ounces.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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Next slide. ... is in close proximity to Battle
Mountain...property, as shown on this slide. Our Lone Tree mine
and ...are only 30 miles to the northwest.
Next slide. Pending permit approval, we are planning initial
Leach production in the year 2002 by reusing the existing Leach
facility. On this slide you can see the depleted Fortitude ... to
the left and the existing Leach ...in the foreground. We also
believe the deposit will prove to be much larger and there's
significant potential of the combined Copper Canyon and copper
based property.
Battle Mountain planned a 30,000 ton per day grinding mill,
gravity circuit, location plant ... incorporating large recovery
process through ... . Resulting concentrate would have been
trucked to out-of-state smelters. Cash operating cost for the
projects were projected at $175 an ounce, generating an internal
pretax rate of return of about 18....
Next slide. Newmont will approve materially on those numbers. I
should note that Newmont's technical team has spent several
months working with Battle Mountain to understand this project,
to find new ways to add value. The size of our U.S. operation
adds flexibility to our plan.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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For instance, both in the ... Canyon mine, soon to close, we can
move surplus trucks and loading equipment ... for a capital
savings of $25 to $30 million. The Lone Tree...will be ...and
will be modified by adding the ..., FSW circuit for copper
recovery, to eliminate the need for the ... process.
This configuration eliminates smelting charges, significantly
reduces transportation costs and increases recovery of both gold
and copper. As a result, tax costs will be reduced by $25 an
ounce, accounting for a third of the overall merger synergy of
$30 million a year. In addition, our autoclave with FXEW process,
chose higher gold and copper recoveries when compared to recovery
rate ...
Next slide. This is a simplified flow chart showing how ore would
move through the initial grinding separation locations ... with
the resulting concentrates ... the final gold and copper
recovery.
Next slide. Phoenix will produce about 390,000 ounces of gold per
year, 1.3 million ounces of silver and 27.5 million pounds of
copper. ... will account for 15 to 20% of gold production of the
early year. Cash cost, as
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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indicated, will be in the range of $140 an ounce initially, $150
an ounce over the 13-year-life of the project.
Capital cost will be about $200 million. Our rate of return will
be appreciably higher; it should exceed 20%. They're also
exploring other ways to reduce capital, including the possibility
of moving some of our excess mill capacity from ...to Phoenix.
Needless to say, our return also improves with any addition to
reserves, of course at higher gold price.
We believe the project can be permitted by mid 2001. This means
that mining and leach operations can start in early 2002, and
mill production in early 2003.
Next slide. With the addition of Phoenix's lower cost ..., the
Nevada cash cost will improve to less than $205 per ounce in
2003; 3% lower than the cash cost in 1999. The companies total
cash cost per ounce will be approximately $165 an ounce in 2003;
a 5% improvement from 1999.
Next slide. Bruce will now add some financial flavor to the
picture.
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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B. Hanson Thank you, Wayne. Now let's examine the transaction. Newmont will
issue approximately 24 million shares, increasing our total
outstanding by 13%, roughly 192 million this year. Regardless of
the ... Canadian exchangeable shares, it is our intent to ...
those shares into Newmont's common stock and not maintain a
separate Canadian listing. We will, however, assume Battle
Mountain's 2.3 million shares of convertible preferred stock ...
$7.5 million a year dividend.
Next slide. Looking at the pro forma capital structure, we pick
up Battle Mountain's long-term debt of approximately $200
million. We have talked to rating agencies, they're quite
comfortable with this deal, and that does not appreciably change
our net debt cap ratio. Net debt after deducting cash, the value
of ... interest, is approximately 40% capitalization versus 39%
of Newmont as of March 31.
Next slide. As Wayne said, we expect ongoing savings of
approximately $30 million a year once Phoenix is in full
operation. Now let me break this down. We expect $10 million a
year or $25 an ounce savings in cash cost in Phoenix. Actually in
the first few years of Phoenix life, savings could be closer to
$15 million a year or $35 an ounce. Interest paid is a $5 million
savings and cost improvements and other operations, primarily
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June 21, 2000/1:00 p.m. CDT
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through the application of Newmont's Gold Medal Performance
Program and through our global purchasing and e-procurement
initiative.
Finally, we anticipate saving $15 million from the closure of
Battle Mountain's headquarters in Houston, the relocation of
Battle Mountain's exploration budget, and reduced interest
expense. The result is that cash costs and working capital will
be reduced. Capital spending will be prioritized on a go forward
basis and earnings and cash flow will be improved.
Next slide. This is clearly a win-win deal. It adds value to
Newmont and places our Nevada assets in a stronger cost and
production position going forward. It's accretive to Newmont
shareholders, ... reserves, production, earning and cash flow
after the mill starts up in Phoenix. It also improves our net
asset value per share.
In summary, this transaction creates a stronger and more liquid
company, provides benefits to shareholders for increased reserves
and production, growth and higher returns from the Phoenix
project, operating flexibility to create further Nevada
synergies, a marginally lower political risk
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profile, and a larger base from which we can examine further
industry consolidation, as Ron discussed earlier.
At this point in time, we're now available to respond to any
questions you may have. Next slide please.
Coordinator Our first question comes from Mike DeRose with Morgan Stanley.
You may ask your question.
M. DeRose Good afternoon, and congratulations. Just a couple of questions.
Number one, could you walk us through some of the key dates for
the transaction in terms of when you expect circulars to be
mailed to shareholders? When Battle Mountain shareholders are
going to vote and that sort of thing? Number two, I was wondering
if you could talk about any sort of board changes, if any at all?
And number three, if there's any kind of a break up fee if this
doesn't proceed?
J. Baliss Sure. Joe Baliss speaking. From a timing point of view, we've
already started putting together our proxy material; it's a joint
effort of both Newmont and Battle Mountain. The variable in this
process is getting them through the SEC and getting the approval.
Our target is, as we said
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at the press release, to have the deal closed by fall, we're
looking at perhaps mid-September to early October. It's the best
window we can give you right now and surely we all want to get
this done as quickly as possible.
Your second question I believe related to a break up fee, a break
up fee of $16 million.
M And the Nent board will stay as it is currently composed.
M. DeRose Just one more question. In terms of the 24 million shares that
you're potentially going to issue, does that include the
convertible preferreds that you were talking about?
M No. We're going to assume the convertible preferred shares, as
they are, 2.3 million shares that'll be converted into Newmont
convertible preferred under the same terms. Pertaining to $7.5
million worth of dividends a year.
M. DeRose Thanks.
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Coordinator Our next question comes from Peter Vogel with Oscar...
P. Vogel A few questions. I'm wondering could you just describe a little
bit more of what led to the transaction? Obviously consolidation
has been expected, especially with declining gold prices. But I'm
wondering, did Battle Mountain, were they experiencing any
problems developing the Arizona project?
Obviously, it looks like you were looking to extract a lot of
synergies from this area. I'm just wondering how that fit into
entering into this agreement in the first place. And then if you
just comment on what regulatory approvals you need to go through,
whether there's anti-trust filings in various states and so
forth. Thank you.
C. Ellers I'll respond to Battle Mountain's incentives for participating
actively in making this transaction occur. I truly believe that
if we're going to get visibility in the investment community, we
have got to build strength in size and in diversity of location,
and to some extent of commodity. Battle Mountain was not meeting
that size criteria and we were becoming less and less visible to
the investor.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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Our Phoenix operation, on a stand-alone basis, looked very
attractive, but with our debt and with the gold price it would be
a prodigious undertaking for us to do that alone. With Newmont's
strength and with their synergies, as Bruce pointed out, there's
a tremendous savings to be made by uniting the Phoenix project
with Lone Tree and Newmont's other operations.
Now, you talked about regulatory and permitting issues...
W. Murty With respect to regulatory considerations, other than getting the
proxy statements through, the merger is subject to the receipt of
one-third shareholder approval. There'll be a court approved plan
of arrangement in Canada, ... exchangeable share of values,
Canadian subsidiary will vote on that.
Again, we have a voting support agreement with Noranda, who
controls about two-thirds of those shares. We don't anticipate
there would be Hart-Scott-Rodino filings here in the United
States. We don't anticipate any issues there.
Coordinator The next question comes from Brian Christy with Canacord Capital.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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B. Christy Good afternoon, gentlemen. A couple questions for you. Is there a
Noranda lock up agreement? They've agreed to vote in favor, but
is there any kind of agreement in place? And the Lahere position,
can you maybe give us some more details there? Are these shares
actually going to be sold? Is this something that you're looking
at in the future to get more involved in?
And on the Phoenix project, it's my understanding that the cap ex
was around $200 million. They've cut the cap ex by about $25 or
$30 million yet it's still at $200 million. I guess my read there
would be that you're going to have to make modifications to Lone
Tree and that'll be the difference. Can you maybe clarify that
please?
M We do have a lock up agreement with Noranda, a voting support
agreement, that's tied right back into the conditions of the
merger agreement itself. Lahere, we'll wait until we close the
transaction. We're familiar with the Lahere project, but we want
to continue to look at it from Newmont's standpoint to see if it
does or does not fit into our strategy going forward, and really
no decisions have been reached on that.
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M And finally in regards to the capital expenditures at Phoenix,
your assumption was correct. We do have additional capital in
terms of the FXEW circuit at Lone Tree.
M But I think the original Battle Mountain estimate was in excess
of $200 million.
M Yes, with the upgrades.
M Yes, with the upgrades.
B. Christy Thanks, gentlemen.
M Thank you.
C. Ellers Thanks, Brian.
Coordinator Our next question comes from Thomas McNamara with CIBC.
T.McNamara Good afternoon. A couple of questions. Can you comment on NOL's
in Nevada that you made, and what you can do with those
potentially from
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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Battle Mountain? And secondly, some other technological aspects
that you can bring, whether they be in Latin America or
underground expertise that Battle Mountain may bring to Newmont.
Just some general comments on that.
M In regards to the NOL's in Nevada that's something that we'll
examine on an ongoing basis. But there may be some tax
opportunities as we look forward.
M With the operating synergies, as far as the client goes, if you
take Cordacoyo and Yatacocha, they're both at high elevations in
South America, they both have ... foundations. There's a lot of
things that we can learn from one another there. ...at Cordacoyo
has the ...and the ... . Newmont has a lot of expertise in this
area.
When we take a look at the underground operation, one of the
things that I'm proud of with Battle Mountain Gold is we've been
recognized as being good underground miners. That's one of the
things we bring to the table. Overall, I think it's an excellent
fit going forward.
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T. McNamara Enough to say that there's a good upside in actual dollar synergy
numbers?
M I believe this is going to be a, I really believe in my own mind
that there's a lot more out there with Phoenix.
M And certainly the opportunity we have for purchasing across the
company I think will be very good ground for us. But also, I
think, as John said, the underground expertise is something that
certainly Newmont can benefit from. And I think to look at the
exchange of technology here will also be an excellent fit.
T. McNamara Thanks a lot.
M Thanks, Tim.
Coordinator Our next question comes from Steven Walker with RVC Dominion
Securities.
S. Walker Yes. Thank you, gentlemen. Just to follow up to Tom's question.
Bruce as I understand it, the synergies do not include any
potential Battle
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Mountain tax loss carry forwards, but they are in fact, after tax
considerations with respect to Newmont?
B. Hanson They're entirely pretax synergies.
S. Walker Those are pretax. Great, thank you very much.
Coordinator The next question comes from Ed Dean with First Albany.
E. Dean Yes, just a question on the global Mountain debt. At what level
in the corporate structure will those debts be assumed?
M Initially they'll be assumed at the Battle Mountain level, which
will become a wholly-owned subsidiary of Newmont Mining.
E. Dean So, there will be no obligation, direct obligation at Newmont
Gold or Newmont Mining level?
M Yes. We will guarantee that the entire sum of it, part of the
synergies here are, it's a fact that we have a much lower
borrowing rate than Battle Mountain does currently. Spread on our
revolving credit facilities about
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20 basis points over LIBOR, and my understanding is that that
amount is paying about 150 basis points over LIBOR.
E. Dean So that the outstanding Battle Mountain debt will become the
obligation of Newmont Mining or at Newmont Gold. Is that correct?
M It will be an obligation of Newmont Mining, it will be
guaranteed by Newmont Mining.
E. Dean Thank you very much.
Coordinator Our next question comes from Victor Flores with HSBC.
V. Flores Good afternoon, gentlemen. Just coming back to the issue,
unfortunately of these convertibles and the taxes, are there any
other clear tax synergies? And secondly, could you give us a bit
of an explanation on exactly what you are going to do with some
of these preferred issues outstanding? There's the 2.3 million
shares of convertible preferred and there's also the subordinate
debentures, which are also convertible; both are way out of the
money, but these things don't go away and when they
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come due, people are going to want to get paid. What exactly do
you have in mind for these?
M Both of those we'll assume, both the convertible preferred and
the convertible debt issue.
V. Flores So they're not going away in any way, shape or form?
M No.
V. Flores And on the taxes, is there anything else you can add, Bruce?
B. Hanson ... it's on going evaluation in regards to taxes and we'll have
to look at it more closely at the end of the year.
V. Flores Okay, great. Thanks.
Coordinator The next question comes from Peter Stripey with Catalyst Fund.
P. Stripey Can you give us an update on the Crown Jewel project?
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M We're continuing to appeal the Washington Pollution Control
Board, the adverse decision, and that isn't changing. We at Crown
Resources are working to try to get the permitting back on the
track that we had it on before that ruling. So, the appeal's in
place and we'll continue.
M I would just say, from Newmont's standpoint, we've not had much
of an opportunity to talk with management at Crown Resources. We
have been in touch with them this morning as a courtesy, but we
will continue our dialogue with them as the transaction proceeds
and make our evaluation as to where we will or would not go.
P. Stripey Thank you.
Coordinator Our next question comes from Fred Araman with Brane, Murray and
Company.
F. Araman Gentlemen, can you tell us how you arrived at the negotiated
price? What valuations you used to arrive at that number?
M Both companies took a look at the financial and property
situation going forward, including the anticipated synergies and
ran typical accretion
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dilution analysis and contribution analysis and looked at it from
a strategic perspective, going forward, for both sets of
shareholders.
F. Araman Could you give us any more details on that? For example, what
kind of valuations you put on the reserves, Battle Mountain
reserves?
M Clearly, you can look at the market capitalization, post
transaction, and divide it by existing reserves.
F. Araman Thank you.
Coordinator The next question comes from Michael Fowler with Research
Capital.
M. Fowler Yes. I've got a number of questions. First off, in terms of
mergers and acquisitions charges or write-offs associated with
the transaction, I remember Santa Fe was one of the big
write-offs that you made after the merger. Do you anticipate any
large expenses or write-offs associated with this transaction?
M We anticipate transaction costs of approximately $35 million
associated with this transaction.
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M. Fowler So $35 million will be expensed in the fourth quarter. Is that
right?
M Whenever it closes.
M. Fowler Next question. You're saying this is going to be accretive to
Newmont shareholders in terms of earnings and net asset value. I
quibble a bit with the net asset value business, but in earnings,
Battle Mountain's actually making sizeable losses. So, how do you
explain the accretion in earnings?
M It's predominantly related to synergies.
M. Fowler Pardon me?
M Predominantly related to the synergies of the transaction.
M. Fowler Let me understand the tax losses at Battle Mountain, Bruce. I
might have missed it, but how much tax losses can you use?
B. Hanson That's something that's still under evaluation at this point in
time.
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 29
M. Fowler And a question about the debt situation of the company. Ron, you
said that one of the purposes of the transaction is to actually
become financially stronger; in fact, you're increasing the debt
of the company. How do you explain that?
R. Kembley Well, we didn't increase it, it went up pro rata. In essence,
we're basically at the same level of debt to capitalization as we
were before. When you look at the company, the resulting company
with a stronger reserve base and a stronger production base, we
think we are better positioned with the combination than we are
without it. ... available operating cash flow over the next five
to ten years; we're a better, a stronger company with it, with
the merger.
M. Fowler Will you have any restricted cash at the end of this transaction?
M No.
M. Fowler Last question. In terms of management, is it going to be
essentially Newmont management, which is the longer-term entity?
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 30
M Well, obviously Newmont is contributing 87% of the asset base
here; it'll be predominantly a Newmont management base. As in any
merger, there are not only assets that come in play, you look at
your people as well. And we would expect to hopefully attract
some of the creative and bright professional staff of the Battle
Mountain people to join us. We've got a larger company to run
with operations far away from where we're operating now. And with
a larger company to run, we'll obviously need some help.
M. Fowler Well, thank you very much. Good luck.
M Thank you.
Coordinator Our next question comes from Adrian David, Global Strategic
Management.
A. David Yes. Good afternoon. I had a couple questions if I may, for the
Newmont people primarily. You put a lot of emphasis on the
Phoenix project. I wonder if it's possible for you to kind of
categorize or give us your top two or three other Battle Mountain
assets that you think are attractive; whether they're mines or
whether they're exploration projects.
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 31
And then the second question on a different issue. You mentioned
a couple of times at the beginning of this presentation and right
at the end, but this might be a base for further consolidation.
Is that something that you care to expand on? Are we expecting
something again in the near term?
M Adrian, we're probably a little paranoid at looking at Phoenix
because it's the largest of the contributors to the reserve base
that we are going to acquire. Also, in our backyard it allows us
to utilize the significant investment we have in Nevada.
And it brings about a lot of synergies, and basically, I think,
it falls in the category of just being good business. It's the
kind of thing that we think that not only Newmont should be doing
but all mining companies should be doing, in utilizing their
current infrastructure rather than throwing new capital into this
business.
Looking at other assets, clearly the Canadian assets are
excellent. They're low cost, they're good cash flow generators
and it's an area where we're not currently a participant, so
obviously, it gives us another base in
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 32
another region. We look forward to seeing how we can grow or
optimize those operations.
Relative to further consolidation, we just continue to say that
in this industry we've been fragmented. We've not been able to
discipline this industry from throwing capital projects from
bringing production on when it wasn't justified. We think that
the growth of a fewer larger companies can bring some more
discipline and give our shareholders a better return.
A. David Thank you.
Coordinator Our next question comes from David Maluley with Scotia Capital.
D. Maluley Hi. I've got a couple questions with regards to just the progress
with some of the deposits. First of all, with Yeyagwa, I was
wondering with regards to your expertise in bio-heat bleaching,
will you be able to advance this faster than Battle Mountain has
done currently?
Secondly, with regards to the modifications which will have to be
carried out at Lone Tree for processing the concentrate from
Phoenix, does this preclude any processing of refractory ores
elsewhere from the state? And
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 33
the last question is, are the liabilities associated with the
closure of Hemlo and Curacoyo. Can you quantify those?
M Okay. Let's talk about the liabilities. The liabilities are
consistent with the views of what Battle Mountain had previously,
we've done some due diligence, and we've looked at some different
options in terms of closure of plants there.
In regards to the Lone Tree autoclave situation, I believe that
we have the capability to continue to run refractory ... through
that circuit. We would just not run the solid liquid separation
and just go straight to CIL.
And the first question, Yeyagwa, clearly we'll look at the
opportunities to bring Newmont technology and expertise to bear
there. I think it's a project that continues to evolve in terms
of ... and cost structure, and obviously the combined expertise
of Battle Mountain and Newmont there, will give it a better
chance of ultimately succeeding.
D. Maluley With regards to the liabilities that Golden Giant and Curacoyo,
can you quantify those for me because I just don't recall what
they are?
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 34
M Golden Giant it's been approved and all the funding is in place
for that. That's taken care of that right now. Curacoyo we
haven't looked at. We see a long-term closure plan that would
require anywhere from $20 to $30 million.
D. Maluley And I kind of missed Mr. Key's comment on Golden Giant. How much
was that?
J. Baliss It's Joe Baliss, David. I don't have the number off the top of my
head but it's consistent with what's in our 10K statement.
D. Maluley And for Lone Tree, are there any capital investments required to
make this conversion?
M Yes. There's the addition of the Lone Tree FXEW circuit. That is
roughly what, $25 million?
D. Maluley And one last one. What is the residual capital on Crown Jewel
now?
M There is none.
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 35
M We wrote that off, David, and we're appealing the adverse
decision that we received at the Pollution Control Board.
D. Maluley Thanks a lot.
M Thank you.
Coordinator Our next question comes from Victor Flores with HSBC.
V. Flores Sorry to come back again. Someone asked the question about
asset disposals and I was just wondering if you could remind us
what U.S. GAAP says, as far as pooling transactions and what you
can do and when, going forward? I think it's 12 months, but
refresh my memory please.
M It's actually two years, and we cannot have a significant asset
disposal within that two-year horizon. And the steps get fairly
complicated but you look at 10% of assets and you look at 10% of
income ...
V. Flores And as far as entering into a subsequent pooling transaction,
that all ends when they change the accounting rules anyway but
...
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 36
M We have entire flexibility to enter into subsequent pooling
transactions so long as...
(dictation is cut off)
W Good afternoon. Can you talk about the preferred shareholder
approval that's required? What approval level you need and what's
the ownership of those preferreds and whether or not there's been
approval acquired by your debenture holders.
M There is no approval required by the debenture holders. The
convertible preferred shareholders will have a vote on the
transaction.
W So, it's like a 66 2/3 approval, they vote all by themselves,
separate from the common?
J. Baliss Two-thirds of the class, Joe Baliss speaking, of the
holders of the convertible preferred, and they'll be voting to
approve the conversion of those preferreds from Battle Mountain
paper to Newmont paper, bearing essentially identical terms.
W Oh, great. Thank you very much.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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Coordinator Our next question comes from John Hill with Salomon Smith Barney.
J. Hill Thank you very much. I just wanted to follow up on Victor's
question with regard to pooling accounting on this transaction.
Is this contingent on gaining pooling and if you're unsuccessful
in pooling a transaction will it still be accretive?
J. Baliss This is Joe Baliss, just with respect to the pooling issue, a lot
of work as been spent by both Battle Mountain and Newmont with
our respective auditors, and we're highly confident that the
transaction will be poolable, which is a condition of the merger
agreement. But given the amount of work that's been done today, I
think we can both say that we are highly confident that we will
get the treatment we are seeking.
J. Hill I understand that, but if you're unsuccessful what are we looking
at in terms of dollar values and is the transaction still
accretive?
M It's a condition of the merger.
J. Hill It is a condition of the merger?
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 38
M Yes.
M Yes.
J. Hill So in other words, if you're unsuccessful the deal is off. Second
question is, I guess really from the Battle Mountain side,
certainly shareholders are getting a higher quality stock and a
part of a stronger company, as spelled out in the press release,
but the share exchange ratio .105 looks a little low; we were
that high in February. We were up to .15 last October, November
and spent all of '98 above .2. I'm really just wondering what
drives such a low share exchange ratio?
M I guess, from Battle Mountain's perspective, we think it's an
appropriate exchange ratio, we think, looking forward, that the
synergies that can be realized by the companies coming together
and merging are tremendous. There are not an awful lot of mining
transactions that have such attractive synergies as this
transaction. And there will be further benefits to the Battle
Mountain shareholders after the deal.
J. Hill Very good. We've just had a lot of feedback; that just looks like
a low multiple. Obviously, both companies will benefit from a
rising share
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 39
price. That would seem to me to be the type of multiple that
would be driven by some sense of urgency and I'm still struggling
to understand what was the immediacy driving a transaction at
such a low exchange.
M John, we've been working together for some time on this and the
premium of course, is going to vary with the day. We've both had
fairly volatile stocks; at the time of the announcement it's a
25% premium. I regard that as an eminently fair deal for Battle
Mountain shareholders, and particularly in light of the quality
of the stock we will be receiving in the exchange.
You're seeing everything from no premium transactions to what
some regard as an almost irresponsible premium transaction. We
have worked together and I think we've come up and negotiated
with one another a deal that's fair to both sides.
R. Kembley John, this is Ron. I'd just like to add not talking to this
premium but talking to the concept of premiums in the gold
industry, a big part of the problem in this industry in my
judgment, has been the last ten years. We've seen some absurd
premiums paid, where the acquirer certainly was not left in a
position to make any money. We've seen premiums that just
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 40
couldn't be justified on any financial basis when our industry
had a mentality of growing regardless of value creation.
Maybe you ought to look at this premium as being better business
sense and ... consolidation and reasonable premiums where not
only current shareholders but future shareholders have a fair
shake in this. This is good for our industry longer term.
J. Baliss John, it's Joe Baliss. You just made one other comment that you
looked back in terms of the relative values of the stocks back in
'98. I think if you look back and see what's happened since '98,
you'll see that we were faced with the adverse rulings at Crown
Jewel that impacted our company certainly going forward and
you'll see that Newmont has done an excellent job bringing
on...and putting in into production. I think that explains some
of the difference right there certainly looking at those historic
numbers.
Coordinator Our next question comes from Michael Enso with Davidson Kempner.
You may ask your question.
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 41
M. Enso Good afternoon. I wanted to just follow up on something you
mentioned at the end of the call. You stated that the deal led to
reduced political risk. I'm wondering if you could elaborate on
that?
M It's marginal decrease in kind of an overall global political
risk profile. From the standpoint of post transaction, 56% of the
combined reserves will be located in North America as compared to
52% of Newmont reserves being located in North America.
M If you deem North America to be a lower political risk, which
I guess you could debate, I guess that as a North American
that's sort of our mentality, then we have a greater
collection of our assets with the acquisition of the Canadian
and U.S. assets.
M. Enso Right. Secondly, if you could just go through, and I know you
probably mentioned this. I didn't get on until a few minutes ago,
unfortunately. If you could just go through the Canadian approval
if necessary...for the court approval?
J. Baliss Baliss This is Joe Baliss speaking. The exchangeable shareholders
will be voting at the same meeting as the common shareholders to
approve the
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 42
transaction and that's the simple majority of the shares as well.
The exchangeables will also be voting as a separate class to
approve their exchangeable shares, which is Newmont common
shares, that will require two-thirds.
M. Enso But the common needs 50%?
J. Baliss That's right. But you have to remember because of our capital
structure, it essentially, even though we have about 98 million
exchangeables outstanding and the balance of the 230 million are
common, the exchangeable shareholders vote together with the
common shareholders at one meeting to approve the transaction.
But the second vote of the exchangeable shareholders alone is
simply to approve the exchange of the Canadian exchangeable for
the Newmont common, and that will require two-thirds of those
voting.
M Of which Nnda is approximately two-thirds already.
M. Enso Noranda is two-thirds of the exchangeable or the common?
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 43
M The exchangeable, 28% of the federal common.
M. Enso So in other words that one's done?
M That's correct.
M. Enso Common is the only one that you have to get real approval for?
M Yes.
M. Enso Okay, thanks.
Coordinator Our next question comes from Joyce Choi with Morgan Stanley.
J. Choi Hi. I was calling in regards to the bond issues. You'd mentioned
that Newmont is plus 20 over LIBOR and for Battle Mountain plus
150. What does that mean for Newmont shareholders once Newmont
takes over the debt obligations of the Battle?
M That credit spreads on existing revolving debt. It's not the
bond.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 44
J. Choi I'm sorry, could you repeat that again?
M Those are the credit spreads on our existing credit facilities,
on the revolving debt facilities. It doesn't refer specifically
to the convertible debt issue.
J. Choi I also want to confirm that the rating agencies don't plan on
changing your ratings or outlooks after this?
M We've had discussions with the rating agencies and we anticipate
a reaffirmation of our ratings.
J. Choi Thank you.
Coordinator Our next question comes from Jason Capallo with Tutor Investment
Corporation.
J. Capallo Hi. I may have missed this, and I apologize if I did. What were
the gold and copper price assumptions you used to come up to your
accretion dilution analysis on any of the in cash flow net
earnings?
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 45
M We used $300 an ounce on gold and $.90 a pound on copper.
J. Capallo What would the numbers look like at either today's gold and
copper prices or the forward curve?
M Well, generally in terms of the transaction because it's
accretive, it's a new line of production basis, there's more
leverage to Newmont shareholders as prices increase and it
becomes less accretive as prices decrease. But it's still
accretive at ... .
J. Capallo Accretive at 285?
M Yes.
J. Capallo Okay.
M Not very far from 300.
J. Capallo Is there any production that wouldn't go forward from Battle
Mountain at today's gold prices to get to your synergy? And would
that affect your synergy number?
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 46
M I think all of Battle Mountain's current operations are
generating positive cash flow and will continue to operate.
J. Capallo Thanks.
Coordinator Our next question comes from Mark Smith with First Associates.
J. Capallo Yes, hi, gentlemen. Just a quick question. Perhaps my ears
deceive me but when you were speaking about the liabilities at
Golden Giant, you mentioned the possibility of mergers in those
operations there as a way of solving those liabilities. Could you
elaborate on that?
M I think in the context of liabilities at Golden Giant, we're
simply sticking with respects to the ultimate reclamation of
closure ... .
M. Smith I see. Thank you very much.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
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Coordinator Our next question comes from Craig Miller with BMO Nesbitt Burns.
C. Miller Yes. I wonder if you could say anything about rationalization of
all the assets which you'll have going forward after the merger?
Any plans for sales of assets or out right closures?
M I think at this point in time we're looking at all the assets
from the staff point. If there's cost improvement to
rationalization efforts that can be made with the neighbors that
sort of thing but we do not have specific plans to shut down
properties or to sell properties at this point.
C. Miller Thank you.
Coordinator Our next question comes from Michael Schecter with Mentor
Partners.
M. Schecter Yes. The preferred is that a separate class vote? And also is
this an auction process or what is the genesis of the
transaction?
M I'm sorry. We could not quite hear your question.
M. Schecter The preferred is that a separate class vote?
M Yes, it is.
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Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 48
M. Schecter And also what was the genesis of the transaction? Did Newmont
approach Battle? Was it an auction process?
J. Baliss It's Joe Baliss speaking. I think it was a recognition by Newmont
that Battle Mountain working away on the Phoenix project near its
own Nevada operation and interest to come and take a look at it
and then a willingness by Newmont to share the results of their
analysis with Battle Mountain and say to Battle Mountain's
management, look at the synergies we could achieve if we could do
something together. I think we've spent a number of months
exploring that and sharing that information. That's how the
transaction developed.
Michael, I'd just add that with our large investment there and
our large land position, we're obviously keeping a keen eye on
all phases of development in that district. And because we feel
that we have something to add to basically anything that's
discovered or that is undergoing development or that's in
operation. So this was not an unusual thing; it's something that
we do on a day-to-day basis.
M. Schecter Is that preferred vote a condition of the merger? And if you
don't get it, what is the outcome?
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NEWMONT MINING CORPORATION
Moderator: Jack Morris
June 21, 2000/1:00 p.m. CDT
Page 49
M If we do not get the convertible preferred vote, it is the
intention to add that convertible preferred remain at a
subsidiary level and...
(dictation is cut off)
