<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- --------------
Commission File Number: 1-9184
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NEWMONT GOLD COMPANY
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2526632
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Denver, Colorado 80203
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
303-863-7414
----------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
There were 109,904,771 shares of common stock outstanding on October 25,
1996.
Exhibit index is on page 20.
There are 24 pages included in this report.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 226,038 $ 172,330
Dividends, interest and other 5,565 7,813
--------- ---------
231,603 180,143
--------- ---------
Costs and expenses
Costs applicable to sales 134,182 92,266
Depreciation, depletion and amortization 33,401 27,976
Exploration and research 16,248 18,385
General and administrative 13,125 10,652
Interest, net of capitalized interest
of $463 in 1996 and $3,532 in 1995 12,385 8,691
Other 1,742 784
--------- ---------
211,083 158,754
--------- ---------
Equity in income of affiliated companies 13,009 7,064
--------- ---------
Pre-tax income 33,529 28,453
Income tax benefit (provision) 5,571 (594)
--------- ---------
Net income 39,100 27,859
Preferred stock dividends - 3,953
--------- ---------
Net income applicable to common shares $ 39,100 $ 23,906
========= =========
Net income per common share $ 0.35 $ 0.25
========= =========
Weighted average number of shares of
common stock and common stock
equivalents outstanding 110,221 96,814
Cash dividends declared per common share $ 0.12 $ 0.12
</TABLE>
<PAGE>
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 561,959 $ 451,849
Dividends, interest and other 18,826 39,737
Gain on disposition of investment - 113,188
--------- ---------
580,785 604,774
--------- ---------
Costs and expenses
Costs applicable to sales 345,679 265,103
Depreciation, depletion and amortization 91,457 76,503
Exploration and research 39,147 40,549
General and administrative 36,937 34,329
Interest, net of capitalized interest
of $4,661 in 1996 and $9,609 in 1995 32,652 26,137
Write-off of exploration property - 18,767
Other 8,795 8,641
--------- ---------
554,667 470,029
--------- ---------
Equity in income of affiliated companies 35,586 20,996
--------- ---------
Pre-tax income 61,704 155,741
Income tax benefit (provision) 10,755 (35,428)
--------- ---------
Net income 72,459 120,313
Preferred stock dividends - 11,859
--------- ---------
Net income applicable to common shares $ 72,459 $ 108,454
========= =========
Net income per common share $ 0.66 $ 1.12
========= =========
Weighted average number of shares of
common stock and common stock
equivalents outstanding 109,672 96,661
Cash dividends declared per common share $ 0.36 $ 0.36
</TABLE>
<PAGE>
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 187,091 $ 59,142
Short-term investments 12,319 11,820
Accounts receivable 38,814 24,458
Inventories 211,718 173,984
Other current assets 45,817 20,128
---------- ----------
Current assets 495,759 289,532
Property, plant and mine
development, net 1,293,311 1,255,278
Investments 90,280 31,658
Other long-term assets 200,269 197,302
---------- ----------
Total assets $2,079,619 $1,773,770
========== ==========
Liabilities
Short-term debt $ 42,554 $ 29,179
Current portion of long-term debt 19,250 4,375
Accounts payable 46,323 38,570
Other accrued liabilities 110,191 122,312
---------- ----------
Current liabilities 218,318 194,436
Long-term debt 585,009 604,259
Reclamation and remediation
liabilities 62,344 64,795
Other long-term liabilities 87,059 85,352
---------- ----------
Total liabilities 952,730 948,842
---------- ----------
Contingencies
Stockholders' Equity
Common stock 1,102 1,049
Capital in excess of par value 426,692 160,081
Retained earnings 701,363 666,161
Treasury stock (2,268) (2,363)
---------- ----------
Total stockholders' equity 1,126,889 824,928
---------- ----------
Total liabilities and
stockholders' equity $2,079,619 $1,773,770
========== ==========
</TABLE>
<PAGE>
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 72,459 $ 120,313
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 91,457 76,503
Distributions less than earnings of
affiliates (5,362) (5,019)
Deferred taxes 1,430 1,850
Gain on disposition of investment - (113,188)
Write-off of exploration property - 18,767
Other - 1,128
--------- ---------
159,984 100,354
(Increase) decrease in operating assets:
Accounts receivable (12,767) 6,047
Inventories (48,074) (44,854)
Other assets (17,635) 4,742
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 5,100 44,286
Accrued income taxes (641) 7,850
Other operating 1,378 (6,625)
--------- ---------
Net cash provided by operating activities 87,345 111,800
--------- ---------
Investing activities:
Additions to property, plant and mine
development (186,717) (232,127)
Advances to joint venture (7,944) (19,898)
Proceeds from sale of investment - 116,354
Other (1,179) (6,805)
--------- ---------
Net cash used in investing activities (195,840) (142,476)
--------- ---------
Financing activities:
Proceeds from short-term borrowings 13,375 8,047
Proceeds from long-term borrowings - 15,000
Repayments of long-term borrowings (4,375) -
Proceeds from issuance of common stock 266,980 4,857
Dividends paid on common stock (39,536) (34,753)
Dividends paid on preferred stock - (11,860)
Debt issuance costs - (222)
--------- --------
Net cash provided by (used in) financing
activities 236,444 (18,931)
--------- --------
</TABLE>
<PAGE>
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
Net increase in cash and cash equivalents $ 127,949 $ (49,607)
Cash and cash equivalents at beginning of
period 59,142 160,637
--------- ---------
Cash and cash equivalents at end of period $ 187,091 $ 111,030
========= =========
Supplemental information:
Interest paid, net of amounts capitalized
of $4,661 in 1996 and $9,609 in 1995 $ 41,089 $ 5,398
Income taxes paid $ 2,000 $ 14,492
</TABLE>
<PAGE>
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Preparation of Financial Statements
These unaudited interim financial statements of Newmont Gold Company
("NGC") and subsidiaries (collectively, the "Company") have been prepared in
accordance with the rules and regulations of the United States Securities and
Exchange Commission. Such rules and regulations allow the omission of certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles, so long
as the statements are not misleading.
In the opinion of management, these financial statements reflect all
adjustments which are necessary for a fair statement of the results for the
periods presented. All adjustments were of a normal recurring nature except
that included in the nine months ended September 30, 1995 are a write-down of
the carrying value of an exploration property for $18.8 million and an
additional provision for reclamation on such property of $4.5 million. These
interim financial statements should be read in conjunction with the annual
financial statements of the Company included in its 1995 Annual Report on Form
10-K.
Newmont Mining Corporation ("NMC") owns approximately 91% of NGC's common
stock. All of NMC's operations are held through NGC.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(2) Batu Hijau Transaction
In July 1996, the Company and Sumitomo Corporation ("Sumitomo") entered
into a definitive joint venture agreement to develop and operate the Batu Hijau
copper/gold deposit in Indonesia. Capital costs of the project are expected to
be $1.6 billion. When considering interest during construction, cost
escalations and working capital, total costs will approximate $1.9 billion.
Under the terms of the agreement, after contributions are made by both parties,
the Company will retain a 45% interest in the project and Sumitomo will have a
35% interest. The remaining 20% is held by an Indonesian company.
The Company will contribute its interest in the project and Sumitomo will
contribute an agreed upon amount of cash, expected to be approximately $245
million. The parties' obligations to make their contributions to the joint
venture are subject to certain conditions including receipt of certain
approvals of the Indonesian government and securing satisfactory project
financing commitments (which is expected to be completed by mid-1997). Until
these conditions are satisfied, Sumitomo has agreed to fund up to $130 million
of project costs through non-interest bearing loans. Effective July 1996, the
Company has accounted for this project as an equity investment. At September
30, 1996 the Company's investment was $47.6 million.
Excluded from the statements of consolidated cash flows are the effects of
non-cash transactions. The following reflects the adjustments made to the
Company's balance sheet subsequent to June 30, 1996 for the Batu Hijau
transaction discussed above (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Increase (decrease)
-------------------
<S> <C>
Assets
Other current assets $ (849)
Property, plant and mine development, net (43,936)
Investments 48,210
Other long-term assets (3,607)
---------
Total assets $ (182)
=========
Liabilities
Accounts payable $ (182)
---------
Total liabilities $ (182)
=========
</TABLE>
(3) Inventories
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(In thousands)
<S> <C> <C>
Current:
Ore and in-process $111,985 $101,684
Precious metals 43,125 29,691
Materials and supplies 54,730 40,651
Other 1,878 1,958
-------- --------
$211,718 $173,984
======== ========
Non-current:
Ore in stockpiles (included
in other assets) $ 65,228 $ 53,167
======== ========
</TABLE>
(4) Investment in Minera Yanacocha
Included in investments is the Company's 38% equity investment in Minera
Yanacocha, S.A. ("Minera Yanacocha"), a Peruvian entity. Summarized financial
information of Minera Yanacocha is as follows:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Sales $ 84,239 $ 55,097 $238,915 $152,402
Costs applicable to sales
and depreciation, depletion
and amortization $ 28,324 $ 20,591 $ 85,469 $ 56,417
Exploration $ 4,731 $ 4,429 $ 13,226 $ 9,818
Other, including Peruvian
income tax provision $ 16,006 $ 9,522 $ 44,212 $ 28,101
Net income $ 35,178 $ 20,555 $ 96,008 $ 58,066
At September 30, At December 31,
1996 1995
---------------- ---------------
(In thousands)
Current assets $ 68,434 $ 71,705
Non-current assets 98,008 88,114
-------- --------
Total assets $166,442 $159,819
======== ========
Current liabilities $ 50,391 $ 49,977
Non-current liabilities 36,530 48,335
-------- --------
Total liabilities $ 86,921 $ 98,312
======== ========
Total equity $ 79,521 $ 61,507
======== ========
</TABLE>
In September 1994, an affiliate of Bureau de Recherches Geologiques et
Minieres, the geological and mining bureau of the French government ("BRGM"),
announced its intention to transfer its 24.7% interest in Minera Yanacocha to
another entity. The Company and Compania de Minas Buenaventura, S.A.
("Buenaventura"), 38.0% and 32.3% owners of Minera Yanacocha, respectively,
filed suit in Peru to seek enforcement of a provision in the bylaws of Minera
Yanacocha, giving shareholders preemptive rights on the proposed sale or
transfer of any shareholder's interest. In February 1995, an appellate court
in Peru issued a preliminary ruling in favor of the Company and Buenaventura,
both of whom elected to exercise their preemptive rights to acquire their
proportionate share of the 24.7% interest. In accordance with the court ruling,
Minera Yanacocha canceled the BRGM shares and issued shares representing
interests in Minera Yanacocha of 13.35% to the Company and 11.35% to
Buenaventura. The Company deposited $48.6 million for its additional interest,
together with the additional shares, with a Peruvian bank pending the final
resolution of the case. The Company borrowed the $48.6 million from the same
<PAGE>
Peruvian bank with the right of set off against the deposit, and accordingly,
these amounts have been netted. The trial hearing in the case occurred in July
1996 and a ruling was issued in September 1996. The ruling provided that the
Company and Buenaventura have the right to acquire the 24.7% interest for a
purchase price of $109.3 million, $59.1 million attributable to the 13.35%
interest of the Company. As established by such ruling, the preemptive rights
were triggered in November 1993 and thus the valuation of the shares held in
escrow were calculated as of such date. The BRGM has filed an appeal
challenging the court's determination that the preemptive rights were triggered
and the date and amount of the valuation. As a result of the ruling, and
subject to final decision of the Peruvian appellate courts, the Company owns
51.35% of Minera Yanacocha. This additional 13.35% interest will not be
reflected in the Company's financial statements until a final decision is made
by the Peruvian appellate courts on the pending appeals. Dividends that the
Company has received related to the 13.35% interest amounted to $18.6 million
at September 30, 1996 and are included in other accrued liabilities. The
Company intends to fund the purchase of the additional interest with its
available cash or borrowings under credit facilities.
(5) Common Stock Issue
In January 1996, NMC issued 4.65 million shares of common stock for $51.87
per share under an existing shelf registration statement filed with the
Securities and Exchange Commission. Proceeds of the issue netted $241.3 million
which were used to purchase an equal number of shares of common stock of NGC
directly from NGC.
(6) Contingencies
Environmental Obligations
Estimated future reclamation and mine closure costs are based principally
on legal and regulatory requirements. Such costs are accrued and charged over
the expected operating lives of the Company's mines using a unit-of-production
method. At September 30, 1996 and December 31, 1995, $20.3 million and $19.0
million, respectively, were accrued for reclamation costs relating to currently
producing mineral properties.
In addition, the Company is involved in several matters concerning
environmental obligations associated with former mining activities. Based upon
the Company's best estimate of its liability for these matters, $52.0 million
and $55.8 million were accrued for such liabilities at September 30, 1996 and
December 31, 1995, respectively. These amounts are included in other current
liabilities and reclamation liabilities. Depending upon the ultimate resolution
of these matters, the Company believes that it is reasonably possible that the
liability for these matters could be as much as 100% greater or 5% lower than
the amount accrued at September 30, 1996.
A discussion of the environmental obligations associated with former mining
activities as of September 30, 1996 follows.
Idarado Mining Company ("Idarado") - 80.1% owned by NGC
In July 1992, NMC 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
<PAGE>
the "Superfund Act." Idarado settled natural resources damages and past and
future response costs and provided habitat enhancement work. In addition,
Idarado agreed in the consent decree to undertake specified remediation work
related to its former mining activities in the Telluride/Ouray area of Colorado.
The Company's best estimate of the remaining cost of this work is included in
the accrued liability for environmental matters, as previously discussed. The
Company expects to complete the remediation work at this property by the end of
1997. If the 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 remediation work. Idarado and the Company have
obtained a $16.3 million letter of credit to secure their obligations under the
consent decree.
Resurrection Mining Company ("Resurrection") - 100% owned by NGC
In 1983, the State of Colorado filed a lawsuit under the Superfund Act
which involves a Resurrection Mining Company and Asarco Incorporated ("Asarco")
joint venture mining operation near Leadville, Colorado. This action was
subsequently consolidated with a lawsuit filed by the U.S. Environmental
Protection Agency ("EPA") in 1986, with the EPA taking the lead role. The
proceedings seek to compel the defendants to remediate the impacts of pre-
existing, historic mining activities that date back to the late 1800's which the
government agencies claim are causing substantial environmental problems in the
area. The lawsuits have named NMC, Resurrection, the joint venture and Asarco
as defendants in the proceedings. The EPA is also proceeding against other
companies with interests in the area.
The EPA divided the remedial work into two phases. Phase I addresses the
Yak Tunnel, a drainage and access tunnel owned by the joint venture. 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
NMC 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 environmental monitoring and operating and maintenance activities.
The parties have entered into a consent decree with respect to Phase II
which apportions liabilities and responsibilities for the site among the various
parties. The EPA has approved remedial actions for selected components of
Resurrection's portion of the site, which were initiated in 1995. However,
the EPA has not yet selected the final remedy for the site. Accordingly, the
Company cannot yet determine the full extent or cost of its share of the
remedial action which will be required under Phase II. The government agencies
may also seek to recover for damages to natural resources.
Although the actual amount of Resurrection's and the Company's share of
such costs for Phase I and Phase II cannot be presently determined, the
Company's best estimate of its potential exposure for these costs is included
in the accrued liability for environmental matters, as previously discussed.
Dawn Mining Company ("Dawn") - 51% owned by NGC
Dawn leased a currently inactive open-pit uranium mine on the Spokane
Indian Reservation in the State of Washington. The mine is subject to
regulation by agencies of the U.S. Department of Interior, the Bureau of Indian
Affairs and the Bureau of Land Management, as well as the EPA. Dawn also owns
a nearby uranium millsite facility.
<PAGE>
In 1991, Dawn's lease was terminated. As a result, Dawn was required to
file a formal mine reclamation plan. The Department of Interior has commenced
an Environmental Impact Study to analyze Dawn's proposed plan and to consider
alternate reclamation plans for the mine. Dawn cannot predict at this time what
type of mine reclamation plan may be selected by the Department of Interior.
Dawn does not have sufficient funds to pay for the reclamation plan it proposed,
for any alternate plan, or for the closure of its mill. The Company's best
estimate for the future costs related to these matters is included in the
accrued liability for environmental matters, as previously discussed.
The Department of Interior previously notified Dawn that when the lease was
terminated, it would seek to hold Dawn and NMC (as Dawn's then 51% owner) liable
for any costs incurred as a result of Dawn's failure to comply with the lease
and applicable regulations. If asserted, the Company will vigorously contest
any such claims. The Company cannot reasonably predict the likelihood or
outcome of any future action against Dawn or the Company arising from this
matter.
Dawn has received a license for a mill closure plan which could potentially
generate the necessary funds to reclaim the mine and the mill. The license,
however, is currently being challenged by third parties.
(7) Supplementary Data
The ratio of earnings to fixed charges for the nine months ended September
30, 1996 was 2.4.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
The following discussion summarizes the results of operations of Newmont
Gold Company ("NGC") and its subsidiaries (collectively, the "Company") for the
quarters and nine month periods ended September 30, 1996 and 1995 and changes
in its financial condition from December 31, 1995 to September 30, 1996.
Newmont Mining Corporation ("NMC") owns approximately 91% of NGC's common stock.
All of NMC's operations are held through NGC. This discussion should be read
in conjunction with the Management's Discussion and Analysis included in the
Company's 1995 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
The Company earned $39.1 million, or $0.35 per share, and $72.5 million,
or $0.66 per share, in the quarter and nine months ended September 30, 1996,
respectively, compared with $27.9 million, or $0.25 per share, in the respective
1995 quarter, and $63.4 million, or $0.53 per share, before considering certain
gains and charges in the nine-month 1995 period. The nine-month period of 1995
included a gain of $113.2 million, or $72.0 million after-tax ($0.75 per share),
on the sale of the NGC's interest in Southern Peru Copper Corporation and a
charge of $23.3 million, or $15.1 million after-tax ($0.16 per share), for the
write-off and reclamation accrual associated with the Ivanhoe exploration
property. This resulted in total net income of $120.3 million, or $1.12 per
share in the first nine months of 1995. The Company's total equity production
rose to 663,700 ounces in the third quarter of 1996 from 504,300 ounces in the
third quarter of 1995 at a weighted average cash cost of production per ounce
of $212 in the 1996 quarter compared to $193 in the 1995 quarter. During the
first nine months of 1996, the Company's total equity production rose to
1,666,200 ounces from 1,328,000 ounces in the first nine months of 1995 at a
weighted average cash cost of production per ounce of $220 in 1996 compared to
$210 in 1995. The Company expects its total equity gold production to
approximate 2.2 million ounces in 1996.
During the third quarter of 1996, consolidated gold sales (which exclude
the Company's equity interest in Minera Yanacocha's production) were 580,300
ounces at an average price of $390 per ounce, compared to 449,800 ounces at an
average price of $383 per ounce in the third quarter of 1995. During the first
nine months of 1996, consolidated gold sales were 1,428,200 ounces at an average
price of $393 per ounce compared to 1,177,400 ounces at an average price of $384
per ounce in the first nine months of 1995.
The 130,500 ounce increase in sales during the third quarter of 1996
compared to the third quarter of 1995 resulted in a $50.0 million increase in
sales revenue, while the $7 increase in the average per ounce gold price over
the same period resulted in a $3.7 million increase. The 250,800 ounce increase
in sales during the first nine months of 1996 compared to the same period of
1995 resulted in a $96.3 million increase in sales revenue, while the $9
increase in the average per ounce gold price over the same period resulted in
a $13.8 million increase.
The higher sales in the 1996 periods are partially due to the Company's 50%
share of production of the Zarafshan-Newmont Joint Venture ("Zarafshan-Newmont")
of 45,200 and 113,100 ounces during the third quarter and first nine months of
1996, respectively. Zarafshan-Newmont commenced operations in the third quarter
of 1995 with 3,100 ounces attributable to the Company's share. The Carlin
operation also showed an increase in production of 39,200 ounces and 70,400
ounces for the third quarter and first nine months of 1996, respectively,
resulting in total production of 485,900 ounces and 1,244,700 ounces,
<PAGE>
respectively. The increased production at Carlin is primarily due to the mining
of high grade underground ore and increased throughput at the refractory ore
treatment plant. Additionally, the Minahasa operation in Indonesia produced
49,200 ounces in the third quarter and 76,100 ounces since production commenced
in early 1996. Of these ounces, 5,700 were produced before commercial
operations commenced, and the revenue from these ounces was credited against the
capitalized costs of the project. All of Minahasa's 1996 production has been
sold at $454 per ounce as a result of Minahasa having entered into forward sales
contracts in 1994.
The Company's equity income from its 38% interest in Minera Yanacocha S.A.
increased to $13.4 million in the third quarter of 1996 from $7.8 million in the
third quarter of 1995 and to $36.5 million in the first nine months of 1996 from
$22.1 million in the first nine months of 1995. Minera Yanacocha produced
219,400 ounces, or 83,400 ounces attributable to the Company's interest, in the
third quarter of 1996 compared to 143,400 ounces, or 54,500 ounces attributable
to the Company's interest, in the third quarter of 1995. Total cash costs were
$99 per ounce in the third quarter of 1996 compared to $120 per ounce in the
third quarter of 1995. Minera Yanacocha produced 611,300 ounces, or 232,300
ounces attributable to the Company's interest, in the first nine months of 1996
compared to 396,400 ounces, or 150,600 ounces attributable to the Company's
interest, in the first nine months of 1995. Total cash costs were $107 per
ounce in the first nine months of 1996 compared to $115 per ounce in the first
nine months of 1995. The increases in production are primarily due to a third
mine coming into production in early 1996, and the processing of higher grade
ore in 1996 compared to 1995.
Primarily as a result of the production increases, costs applicable to
sales increased $41.9 million and $80.6 million in the third quarter and first
nine months of 1996, respectively, when compared to the same periods in 1995.
Of these amounts, $21.5 million and $41.6 million relate to Carlin operations
for the third quarter and nine months of 1996, respectively. In addition, $20.4
million and $39.2 million relate to the Company's share of costs attributable
to Zarafshan-Newmont and Minahasa during the third quarter and first nine months
of 1996, respectively. On a per ounce of gold sold basis, costs applicable to
sales were higher in the 1996 periods compared to the 1995 periods. The
following tables summarize the significant components of these costs per ounce
of gold sold:
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------
Zarafshan- Consol-
Carlin Newmont Minahasa idated
----------- ---------- -------- ----------
1996 1995 1996 1995 1996 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash operating costs $212 $172 $242 $217 $200 $214 $173
Royalties 17 30 0 0 8 15 29
Other cash costs 2 2 0 0 0 1 2
---- ---- ---- ---- ---- ---- ----
Total cash costs 231 204 242 217 208 230 204
Other 2 1 1 1 2 1 1
---- ---- ---- ---- ---- ---- ----
Total costs applic-
able to sales $233 $205 $243 $218 $210 $231 $205
==== ==== ==== ==== ==== ==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------
Zarafshan- Consol-
Carlin Newmont Minahasa idated
----------- ---------- -------- ----------
1996 1995 1996 1995 1996 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash operating costs $222 $188 $222 $217 $199 $221 $188
Royalties 21 32 0 0 8 19 32
Other cash costs 1 4 0 0 0 0 4
---- ---- ---- ---- ---- ---- ----
Total cash costs 244 224 222 217 207 240 224
Other 2 1 1 1 2 2 1
---- ---- ---- ---- ---- ---- ----
Total costs applic-
able to sales $246 $225 $223 $218 $209 $242 $225
==== ==== ==== ==== ==== ==== ====
</TABLE>
The increase in Carlin production costs on a per-ounce-of-gold-sold basis
in the third quarter and first nine months of 1996 was the result of higher
costs related to underground mining and the refractory ore treatment plant as
well as increased waste-to-ore ratios. The increase in production costs at
Zarafshan-Newmont in the third quarter of 1996 was primarily the result of a
reduction in the estimated gold recovery rate for this leach operation.
Consolidated per ounce production costs are expected to continue to run higher
than 1995 amounts for the balance of the year.
For the third quarter and first nine months of 1996, royalty costs on an
aggregate basis were $8.8 million and $27.1 million, respectively. This
compares to royalty costs in the third quarter and first nine months of 1995 of
$13.2 million and $37.4 million, respectively. The decrease in royalty costs
on a per ounce basis is due to the lower production of royalty-burdened ore at
Carlin, as previously discussed, and this is expected to continue the rest of
the year.
In addition to expensed production costs, the Company capitalized $16.1
million and $57.9 million of mining costs during the third quarter and first
nine months of 1996, respectively. These costs were associated with deposits
having diverse grade and waste-to-ore ratios, the largest being the Post deposit
at Carlin. Capitalized costs in the third quarter and first nine months of 1995
were $5.7 million and $28.5 million, respectively. The current year increases
are attributable to more tons being mined at deposits with these characteristics
in the 1996 periods compared to the 1995 periods.
Depreciation, depletion and amortization increased $5.4 million and $15.0
million in the third quarter and first nine months of 1996, respectively,
compared to the same periods in 1995. The increase is primarily due to
depreciation related to the facilities at Zarafshan-Newmont and Minahasa.
The difference in exploration and research expense between the 1996 and
1995 periods is not considered significant and the amount of such expense for
1996 is expected to be at approximately the level incurred in 1995.
<PAGE>
General and administrative expenses increased $2.5 million and $2.6 million
in the third quarter and first nine months of 1996, respectively, compared to
the same periods in 1995. The increase is primarily due to higher legal costs
associated with environmental and other corporate matters and higher insurance
costs for political risk coverage associated with the foreign operations.
Net interest expense increased $3.7 million and $6.6 million in the third
quarter and first nine months of 1996, respectively, compared with the same
respective periods in 1995. Total interest expense was not significantly
different between the periods. Capitalized interest decreased as a result of
the 1995 third quarter start-up of the Zarafshan-Newmont operation, which, for
the nine month period, was partially offset by an increase in capitalized
interest related to development of the Minahasa project which did not commence
operations until April 1996.
Interest income for the third quarter and first nine months of 1996 is $2.2
million and $9.0 million, respectively, compared to $2.0 million and $7.1
million for the respective 1995 periods. This increase is due to higher cash
balances in the 1996 periods. Additionally, dividends, interest and other
income in the third quarter and first nine months of 1995 includes $5.3 million
and $28.3 million, respectively, for business interruption insurance recorded
for the start-up problems with the refractory ore treatment plant. The first
nine months of 1996 also includes $3.1 million of such insurance.
In April 1995, the Company sold its 10.7% interest in Southern Peru Copper
Corporation for $116.4 million, which resulted in a pre-tax gain of $113.2
million, as previously discussed.
In the second quarter of 1995, a charge of $18.8 million was taken for the
write-off of the Ivanhoe exploration property in Nevada after an evaluation of
the property determined it was not suitable for development. In addition, a
charge of $4.5 million, which is included in other expense, was taken for the
estimated costs to remediate areas disturbed by previous mining and exploration
activity on the property.
Both years' effective tax rates benefit from, and are very sensitive to,
the estimated amount of annual percentage depletion since it represents a
significant portion of pre-tax financial income. In addition, during the first
nine months of 1995, the Company recognized $41.2 million of taxes related to
the sale of its investment in Southern Peru Copper Corporation. This charge was
offset by a deferred tax benefit of approximately $8.1 million related to the
previously mentioned $23.3 million charge associated with the Ivanhoe property.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1996 the Company generated $87.3 million
of cash flow from operating activities, received $267.0 million of proceeds from
the issuance of common stock, including $241.3 million from the stock offering
as discussed in Note 5 of Item 1, and borrowed $13.4 million under short-term
credit facilities. A portion of these proceeds was used to fund $186.7 million
of capital expenditures. Of this amount, approximately $125.2 million was spent
on projects at the Carlin operations including capitalized mining costs, mine
equipment, underground development and improvements to the refractory ore
treatment plant. In addition, $24.0 million was spent for mine site development
at the Minahasa operation, $15.1 million was spent for development plans at the
Batu Hijau project through June 30, 1996 and $12.3 million was spent on
construction of a new technical facility in Denver.
<PAGE>
Although cash requirements during 1996 are expected to exceed operating
cash flow, the proceeds received from the common stock sale, as previously
discussed, are expected to result in more than an adequate amount of funds to
cover the Company's cash requirements for the year.
Accounts receivable increased $14.3 million during the first nine months
of 1996 primarily due to an increase in current estimated federal income taxes
receivable.
The increase in current inventories during the first nine months of 1996
is primarily attributable to the start-up of operations at Zarafshan-Newmont and
Minahasa.
Other current assets increased $25.7 million during the first nine months
of 1996. The increase is primarily the result of advances to Zarafshan-Newmont
of $17.7 million, $10.2 million of which was advanced in prior years and was
reclassified from long-term assets in 1996.
The $58.6 million increase in investments during the first nine months of
1996 results primarily from $47.6 million for the investment in Batu Hijau.
As discussed in Note 2, in July 1996, the Company and Sumitomo Corporation
("Sumitomo") entered into an agreement to develop and operate the Batu Hijau
project in Indonesia. The estimated cost for development of the open pit mine,
mill, and infrastructure including employee housing, a port, electrical
generation facilities, interest during construction, cost escalations and
working capital is expected to approximate $1.9 billion. Batu Hijau contains
a mineable resource of 11.7 billion pounds of copper and 13.4 million ounces of
gold. Production is expected to begin around the turn of the century, with a
projected mine life in excess of 20 years.
Under the joint venture agreement between Sumitomo and the Company, the
Company will, at the outset, contribute to the joint venture its interest in the
project. Sumitomo will contribute, at the outset, approximately $168 million
and in the months immediately following the date of the initial contributions,
an estimated additional $77 million. The parties' obligations to make their
initial contributions to the joint venture are subject to certain conditions,
including receipt of certain approvals of the Indonesian government and securing
satisfactory project financing commitments (which is expected to be completed
by mid-1997). Until these conditions are satisfied, Sumitomo has agreed to fund
up to $130 million of project costs through non-interest bearing loans. As a
result of the contemplated ownership structure, the Company is accounting for
its investment in Batu Hijau as an equity investment effective July 1996. The
Company's investment at September 30, 1996 was $47.6 million.
Sumitomo will provide or arrange for up to 60% of the total debt package
that is arranged for the project up to $800 million. The Company expects to
fund its share of project costs through operating cash flow and/or third party
financing sources as required. Depending on financing arrangements, it is
possible that the Company will have no cash requirements for the project until
1998.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 - Statement re Computation of Per Share Earnings.
12 - Statement re Computation of Ratio of Earnings to Fixed
Charges.
27 - Financial Data Schedule.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended September 30,
1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWMONT GOLD COMPANY
(Registrant)
Date: November 5, 1996 /s/ WAYNE W. MURDY
------------------------------
Wayne W. Murdy
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 5, 1996 /s/ GARY E. FARMAR
------------------------------
Gary E. Farmar
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Page
----
<S> <C>
Exhibit 11 - Statement re Computation of Per Share Earnings 21-22
Exhibit 12 - Statement re Computation of Ratios of Earnings 23
to Fixed Charges
Exhibit 27 - Financial Data Schedule 24
</TABLE>
<PAGE>
EXHIBIT 11
Page 1 of 2
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE CALCULATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- ------- --------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income $ 39,100 $ 27,859 $ 72,459 $120,313
Preferred stock dividends - (3,953) - (11,859)
-------- -------- -------- --------
Net income applicable to
common shares $ 39,100 $ 23,906 $ 72,459 $108,454
======== ======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 109,904 96,600 109,305 96,531
Equivalent common shares from
stock options 317 214 367 130
-------- -------- -------- --------
Common and common equivalent
shares 110,221 96,814 109,672 96,661
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Net income per common and
common equivalent shares $ 0.35 $ 0.25 $ 0.66 $ 1.12
======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 11
Page 2 of 2
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
<TABLE>
<CAPTION>
FULLY DILUTED EARNINGS PER SHARE CALCULATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- ------- --------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income applicable to
common shares $ 39,100 $ 27,859 $ 72,459 $120,313
======== ======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 109,904 96,600 109,305 96,531
Equivalent common shares from
stock options 317 214 367 154
Equivalent common shares from
conversion of preferred stock - 7,899 - 7,899
-------- -------- -------- --------
Common and common equivalent
shares 110,221 104,713 109,672 104,584
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.35 $ 0.27 $ 0.66 $ 1.15
======== ======== ========= ========
</TABLE>
<PAGE>
EXHIBIT 12
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1996
------------------
<S> <C>
Earnings:
Income before income taxes $ 61,704
Adjustments:
Net interest expense (1) 32,652
Amortization of capitalized interest 2,022
Portion of rental expense representative
of interest 1,599
Undistributed income of less than 50%
owned entities (5,362)
--------
$ 92,615
========
Fixed Charges:
Net interest expense (1) $ 32,652
Capitalized interest 4,198
Portion of rental expense representative
of interest 1,599
--------
$ 38,449
========
Ratio of earnings to fixed charges 2.4
========
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries
and amortization of debt issuance costs. Excludes interest
obligations of $0.8 million for the nine months ended
September 30, 1996 for certain third party debt that the
Company guarantees. The Company has not been required to
pay any interest on these obligations in the past, nor does
the Company expect to have to pay any amounts with respect
to such debt in the future.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FOR 3RD QUARTER 10Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 187,091
<SECURITIES> 12,319
<RECEIVABLES> 38,814
<ALLOWANCES> 0
<INVENTORY> 211,718
<CURRENT-ASSETS> 495,759
<PP&E> 2,021,528
<DEPRECIATION> 728,217
<TOTAL-ASSETS> 2,079,619
<CURRENT-LIABILITIES> 218,318
<BONDS> 585,009
0
0
<COMMON> 1,102
<OTHER-SE> 1,125,787
<TOTAL-LIABILITY-AND-EQUITY> 2,079,619
<SALES> 561,959
<TOTAL-REVENUES> 580,785
<CGS> 345,679
<TOTAL-COSTS> 437,136
<OTHER-EXPENSES> 84,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,652
<INCOME-PRETAX> 61,704
<INCOME-TAX> 10,755
<INCOME-CONTINUING> 72,459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,459
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
