<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
March 21, 1994
NEWMONT GOLD COMPANY
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
Delaware 1-9184 13-2526632
- --------------- ---------------- -----------------
(State or other (Commission file (I.R.S. Employer
jurisdiction of number) Identification
incorporation) Number)
</TABLE>
1700 Lincoln Street, Denver, Colorado 80203
----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 863-7414
N/A
-------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 18, 1994, the stockholders of Newmont Gold Company
(the "Company") approved the proposed transaction between the Company and its
then 90.1% stockholder, Newmont Mining Corporation ("Newmont Mining"), whereby
the Board of Directors of the Company had agreed to the transfer by Newmont
Mining of all of the assets of Newmont Mining, other than 85,850,101 shares of
the common stock, par value $0.01 per share, of the Company (the "NGC Common
Stock") held by Newmont Mining, but including 8,649,899 shares of NGC Common
Stock, to the Company in exchange for (i) the assumption by the Company of all
of the liabilities (contingent or otherwise) of Newmont Mining other than
Newmont Mining's obligations with respect to the $5.50 Convertible Preferred
Stock of Newmont Mining (the "NMC Preferred Stock") (other than accrued and
unpaid dividends as of December 31, 1993) and employee stock options of Newmont
Mining (the "NMC Options") exercisable for the common stock, par value $1.60
per share, of Newmont Mining (the "NMC Common Stock"), (ii) the issuance by the
Company to Newmont Mining of 2,875,000 shares of $5.50 convertible preferred
stock, par value $5.00 per share, of the Company having terms identical to the
NMC Preferred Stock (except that upon conversion, Newmont Mining will be
entitled to receive shares of NGC Common Stock (instead of NMC Common Stock)),
and (iii) the issuance by the Company to Newmont Mining of stock options
exercisable for NGC Common Stock on the same terms as the NMC Options (the
preceding in its entirety, the "Transaction"). The Transaction is described in
greater detail in the definitive Proxy Statement of the Company dated February
16, 1994 mailed to its stockholders in connection with a 1994 Special Meeting
of Stockholders and which is incorporated by reference in this Current Report
on Form 8-K and is filed as Exhibit 1 hereto. Consummation of the Transaction
was contingent upon approval of a majority of the stockholders of the Company.
Following approval by a majority of the stockholders of the Company, authorized
representatives of the Company and Newmont Mining executed and delivered on
March 21, 1994 a related Bill of Sale and Assignment and Assumption of
Liabilities Agreement. Pursuant to the terms of the letter agreement, dated
December 15, 1993, between the Company and Newmont Mining (the "Letter
Agreement") related to the Transaction, the parties agreed that for accounting
purposes the effective date of the Transaction will be January 1, 1994. The
Letter Agreement is filed as Exhibit 2 hereto.
-2-
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired. Audited combined
financial statements of Newmont Mining Corporation and subsidiaries
excluding Newmont Gold Company, for the years ended December 31, 1993
and 1992 are incorporated herein by reference and are filed as Exhibit
3 hereto.
(b) Pro Forma Financial Information. The required pro forma financial
information is incorporated herein by reference and is filed as
Exhibit 4 hereto.
(c) Exhibits.
1. Proxy Statement, dated February 16, 1994, of Newmont Gold Company
(incorporated by reference to Proxy Statement on Schedule 14A, dated
February 16, 1994, filed by Newmont Gold Company).
2. Letter Agreement, dated December 15, 1993, between Newmont Mining
Corporation and Newmont Gold Company (incorporated by reference
to Exhibit A to Proxy Statement on Schedule 14A, dated February 16,
1994, filed by Newmont Gold Company).
3. Audited combined financial statements of Newmont Mining Corporation
and subsidiaries excluding Newmont Gold Company, for the three years
ended December 31, 1993.
4. Pro Forma Condensed Consolidated Financial Statements of Newmont Gold
Company and subsidiary (incorporated by reference to Note 13 to the
Consolidated Financial Statements of Newmont Gold Company and
subsidiary contained in Item 8 to the Annual Report on Form 10-K for
the year ended December 31, 1993 of Newmont Gold Company.
-3-
<PAGE> 4
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 GOLD COMPANY
Date: April 5, 1994 By: /s/ TIMOTHY J. SCHMITT
Name: Timothy J. Schmitt
Title: Vice President, Secretary and
Assistant General Counsel
-4-
<PAGE> 5
EXHIBIT INDEX
Exhibit
Number
- -------
1. Proxy Statement, dated February 16,
1994, of Newmont Gold Company
(incorporated by reference to Proxy
Statement on Schedule 14A, dated
February 16, 1994, filed by Newmont Gold
Company).
2. Letter Agreement, dated December 15, 1993,
between Newmont Mining Corporation and
Newmont Gold Company (incorporated by
reference to Exhibit A to Proxy Statement
on Schedule 14A, dated February 16, 1994,
filed by Newmont Gold Company).
3. Audited combined financial statements of
Newmont Mining Corporation and
subsidiaries excluding Newmont Gold
Company, for the three years ended
December 31, 1993.
4. Pro Forma Condensed Consolidated
Financial Statements of Newmont Gold
Company and subsidiary (incorporated by
reference to Note 13 to the Consolidated
Financial Statements of Newmont Gold
Company and subsidiary contained in Item
8 to the Annual Report on Form 10-K for
the year ended December 31, 1993 of
Newmont Gold Company.
<PAGE> 1
EXHIBIT 3
COMBINED FINANCIAL STATEMENTS OF NEWMONT MINING CORPORATION AND
SUBSIDIARIES EXCLUDING NEWMONT GOLD COMPANY
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Newmont Mining Corporation:
We have audited the accompanying combined balance sheets of Newmont
Mining Corporation (a Delaware corporation) and subsidiaries excluding Newmont
Gold Company (see Note 1) as of December 31, 1993 and 1992, and the related
statements of combined operations, and combined cash flows for each of the
three years in the period ended December 31, 1993. These financial statements
are the responsibility of Newmont's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of Newmont
Mining Corporation and subsidiaries excluding Newmont Gold Company as of
December 31, 1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in Note 4 to the combined financial statements, effective
January 1, 1993, the method of accounting for income taxes was changed. In
addition, as discussed in Note 8 to the combined financial statements,
effective January 1, 1992, the method of accounting for postretirement benefits
other than pensions was changed.
ARTHUR ANDERSEN & CO.
Denver, Colorado,
March 30, 1994
1
<PAGE> 2
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1993 1992
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . $ 69,361 $290,473
Short-term investments . . . . . . . . . . . . . . . . . 18,709 18,015
Other . . . . . . . . . . . . . . . . . . . . . . . . . 5,666 11,077
--------- --------
Current assets . . . . . . . . . . . . . . . . . . . . 93,736 319,565
Asset held for sale . . . . . . . . . . . . . . . . . . -- 37,371
Property, plant and mine development, net . . . . . . . 99,070 66,928
Long-term inventories . . . . . . . . . . . . . . . . . 23,806 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 107,501 83,813
--------- --------
Total assets . . . . . . . . . . . . . . . . . . . . $ 324,113 $507,677
========= ========
Liabilities and Combined Deficit
Short-term debt . . . . . . . . . . . . . . . . . . . . $ 15,739 $ 10,941
Current portion of long-term debt . . . . . . . . . . . -- 88,689
Advances from related party . . . . . . . . . . . . . . 159,573 198,050
Other . . . . . . . . . . . . . . . . . . . . . . . . . 34,038 62,040
Deferred revenue . . . . . . . . . . . . . . . . . . . . -- 23,508
--------- --------
Current liabilities . . . . . . . . . . . . . . . . . 209,350 383,228
Long-term debt . . . . . . . . . . . . . . . . . . . . . 192,000 177,000
Reclamation liabilities . . . . . . . . . . . . . . . . 55,951 40,577
Other . . . . . . . . . . . . . . . . . . . . . . . . . 69,587 64,520
Deferred income taxes . . . . . . . . . . . . . . . . . -- 44,052
--------- --------
Total liabilities . . . . . . . . . . . . . . . . . . 526,888 709,377
Combined deficit . . . . . . . . . . . . . . . . . . . . (202,775) (201,700)
--------- --------
Total liabilities and combined deficit . . . . . . . $ 324,113 $507,677
========= ========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
2
<PAGE> 3
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
STATEMENTS OF COMBINED OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Sales and other income
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,693 $ 66,764 $ 50,021
Dividends, interest and other . . . . . . . . . . . . . . 19,643 18,241 24,822
Gain on disposition of securities . . . . . . . . . . . . 29,607 -- 36,107
-------- ------- --------
81,943 85,005 110,950
-------- ------- --------
Costs and expenses
Costs applicable to sales . . . . . . . . . . . . . . . . (6,887) (8,676) (2,310)
Depreciation, depletion and amortization . . . . . . . . (2,831) (2,015) (1,715)
Exploration and research . . . . . . . . . . . . . . . . (42,633) (37,335) (36,023)
General and administrative . . . . . . . . . . . . . . . (24,577) (22,048) (16,585)
Third party interest . . . . . . . . . . . . . . . . . . (20,894) (16,960) (13,021)
Capitalized interest . . . . . . . . . . . . . . . . . . 8,500 2,405 --
Related party interest . . . . . . . . . . . . . . . . . (5,326) (7,382) (7,302)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (10,458) (20) (46,229)
-------- ------- --------
(105,106) (92,031) (123,185)
Equity in income (loss) of affiliated companies . . . . . . 5,001 (2,821) --
Minority interest in loss of subsidiaries . . . . . . . . . 339 439 --
-------- ------- --------
Income (loss) before income taxes and
cumulative effect of changes in accounting
principles . . . . . . . . . . . . . . . . . . . . . . . (17,823) (9,408) (12,235)
Income tax benefit (provision) . . . . . . . . . . . . . . 10,827 20,634 (6,934)
-------- ------- --------
Income (loss) before cumulative effect of
changes in accounting principles . . . . . . . . . . . . (6,996) 11,226 (19,169)
Cumulative effect of changes in accounting
principles, net of income tax benefit of
$5,962 in 1992 . . . . . . . . . . . . . . . . . . . . . 35,805 (5,216) --
-------- ------- --------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . 28,809 6,010 (19,169)
Preferred stock dividends . . . . . . . . . . . . . . . . . (15,910) (1,747) --
-------- ------- --------
Income (loss) after preferred dividends . . . . . . . . . . $ 12,899 $ 4,263 $(19,169)
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
3
<PAGE> 4
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
STATEMENTS OF COMBINED CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------
1993 1992 1991
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net income (loss) . . . . . . . . . . . . . . . . . . . . $28,809 $ 6,010 $ (19,169)
--------- -------- ---------
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation, depletion and amortization . . . . . . 2,831 2,015 1,715
Deferred taxes . . . . . . . . . . . . . . . . . . . (49,706) (25,640) 5,341
Gain on disposition of securities . . . . . . . . . . (29,607) -- (36,107)
Debt repayment at less than monetized amount . . . . (23,508) (26,039) (20,944)
Increase in operating assets . . . . . . . . . . . . (18,157) (23,845) (853)
Increase (decrease) in operating liabilities . . . . (27,937) 5,700 (12,683)
Other operating . . . . . . . . . . . . . . . . . . . (7,206) 37 (220)
--------- -------- ---------
Total adjustments . . . . . . . . . . . . . . . . . . (153,290) (67,772) (63,751)
--------- -------- ---------
Net cash used in operating activities . . . . . . . . . . (124,481) (61,762) (82,920)
--------- -------- ---------
Investing activities
Net proceeds from sales of securities and short-term
investments . . . . . . . . . . . . . . . . . . . . . . 88,189 18,264 16,897
Purchase of short-term investments . . . . . . . . . . . (16,845) (19,664) (13,861)
Additions to property, plant and mine development . . . . (34,974) (45,304) --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 9,270 2,984 12,922
--------- -------- ---------
Net cash provided by (used in) investing activities . . . . 45,640 (43,720) 15,958
--------- -------- ---------
Financing activities
Short-term borrowings . . . . . . . . . . . . . . . . . . 4,798 28 2,618
Advances from (repayments to) related party, net . . . . (38,477) 34,976 81,539
Proceeds from long-term borrowings . . . . . . . . . . . 15,000 177,000 --
Repayments of long-term borrowings . . . . . . . . . . . (88,689) (86,157) (91,314)
Proceeds from exercise of stock options . . . . . . . . . 23,070 13,488 3,185
Proceeds from issuance of preferred stock . . . . . . . . -- 279,811 --
Dividends paid on common equity . . . . . . . . . . . . . (41,019) (40,816) (40,621)
Dividends paid on preferred stock . . . . . . . . . . . . (16,954) -- --
--------- -------- ---------
Net cash provided by (used in) financing activities . . . . (142,271) 378,330 (44,593)
--------- -------- ---------
Net increase (decrease) in cash and cash equivalents . . . (221,112) 272,848 (111,555)
Cash and cash equivalents at beginning of year . . . . . . 290,473 17,625 129,180
--------- -------- ---------
Cash and cash equivalents at end of year . . . . . . . . . $ 69,361 $290,473 $ 17,625
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
4
<PAGE> 5
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(1) BASIS OF PRESENTATION
These combined historical financial statements were prepared from the
consolidated financial statements of Newmont Mining Corporation and its
subsidiaries ("Newmont Mining Corporation") by excluding from such statements
the financial results and accounts of Newmont Gold Company and its subsidiary
("NGC"). Such "entity" is referred to hereinafter as "Newmont Mining." These
statements were prepared to reflect the assets, liabilities and related
operations of Newmont Mining Corporation that were transferred to NGC, its
approximately 90% owned subsidiary. Adjustments have also been made to
recognize certain transactions between Newmont Mining Corporation and NGC that
previously were eliminated in Newmont Mining Corporation's historical
consolidated financial statements.
The combined deficit represents the difference between the combined
assets and liabilities of Newmont Mining. Included in Newmont Mining's
combined deficit are the impacts of preferred stock and the exercise of
employee stock options. As NGC will issue preferred stock and stock options
with identical terms to those outstanding on Newmont Mining as a part of the
transaction described elsewhere in this document, a discussion of such equity
instruments is included within these footnotes.
As the combined deficit reflected in the accompanying financial
statements does not represent shareholder equity of any particular corporate
enterprise, no earnings or dividends per share information has been presented.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
These combined financial statements include the accounts of Newmont
Mining and its more than 50% owned subsidiaries but exclude NGC. All
significant intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all cash balances and highly
liquid investments with an original maturity of three months or less. Excess
cash balances are primarily concentrated in U.S.
5
<PAGE> 6
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Treasury bills with lesser amounts invested in high quality commercial paper
and time deposits with high credit-worthy financial institutions.
INVESTMENTS
Short-term investments are carried at cost, which approximates market,
and include Eurodollar government and corporate obligations rated AA or higher.
At December 31, 1993 and 1992, approximately $10 million of such investments
secured letters-of-credit.
Investments in companies in which ownership is between 20% and 50% are
accounted for by the equity method of accounting.
Investments in companies owned less than 20% are recorded at the lower
of cost or net realizable value.
INVENTORIES
Non-current inventories are stated at the lower of average cost or net
realizable value and represent ore in stockpiles from which no material is
expected to be processed for more than one year after the balance sheet date.
PROPERTY, PLANT AND MINE DEVELOPMENT
Expenditures for property and equipment are capitalized and
depreciated using the straight-line method at rates sufficient to depreciate
such costs over the estimated lives of such facilities, which range from two to
fifteen years.
Mineral exploration costs are expensed as incurred. When it has been
determined that a mineral property has proven or probable ore reserves, the
costs of subsequent reserve definition and the costs incurred to develop such
property, including costs to remove overburden to initially expose the ore
body, are capitalized. Such costs, and estimated future development costs are
amortized using a units-of-production method over the estimated life of the ore
body. On-going development expenditures to maintain production are generally
charged to operations as incurred.
Significant payments related to the acquisition of exploration
interests are capitalized. If a mineable ore body is discovered, such costs
are amortized using a units-of-production method. If no mineable ore body is
discovered, such costs are expensed in the
6
<PAGE> 7
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
period in which it is determined the property has no future economic value.
Interest expense allocable to the cost of developing mining properties
and to constructing new facilities is capitalized until operations commence and
depreciated on the same basis as the property or facility.
Gains or losses from normal sales or retirements of assets are
included in income or expense.
DEFERRED INCOME TAXES
Prior to 1993, deferred income taxes were recorded under Accounting
Principles Board Opinion No. 11, "Accounting for Income Taxes" ("APB 11").
Under the deferred method of APB 11, certain revenues and expenses were
recognized for financial reporting purposes at different times than such
amounts were recognized for income tax purposes, generating a deferred income
tax charge or benefit for the year.
Effective January 1, 1993, Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109") was adopted. Under the
liability method of SFAS 109, certain temporary differences between the
financial reporting basis of liabilities and assets and the related income tax
basis for such liabilities and assets are recognized.
This generates a net deferred income tax liability or net deferred
income tax asset as measured by the statutory tax rates in effect as enacted.
The deferred income tax charge or benefit is then derived by recording the
change in the net deferred income tax liability or net deferred income tax
asset balance for the year.
HEDGING ACTIVITIES
Newmont Mining entered into gold loans, options contracts and forward
sales contracts to hedge the effect of price changes on the gold NGC produced.
Gains and losses realized on such instruments, as well as any cost or revenue
associated therewith, has been recognized in sales when the related production
was delivered.
7
<PAGE> 8
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY, PLANT AND MINE DEVELOPMENT
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1993 1992
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land and mining claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,504 $36,341
Buildings and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,029 19,389
Mine development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,199 33,327
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,120 --
------- -------
122,852 89,057
Less accumulated depreciation, depletion and amortization . . . . . . . . . . . (23,782) (22,129)
------- -------
$99,070 $66,928
======= =======
</TABLE>
(4) INCOME TAXES
Newmont Mining Corporation files a consolidated tax return which
includes the operations of NGC. Subject to a tax sharing arrangement between
Newmont Mining Corporation and NGC, the tax provision for NGC is calculated as
if NGC was a separate taxpayer. Due to this, certain tax attributes related to
NGC may not be able to be utilized by NGC on a separate taxpayer basis, but can
be utilized on Newmont Mining Corporation's consolidated tax return.
The tax provisions (benefits) and related disclosures for these
statements were calculated by subtracting NGC's separate taxpayer amounts in
its historical financial statements from the consolidated amounts in Newmont
Mining Corporation's historical financial statements. Although the resulting
amounts are not necessarily indicative of what would result if the combined
assets and liabilities were considered as a separate taxpayer, management does
believe they are representative of what the impact of the combined assets and
liabilities would be in a consolidated tax return with NGC.
SFAS 109 requires that, effective January 1, 1993, income taxes be
accounted for under the liability method, rather than the deferred method
required previously under APB 11. The cumulative effect of this change in
accounting for income taxes, attributable to fiscal years prior to 1993, is an
increase to earnings of $35.8 million.
Under SFAS 109, deferred income tax liabilities and deferred income
tax assets are established when temporary differences arise between the
financial reporting basis and the income tax basis of such liabilities and
assets. The actual measurement of the deferred income tax liabilities and
assets is based upon the tax rates and tax law provisions as enacted.
8
<PAGE> 9
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income tax assets include future tax benefits such as net
operating losses or tax credit carryforwards. A valuation allowance must be
recorded against any portion of a deferred income tax asset which will more
likely than not fail to be realized.
Components of the deferred income tax (liabilities) and assets at
December 31, 1993 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred Tax Liabilities:
Accelerated tax depreciation deducted in excess of book depreciation $ (746)
Alternative minimum tax credits attributable to NGC, utilized by
Newmont Mining (46,103)
Depletion of the cost of land and mining claims for tax in excess of book amortization (1,012)
Other (5,546)
--------
Gross deferred tax liabilities (53,407)
--------
Deferred Tax Assets:
Investments in subsidiaries not consolidated for tax purposes 18,415
Reclamation costs not deducted in tax return 982
Exploration costs not deducted in tax return 33,720
Retiree benefit costs not deducted in tax return 4,974
Other 5,517
--------
Gross deferred tax assets 63,608
--------
Valuation allowance for deferred tax assets (4,974)
--------
Net deferred tax assets $ 5,227
========
</TABLE>
Based upon estimates of future operations and tax planning strategies (which
included NGC's operations on a consolidated basis), Newmont Mining believes
that it more likely than not will utilize $58.6 million of the $63.6 million of
gross deferred income tax assets at December 31, 1993, reflecting a valuation
allowance of $5.0 million.
Newmont Mining gives no outright assurance that it will generate
sufficient taxable income to fully realize the remaining $58.6 of gross
deferred income tax assets. Future levels of taxable income are dependent, in
part, upon gold prices, general economic conditions and other factors beyond
Newmont Mining's control.
Pre-tax financial statement income before the cumulative effect of
changes in accounting principles consists of (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Domestic $(30,514) $ 7,167 $ 3,250
Foreign 12,691 (16,575) (15,485)
-------- -------- --------
$(17,823) $ (9,408) $(12,235)
======== ======== ========
</TABLE>
9
<PAGE> 10
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
On August 10, 1993, President Clinton signed into law the Revenue
Reconciliation Act of 1993, raising the federal corporate income tax rate from
34% to 35% (retroactive to January 1, 1993).
The provisions (benefits) for income taxes before the cumulative
effect of changes in accounting principles consist of (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1993 1992 1991
---------- --------- --------
(SFAS 109) (APB 11)
---------- --------------------
<S> <C> <C> <C>
Current:
Domestic $ 1,589 $ (1,418) $ 1,129
Foreign 1,369 462 464
-------- -------- --------
2,958 (956) 1,593
-------- -------- --------
Deferred:
Domestic (12,718) (19,678) 5,341
Foreign - - -
Adjustment in net deferred
tax liabilities for change
in tax rates (1,067) - -
-------- -------- --------
(13,785) (19,678) 5,341
-------- -------- --------
$(10,827) $(20,634) $ 6,934
======== ======== ========
</TABLE>
In accordance with APB 11, Newmont Mining's deferred income tax provisions
(benefits) for 1992 and 1991, before the cumulative effect of a change in
accounting principle, consists of (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1992 1991
--------- --------
<S> <C> <C>
Excess depreciation
deducted (not deducted)
on tax returns $(13,569) $ 15,086
Net gains recognized in
tax return, recognized
previously for financial
statement purposes - (10,035)
Relocation costs not deducted
in tax returns 863 922
Excess mine development and
exploration costs not
deducted in tax returns (11,418) (403)
Costs capitalized to inventory 2,736 464
Other 1,710 (693)
-------- --------
$(19,678) $ 5,341
======== ========
</TABLE>
10
<PAGE> 11
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions for income taxes before the cumulative effect of changes in
accounting principles differ from the amounts computed by applying the U.S.
corporate income tax statutory rate for the following reasons (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1993 1992 1991
---------- -------- --------
(SFAS 109) (APB 11)
---------- -------------------
<S> <C> <C> <C>
U.S. corporate income
tax at statutory rate $ (6,238) $ (3,199) $ (4,160)
Percentage depletion (4,073) (8,214) (26)
Non-taxable portion of
dividends received
from domestic corporations (474) (384) (3,031)
Undistributed income of,
losses of and dividends
received from subsidiaries
and affiliates (693) (6,400) 16,485
Other 651 (2,437) (2,334)
-------- -------- -------
$(10,827) $(20,634) $ 6,934
======== ======== =======
</TABLE>
Included in other long-term liabilities at December 31, 1993 and 1992
is $29.6 million and $23.1 million, respectively, of income taxes payable.
In 1991, Newmont Mining credited retained earnings approximately $35
million for previously provided deferred income taxes. These deferred income
taxes related to a former subsidiary whose stock was distributed to Newmont
Mining's shareholders in a prior year. At that time, the distribution reduced
retained earnings.
(5) DEBT
LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1993 1992
---- ----
<S> <C> <C>
8 5/8% notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000 $150,000
Medium-term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,000 27,000
Gold loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 88,689
-------- --------
192,000 265,689
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (88,689)
-------- --------
$192,000 $177,000
======== ========
</TABLE>
11
<PAGE> 12
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8 5/8% NOTES
In April 1992, Newmont Mining issued unsecured notes with a principal
amount of $150 million due April 1, 2002 bearing an annual interest rate of
85/8%. Interest is payable semi-annually in April and October and the notes
are not redeemable prior to maturity. Using interest rates prevailing on
similar instruments at December 31, 1993 and 1992, this debt is estimated to
have a fair value of $170.7 million and $157.7 million, respectively.
MEDIUM-TERM NOTES
Beginning in May 1992, Newmont Mining began issuing notes under its
medium-term note program. Notes totalling $42 million and $27 million with a
weighted average interest rate of 7.7% and 7.9% maturing on various dates
ranging from mid-1999 to late 2004 were outstanding as of December 31, 1993 and
1992, respectively. Using the interest rates prevailing on similar
instruments at December 31, 1993 and 1992, this debt was estimated to have a
fair value of $45.6 million and $27.2 million at those respective dates.
GOLD LOAN
In 1988, Newmont Mining entered into a loan agreement with a group of
lenders under which one million ounces of gold were borrowed and the obligation
was monetized for $448.8 million. The borrowings were repaid in 16 equal
quarterly installments of gold ounces with the final quarterly installment paid
in December 1993.
In April 1992, Newmont Mining entered into forward contracts to
acquire the gold necessary to satisfy the final six quarterly installments due
on the loan at an average price of $355 per ounce. The difference between the
forward contract values and the monetized amount of the gold loan was reflected
as deferred revenue on the combined balance sheet at December 31, 1992.
Sales revenues of $23.5 million, $26.0 million and $20.9 million were
recognized in 1993, 1992 and 1991, respectively, as the monetized amount of the
repaid ounces was less than that at which the ounces were originally recorded.
Newmont Mining paid interest in gold ounces at the lenders' gold base
rate plus 0.5%. Interest was calculated on current market prices for gold.
The gold interest rate averaged 1.9%, 1.4%
12
<PAGE> 13
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and 2.0% in 1993, 1992 and 1991, respectively. The effective interest rate
based upon the monetized value of the gold loan averaged 1.8%, 1.3% and 1.6% in
1993, 1992 and 1991, respectively. Newmont Mining paid a $1.8 million fee to
the lenders upon origination of the loan which was amortized over the life of
the agreement.
PROJECT FINANCING FACILITY
Newmont Mining, through a wholly-owned subsidiary, is a 50%
participant in a joint venture in the Republic of Uzbekistan. The other 50%
participants are two entities of the Uzbekistan government. The joint venture
was established to construct and operate a leaching facility to produce gold
from low-grade ore. The project is expected to cost approximately $150
million.
The joint venture has secured $105 million of project financing for
the project from a consortium of banks. The loan is payable out of the
proceeds of the project, beginning the earlier of six months after completion
or July 20, 1996 in semi-annual installments over three years. The average
interest rate on the loan is 2.25 percentage points over the London Interbank
Borrowing Rate prior to completion of the project and 3.75 percentage points
over the London Interbank Borrowing Rate after completion of the project. No
amounts had been drawn under the loan at December 31, 1993.
Newmont Mining has guaranteed one-half of the payment of any amounts
due under the loan until the requirements of a specified completion test have
been satisfied, at which time the loan will become non-recourse debt. Such
completion test must be satisfied no later than October 1996. Newmont Mining
has obtained political risk insurance coverage for its investment and loan
guarantee in Uzbekistan.
REVOLVING CREDIT FACILITY
Newmont Mining has a revolving credit facility under which it may
borrow up to $280 million. The revolving credit facility expires in April
1997. No amounts were drawn down under the facility in 1993 or 1992. Interest
rates are variable at the lenders' base rate plus 0.3% until May 1995 and
0.425% thereafter. Newmont Mining has the option to fix the rate for up to six
months. There is an annual facility fee of 0.2% on the lenders' total
commitment.
13
<PAGE> 14
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Newmont Mining's revolving credit facility contains covenants limiting
consolidated indebtedness, as defined, to $750 million and requiring a minimum
net worth. The minimum net worth requirement was $225 million in 1993 and
increases $25 million annually. Also, as of December 31, 1993, the payment of
future dividends to common and preferred stockholders was limited to $173.6
million.
DOLLAR/GOLD DEBT SWAPS
During 1989 and 1990, Newmont Mining entered into dollar/gold debt
swaps for a total notional principal amount of $150 million and 383,400 ounces
of gold. Upon termination of a swap, Newmont Mining was required to deliver
the number of gold ounces involved in return for payment by the counterparty of
the notional principal amount involved. The effect of a swap was to convert
dollar denominated debt into gold denominated debt which, on average, had a
significantly lower interest rate than dollar denominated debt. In early 1991,
Newmont Mining terminated a $50 million swap covering 127,700 ounces of gold
and recognized $5.2 million of revenue. In 1992, Newmont Mining terminated its
remaining $100 million of swaps covering 255,800 ounces of gold and recognized
$19.7 million of revenue.
SHORT-TERM DEBT
All short-term debt at December 31, 1993 and 1992 consisted of bank
debt.
Newmont Mining currently has unsecured demand bank lines of credit
aggregating $16 million, of which $15.7 million and $10.9 million were
outstanding at December 31, 1993 and 1992, respectively. These facilities bear
interest at customary short-term rates for borrowers with similar credit
ratings. The interest rates on this short-term bank debt averaged 6.0%, 6.1%
and 8.5% in 1993, 1992 and 1991, respectively, and were 6.0% at December 31,
1993 and 1992.
14
<PAGE> 15
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) COMBINED DEFICIT
As discussed in Note 1, the combined deficit represents the difference
between the assets and liabilities of Newmont Mining and includes transactions
related to Newmont Mining's preferred and common stocks. The following is a
reconciliation of the deficit balance between periods (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------
1993 1992
--------- ---------
<S> <C> <C>
Balance, beginning of year . . . . . . . . . . . . . . . . . . . $(201,700) $(460,503)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,809 6,010
Preferred stock issued . . . . . . . . . . . . . . . . . . . . . -- 279,811
Stock options exercised . . . . . . . . . . . . . . . . . . . . . 26,104 13,478
Dividends on common equity . . . . . . . . . . . . . . . . . . . (41,019) (40,816)
Dividends on preferred stock . . . . . . . . . . . . . . . . . . (15,910) (1,747)
Minimum pension liability adjustment . . . . . . . . . . . . . . (1,047) (2,668)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,988 4,735
--------- ---------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . $(202,775) $(201,700)
========= =========
</TABLE>
(7) STOCKHOLDERS' EQUITY
PREFERRED STOCK
In the fourth quarter of 1992, Newmont Mining issued 2.875 million
shares of $5.00 par value Convertible Preferred Stock at a price of $100 per
share, which netted approximately $280 million after offering expenses. The
$5.50 annual dividend per share is cumulative from the original issue date and
is payable quarterly commencing March 15, 1993. The shares are convertible at
any time at the option of the holder into shares of common stock of Newmont
Mining at a conversion price of $36.395 (as adjusted for a 1.2481 shares to 1
share stock split declared March 21, 1994) for each share of common stock,
subject to certain adjustments. The Convertible Preferred Stock is not
redeemable prior to November 15, 1995. On and after such date it is
redeemable, in whole or in part, at the option of Newmont Mining, at a
beginning redemption price of $103.85 per share. Such redemption price then
declines $0.55 per share annually until it reaches $100 per share on November
15, 2002, which is also the liquidation preference per share. The Convertible
Preferred Stock ranks senior to the participating preferred stock and, in
general, does not have voting rights.
The Convertible Preferred Stock was offered under Rule 144A and
Regulation S under the U.S. Securities Act of 1933 and is therefore not
registered under such act. The Convertible Preferred Stock is held by
shareholders through depositary shares, each of
15
<PAGE> 16
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
which represents one-half of a share of the Convertible Preferred Stock and
entitles the holder to all proportional rights and preferences of the
Convertible Preferred Stock.
STOCK OPTION PLANS
Under Newmont Mining's stock option plans, options to purchase shares
of Newmont Mining are granted to key employees at the fair market value of such
shares on the date of grant. The options under these plans are subject to
certain restrictions, vest over a two year period and are exercisable over a
period not exceeding ten years. At December 31, 1993, 1,398,890 shares were
available for future grants under Newmont Mining's stock option plans.
In 1993 and 1992 certain key executives were granted options that,
although the exercise price is generally equal to the fair market value on the
date of grant, cannot be exercised when vested until the market price of
Newmont Mining's common stock is a defined amount above the option exercise
price. In addition, the same executives have been granted options whose
exercise prices are in excess of the fair market value on the date of grant.
Generally, these key executive options vest over a five year period and are
exercisable over a ten year period. At December 31, 1993, 956,444 shares of
these options were outstanding.
The following table summarizes annual stock option activity for the
three years ended December 31, 1993:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------- ----------------------- -----------------------
Number Option price Number Option price Number Option price
of shares per share of shares per share of shares per share
--------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,418,991 $27.19-56.09 1,711,900 $27.19-38.66 1,506,615 $27.19-38.66
Granted 634,192 $37.56-56.09 1,256,524 $29.55-56.09 425,134 $31.40-31.65
Exercised (758,533) $27.19-40.06 (444,588) $27.19-38.66 (122,749) $27.19-29.80
Canceled (239,563) $27.19-56.09 (104,845) $28.24-38.66 (97,100) $27.19-38.66
--------- ------------ --------- ------------ --------- ------------
Outstanding at end of year 2,055,087 $27.19-56.09 2,418,991 $27.19-56.09 1,711,900 $27.19-38.66
========= ========= =========
</TABLE>
At December 31, 1993, 738,777 options were exercisable.
All share and per share amounts herein have been restated for the
1.2481 shares to 1 share stock split declared March 21, 1994.
16
<PAGE> 17
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) EMPLOYEE BENEFIT PLANS
PENSION BENEFITS
Newmont Mining has a qualified non-contributory defined benefit
pension plan which covers salaried employees. Employees vest in the plan after
five years of service. In addition, Newmont Mining has a non-qualified
supplemental pension plan for salaried employees whose benefits under the
qualified plan are limited by federal legislation. Pension costs are
determined annually by independent actuaries and pension contributions to the
qualified plan are made based on funding standards established by ERISA.
Newmont Mining maintains a trust for the purpose of funding the supplemental
pension plan as well as death benefits for officers of Newmont Mining. This
trust is funded at the discretion of Newmont Mining and had a balance of $5.0
million and $4.8 million (which approximated market) at December 31, 1993 and
1992, respectively. Although the trust's assets can be used to pay benefits
for the supplemental pension plan, they cannot be used in determining the net
pension liability for the supplemental pension plan. The plans' benefit
formulas are based on an employee's years of credited service and such
employee's last five years average pay. The qualifying plan's assets consist
of stocks, bonds and cash.
The components of pension expense for these two plans, in the
aggregate, consist of (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-----------
DECEMBER 31,
-------------
1993 1992
------- ------
<S> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,265 $2,280
Interest cost on projected benefit obligation . . . . . . . . . . . . . . . . . 4,753 4,481
Return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,653) (4,726)
Amortization of unrecognized prior service cost and
net accumulated losses less amortization of net
transition asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 161
------ ------
Pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,613 $2,196
====== ======
</TABLE>
17
<PAGE> 18
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following tables set forth the funded status of the plans and the
amounts recognized in the combined balance sheets at December 31, 1993 and
1992, respectively (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993
--------------------
QUALIFIED SUPPLEMENTAL
PENSION PLAN PENSION PLAN
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation --
Vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(50,329) $(4,263)
Non-vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,644) (42)
-------- -------
(51,973) (4,305)
Effect of future salary increases . . . . . . . . . . . . . . . . . . . . . . . (5,411) (146)
-------- -------
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . (57,384) (4,451)
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,299 --
-------- -------
Plan assets greater (less) than projected
benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,915 (4,451)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . 22 --
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,256 5,861
Unrecognized net transition (asset) liability . . . . . . . . . . . . . . . . . . (3,146) 3,103
Adjustment required to recognize minimum liability . . . . . . . . . . . . . . . -- (8,818)
-------- -------
Net pension asset (liability) . . . . . . . . . . . . . . . . . . . . . . . $1,047 $(4,305)
======== =======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1992
--------------------
QUALIFIED SUPPLEMENTAL
PENSION PLAN PENSION PLAN
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation --
Vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(43,500) $(8,895)
Non-vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,500) (100)
-------- -------
(46,000) (8,995)
Effect of future salary increases . . . . . . . . . . . . . . . . . . . . . . . (6,215) (500)
-------- -------
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . (52,215) (9,495)
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,342 --
-------- -------
Plan assets greater (less) than projected
benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,127 (9,495)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . 23 --
Unrecognized net (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . (2,027) 4,542
Unrecognized net transition (asset) liability . . . . . . . . . . . . . . . . . . (3,611) 3,491
Adjustment required to recognize minimum liability . . . . . . . . . . . . . . . -- (7,533)
-------- -------
Net pension asset (liability) . . . . . . . . . . . . . . . . . . . . . . . $ 1,512 $(8,995)
======== =======
</TABLE>
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, an adjustment was required to reflect a minimum liability for
the supplemental pension plan in 1993 and 1992. Such adjustment resulted in
recording an intangible asset and, to the extent the minimum liability
adjustment exceeded the unrecognized net transition liability, an increase in
the combined deficit net of related deferred income tax benefits.
18
<PAGE> 19
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In measuring the projected benefit obligation for the plans, the
following assumptions were used:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1993 1992
---- ----
<S> <C> <C>
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . 7.50% 7.75%
Rate of increase in future compensation . . . . . . . . . . . . . . . . . . . . 4.0% 4.0%
Weighted-average expected long-term rate of
return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.25% 9.25%
</TABLE>
RETIREE BENEFITS OTHER THAN PENSIONS
Newmont Mining provides defined medical benefits to qualifying
retirees who were salaried employees and their eligible dependents and it
provides defined life insurance benefits to qualifying retirees who were
salaried employees. In general, participants become eligible for these
benefits upon retirement directly from Newmont Mining if they are at least 55
years old and the combination of their age and years of service with Newmont
Mining equals 75 or more.
The defined medical benefits cover most of the reasonable and
customary charges for hospital, surgical, diagnostic, physician services and
prescription drugs. Life insurance benefits are based on a percentage of final
base annual salary and decline over time after coverage begins.
Newmont Mining adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
("SFAS 106"), effective January 1, 1992. The statement requires that
postretirement benefits be accrued during an employee's service to Newmont
Mining. Previously, Newmont Mining recorded the expense when benefit payments
were made for retirees.
The actuarially determined accumulated postretirement benefit
obligation ("APBO") calculated in accordance with SFAS 106 at January 1, 1992
was $11.2 million. This amount was expensed, net of related income tax
benefits of $6.0 million, as a cumulative effect of a change in accounting
principle.
19
<PAGE> 20
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The components of expense for postretirement benefits other than
pensions for 1993 and 1992, exclusive of the cumulative effect of adopting SFAS
106 as of January 1, 1992, are shown in the table below:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296 $ 264
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . 897 799
------ ------
Expense for postretirement benefits
other than pensions . . . . . . . . . . . . . . . . . . . . . . $1,193 $1,063
====== ======
</TABLE>
In 1991, the annual amount expensed for these benefits under Newmont
Mining's prior accounting policy was insignificant.
The following table sets forth the components of the liability for
Newmont Mining's plans and the amounts carried on the combined balance sheets as
of December 31, 1993 and 1992:
Actuarial present value of accumulated benefit obligation:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,651 $ 9,481
Other fully eligible plan
participants . . . . . . . . . . . . . . . . . . . . . . . . 558 433
Other active plan participants . . . . . . . . . . . . . . . . 1,523 1,150
------- -------
12,732 11,064
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . (997) --
------- -------
Accrued liability for postretirement
benefits other than pensions $11,735 $11,064
======= =======
</TABLE>
At December 31, 1993 and 1992, $3.4 million and $3.6 million of assets,
with a market value of approximately the same amount, were designated in a
trust to pay postretirement benefits other than pensions. Since these assets
could be used to pay other employee benefits, they cannot be used for the
postretirement benefit calculations. There is no formal funding policy for
these postretirement benefits.
Weighted-average discount rates of 7.50% and 7.75% were used in
calculating the APBO at December 31, 1993 and 1992, respectively. The assumed
health care cost trend rates to measure the expected cost of benefits at
December 31, 1993 start at a 11% annual increase for coverage before the age of
65 and a 10% annual increase for coverage after the age of 64. These rates
were
20
<PAGE> 21
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
assumed to decrease one percentage point each year until a 6% annual rate of
increase was reached, at which point a 6% annual rate of increase was assumed
thereafter. The effect of a one percentage point annual increase in the
assumed cost trend rates would increase the aggregate of service and interest
costs for 1993 by approximately 24% and the APBO by approximately 20%.
SAVINGS PLAN
Newmont Mining has a qualified defined contribution savings plan which
covers salaried employees. In addition, Newmont Mining has a non-qualified
supplemental savings plan for salaried employees whose benefits under the
qualified plan are limited by federal regulations.
After six months of service, Newmont Mining generally matches 100% of
employee contributions up to 6% of base salary.
Newmont Mining's matching contributions to the savings plans were $.4
million in 1993, 1992 and 1991, respectively.
SEVERANCE BENEFITS
Newmont Mining has a Severance Pay Plan for salaried employees who are
involuntarily terminated. In addition, Newmont Mining has employment
agreements with certain key executives pursuant to which Newmont Mining would
be liable for certain supplemental severance payments in the event of a
diminution in the executive's duties or termination of employment, as defined.
The potential obligations arising from the employment agreements have been
pre-funded through a trust. The trust balances of approximately $12.8 million,
(with a similar market value), and $12.4 million at December 31, 1993 and 1992,
respectively, is included in other assets.
(9) OTHER EXPENSE
Newmont Mining is involved in several matters concerning environmental
obligations primarily associated with former mining activities, as discussed in
Note 13. Included in other expense for the years ended December 31, 1993 and
December 31, 1991, are provisions of $6 million and $36 million, respectively,
related to these matters.
Newmont Mining expensed $2.3 million in 1993 when it wrote-down the
carrying value of certain assets.
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EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In 1991, there was a charge of $6 million primarily associated with
delays in subleasing Newmont Mining's former office space in New York City. In
addition, there was a charge of $1.5 million due to corporate-wide layoffs and
certain organizational changes.
(10) GAIN ON SALE OF SECURITIES
In May 1993, Newmont Mining sold its remaining 14% interest in Newcrest
Mining Limmited for $67 million and recognized a gain of $29.6 million. This
interest was reflected as an asset held for sale at December 31, 1992.
In 1991, Newmont Mining retired all of its 7% exchangeable debentures,
due 2001, pursuant to the terms thereof by exchanging its entire investment in
E.I. duPont de Nemours and Company ("duPont") common stock. A gain of $36.1
million was recognized on the disposal of the duPont stock.
(11) TRANSACTIONS WITH NEWMONT GOLD COMPANY
NGC's treasury and cash management functions were centralized at
Newmont Mining. Newmont Mining invested cash balances in less than 90 day
money market instruments. NGC was credited with the average rate of earnings
received by Newmont Mining on invested funds. During 1993, 1992 and 1991, such
rates were 2.9%, 3.3% and 5.8%, respectively.
Newmont Mining and NGC were also parties to a management services
agreement whereby NGC agreed to provide Newmont Mining general executive,
administrative and other services. Pursuant to this agreement, Newmont Mining
was charged $21.8 million, $19.6 million and $15.3 million in 1993, 1992 and
1991, respectively.
(12) SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities includes the following cash
payments:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Income taxes $20,373 $ -- $ 30,783
Interest, net of amounts
capitalized $ 9,731 $ 9,636 $ 14,344
</TABLE>
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<PAGE> 23
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Excluded from the statements of combined cash flows are the effects of
certain non-cash transactions. As discussed in Note 10, during 1991 holders of
Newmont Mining's $77.6 million 7% exchangeable debentures exchanged such
debentures for duPont shares, held by Newmont Mining as an investment, that had
a book value of $40 million.
(13) COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL OBLIGATIONS
Newmont Mining'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 generally
becoming more restrictive. Newmont Mining 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. Newmont Mining has made,
and expects to make in the future, expenditures to comply with such laws and
regulations. Newmont Mining cannot predict such future expenditures.
Newmont Mining is involved in several matters concerning environmental
obligations primarily associated with former mining activities.
Based upon Newmont Mining's best estimate of its liability for these
matters, $62.7 million and $68.5 million were accrued at December 31, 1993 and
1992, respectively, excluding $1.7 million and $.5 million at December 31, 1993
and 1992 respectively, of reclamation costs relating to currently producing
mineral properties. The amounts are included in reclamation liabilities and
other current liabilities on the combined balance sheets for the respective
periods. Depending upon the ultimate resolution of these matters, Newmont
Mining believes that it is reasonably possible that the liability for these
matters could be as much as 60% greater or 20% lower than the amount accrued at
December 31, 1993.
Newmont Mining has recorded long-term receivables from third parties,
primarily insurance companies, of $42.2 million and $41.2 million at December
31, 1993 and 1992, respectively, for both a portion of the costs previously
expended and for the future liabilities estimated in connection with these
matters. These amounts are considerably less than what Newmont Mining has or
will claim from the insurance carriers. Substantially all of this
23
<PAGE> 24
EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
amount is contested by the insurance companies involved. Newmont Mining is
negotiating with some of its insurance carriers for past and future costs
relating to certain of these matters. The insurance carriers have reserved
their rights or disclaimed liability under their respective policies, and
certain carriers have commenced declaratory judgement actions seeking to avoid
coverage. Newmont Mining has commenced litigation seeking coverage from
certain carriers. Although Newmont Mining cannot reasonably predict the
outcome of these actions, it is nevertheless management's opinion that a
substantial recovery of claimed costs will be made from the insurance carriers.
The total receivables recognized represent the reasonably probable amount
Newmont Mining expects to receive based upon its discussions with counsel. See
Note 9 for certain charges taken related to these matters.
The following is a discussion of the environmental obligations as of
December 31, 1993.
Idarado Mining Company ("Idarado") - 80.1% owned
In July 1992, Newmont Mining and Idarado signed a consent decree with
the State of Colorado ("State") which was agreed to by the U.S. District Court
of Colorado to settle a lawsuit brought by the State under the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"), generally
referred to as the "Superfund Act." Idarado paid $5.35 million pursuant to
this consent decree in August 1992 to settle natural resources damages, past
and future response costs and to provide habitat enhancement work. In
addition, Idarado agreed in the consent decree to undertake specified
reclamation and remediation work related to its former mining activities in the
Telluride/Ouray area of Colorado. Newmont Mining's best estimate of the cost
of this work is included in the gross liability, as previously discussed. If
the reclamation and remediation work does not meet certain measurement criteria
specified in the consent decree, the State and court reserve the right to
require Idarado to perform other reclamation and remediation work. Idarado and
Newmont Mining have obtained a $16.3 million letter of credit to secure their
obligations under the consent decree.
Resurrection Mining Company ("Resurrection") - 100% owned
In 1983, the State of Colorado ("State") filed a lawsuit under the
Superfund Act which involves a joint venture mining operation near Leadville,
Colorado in which Resurrection is a joint venturer. This action was
subsequently consolidated with a lawsuit filed by
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EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the United States Environmental Protection Agency ("EPA") in 1986. The EPA is
taking the lead role on cleanup issues and the matters are now proceeding
principally through the administrative processes of CERCLA, rather than through
the court action. The proceedings seek to compel the defendants to remediate
the impacts of pre-existing mining activities which the governments claim are
causing substantial environmental problems in the area. The mining operations
of the joint venture are operated by ASARCO, the other joint venturer. The
governments have made Newmont Mining, Resurrection, the joint venture and
ASARCO defendants in the proceedings. They are also proceeding against other
companies with interests in the area.
The EPA divided the remedial work into two phases. Phase I addresses a
drainage and access tunnel owned by the joint venture -the Yak Tunnel. Phase
II addresses the remainder of the site.
In 1988 and 1989, the EPA issued administrative orders with respect to
Phase I work for the Yak Tunnel. The joint venture, ASARCO, Resurrection and
Newmont Mining have collectively implemented those orders by constructing a
water treatment plant which was placed in operation in early 1992. The joint
venture is in negotiations regarding remaining remedial work for Phase I, which
primarily consists of monitoring and environmental maintenance activities.
In October 1993, Resurrection paid $4.4 million for its share of past
response costs and interest through January 1991 for the United States and
through January 1992 for the State.
The EPA has not yet completed work to define a remedy for Phase II and
thus has not published a current estimate of the costs of such remedial action.
Accordingly, Newmont Mining cannot yet determine the full extent or cost of
remedial action which will be required under Phase II. Moreover, in addition
to costs of remedial action, the governments will seek to recover future
response costs to be incurred at the site and may seek to recover for damages
to natural resources. The case currently involves other solvent defendant
corporations. The allocation of costs and damages incurred or to be incurred
at the site among those defendants, if any such allocation is to be made,
cannot be determined at this time.
Although the ultimate amount of total costs and Resurrection's and
Newmont Mining's exposure for such costs for Phase I and Phase II cannot be
presently determined, Newmont Mining's best estimate
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EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
of its potential exposure for these costs is included in the gross liability
for these matters, previously discussed.
Dawn Mining Company ("Dawn") - 51% owned
Dawn leased a currently inactive open-pit uranium mine on the Spokane
Indian Reservation in the State of Washington ("State"). The mine is subject
to regulation by agencies of the United States Department of Interior, the
Bureau of Indian Affairs ("BIA") and the Bureau of Land Management, as well as
the EPA. Dawn also owns a nearby uranium millsite facility.
In 1991, Dawn's lease was formally terminated. As a result, Dawn was
required to file a formal reclamation plan. Dawn does not have sufficient
funds to pay for such a reclamation plan or to pay for the closure of its mill.
Dawn proposed to the State a mill closure plan which could potentially generate
the necessary funds to reclaim the mine and the mill. The State notified Dawn
that the proposed plan was not the State's preferred alternative and was not
consistent with certain policy considerations of the State. At December 31,
1993, Dawn was in the process of revising its proposed mill closure plan so as
to meet these State concerns. Newmont Mining's best estimate for the future
costs related to these matters is included in the gross liability for
environmental matters, previously discussed.
The Department of Interior previously notified Dawn that when the lease
was terminated, it would seek to hold Dawn and Newmont Mining (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. Newmont Mining would vigorously
contest any such claims. Newmont Mining cannot reasonably predict the
likelihood or outcome of any future action against Dawn or Newmont Mining
arising from this matter.
OTHER COMMITMENTS AND CONTINGENCIES
Newmont Mining guaranteed $35.7 million of Magma Copper Company's (a
former subsidiary) Pollution Control Revenue Bonds due 2009. It is expected
that Newmont Mining will be required to remain liable on this guarantee so long
as the bonds relating thereto are outstanding.
Newmont Mining is involved from time to time in legal proceedings of a
character incident to its business. It does not believe that adverse decisions
in any pending or threatened
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EXHIBIT 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
proceedings or any amounts which it may be required to pay by reason thereof
will have a material adverse effect on its financial condition or results of
operations.
27
