Table of Contents

 

 

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, 2012

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: 001-31240

 

 

 

NEWMONT MINING CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		84-1611629
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
6363 South Fiddler’s Green Circle Greenwood Village, Colorado		80111
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (303) 863-7414

 

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b2 of the Exchange Act.

(Check one):

 

Large accelerated filer		x		Accelerated filer		¨
Non-accelerated filer		¨  (Do not check if a smaller reporting company.)		Smaller reporting company		¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act).    ¨  Yes    x  No

There were 491,536,089 shares of common stock outstanding on October 25, 2012 (and 4,898,042 exchangeable shares).

 

 

 

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Table of Contents

TABLE OF CONTENTS

 

				Page
PART I
ITEM 1.		FINANCIAL STATEMENTS			1
		Condensed Consolidated Statements of Income			1
		Condensed Consolidated Statements of Comprehensive Income			2
		Condensed Consolidated Statements of Cash Flows			3
		Condensed Consolidated Balance Sheets			4
		Notes to Condensed Consolidated Financial Statements			5
ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			44
		Overview			44
		Selected Financial and Operating Results			46
		Consolidated Financial Results			47
		Results of Consolidated Operations			53
		Liquidity and Capital Resources			58
		Environmental			61
		Accounting Developments			61
		Non-GAAP Financial Measures			62
		Safe Harbor Statement			65
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			65
ITEM 4.		CONTROLS AND PROCEDURES			68
PART II
ITEM 1.		LEGAL PROCEEDINGS			69
ITEM 1A.		RISK FACTORS			69
ITEM 2.		ISSUER PURCHASES OF EQUITY SECURITIES			69
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES			69
ITEM 4.		MINE SAFETY DISCLOSURES			69
ITEM 5.		OTHER INFORMATION			70
ITEM 6.		EXHIBITS			70
SIGNATURES					71
EXHIBIT INDEX					72

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PART I—FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS.

NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions except per share)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Sales (Note 3)		$	2,480			$	2,744			$	7,392			$	7,593
Costs and expenses
Costs applicable to sales (1) (Note 3)			1,088				1,008				3,107				2,865
Amortization			272				270				751				776
Reclamation and remediation (Note 4)			17				6				49				63
Exploration			115				104				309				255
Advanced projects, research and development			74				93				258				247
General and administrative			51				50				162				145
Other expense, net (Note 5)			131				36				377				196
			1,748				1,567				5,013				4,547
Other income (expense)
Other income, net (Note 6)			52				(76	)			121				3
Interest expense, net			(67	)			(65	)			(190	)			(193	)
			(15	)			(141	)			(69	)			(190	)
Income before income and mining tax and other items			717				1,036				2,310				2,856
Income and mining tax expense (Note 9)			(228	)			(371	)			(746	)			(863	)
Equity income (loss) of affiliates			(9	)			10				(39	)			12
Income from continuing operations			480				675				1,525				2,005
Loss from discontinued operations (Note 10)			(33	)			—				(104	)			(136	)
Net income			447				675				1,421				1,869
Net income attributable to noncontrolling interests (Note 11)			(80	)			(182	)			(285	)			(475	)
Net income attributable to Newmont stockholders		$	367			$	493			$	1,136			$	1,394
Net income attributable to Newmont stockholders:
Continuing operations		$	400			$	493			$	1,240			$	1,530
Discontinued operations			(33	)			—				(104	)			(136	)
		$	367			$	493			$	1,136			$	1,394
Income per common share (Note 12)
Basic:
Continuing operations		$	0.81			$	1.00			$	2.50			$	3.10
Discontinued operations			(0.07	)			—				(0.21	)			(0.28	)
		$	0.74			$	1.00			$	2.29			$	2.82
Diluted:
Continuing operations		$	0.81			$	0.98			$	2.48			$	3.05
Discontinued operations			(0.07	)			—				(0.21	)			(0.27	)
		$	0.74			$	0.98			$	2.27			$	2.78
Cash dividends declared per common share		$	0.35			$	0.30			$	1.05			$	0.65

  

 

(1)	Excludes Amortization and Reclamation and remediation.

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in millions)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Net income		$	447			$	675			$	1,421			$	1,869
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities, net of $(62), $(6), $(67) and $74 tax benefit and (expense), respectively			184				(270	)			(129	)			(345	)
Foreign currency translation adjustments			16				(163	)			16				(36	)
Change in pension and other post-retirement benefits, net of $3, $2, $7 and $5 tax expense, respectively			4				3				12				11
Change in fair value of cash flow hedge instruments, net of $(16), $70, $(34) and $222 tax benefit and (expense), respectively
Net change from periodic revaluations			55				(389	)			128				(172	)
Net amount reclassified to income			(24	)			(32	)			(83	)			(104	)
Net unrecognized gain (loss) on derivatives			31				(421	)			45				(276	)
Other comprehensive income (loss)			235				(851	)			(56	)			(646	)
Comprehensive income		$	682			$	(176	)		$	1,365			$	1,223
Comprehensive income attributable to:
Newmont stockholders		$	601			$	(355	)		$	1,079			$	748
Noncontrolling interests			81				179				286				475
		$	682			$	(176	)		$	1,365			$	1,223

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

 

		Nine Months Ended September 30,
		2012				2011
Operating activities:
Net income		$	1,421			$	1,869
Adjustments:
Amortization			751				776
Loss from discontinued operations			104				136
Reclamation and remediation			49				63
Deferred income taxes			25				(106	)
Stock based compensation and other non-cash benefits			55				62
Impairment of marketable securities			39				175
Gain on asset sales, net			(12	)			(68	)
Other operating adjustments and write-downs			149				102
Net change in operating assets and liabilities (Note 23)			(1,039	)			(343	)
Net cash provided from continuing operations			1,542				2,666
Net cash used in discontinued operations			(12	)			(4	)
Net cash provided from operations			1,530				2,662
Investing activities:
Additions to property, plant and mine development			(2,394	)			(1,781	)
Sale of marketable securities			209				74
Purchases of marketable securities			(209	)			(17	)
Acquisitions, net			(22	)			(2,301	)
Proceeds from sale of other assets			13				6
Other			(48	)			(9	)
Net cash used in investing activities			(2,451	)			(4,028	)
Financing activities:
Proceeds from debt, net			3,343				1,798
Repayment of debt			(1,956	)			(2,086	)
Payment of conversion premium on debt			(172	)			—
Dividends paid to common stockholders			(521	)			(321	)
Dividends paid to noncontrolling interests			(3	)			(17	)
Proceeds from stock issuance, net			20				35
Other			(2	)			3
Net cash provided from (used in) financing activities			709				(588	)
Effect of exchange rate changes on cash			1				33
Net change in cash and cash equivalents			(211	)			(1,921	)
Cash and cash equivalents at beginning of period			1,760				4,056
Cash and cash equivalents at end of period		$	1,549			$	2,135

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions)

 

		At September 30, 2012				At December 31, 2011
ASSETS
Cash and cash equivalents		$	1,549			$	1,760
Trade receivables			314				300
Accounts receivable			470				320
Investments (Note 17)			89				94
Inventories (Note 18)			842				714
Stockpiles and ore on leach pads (Note 19)			720				671
Deferred income tax assets			251				396
Other current assets (Note 20)			1,089				1,133
Current assets			5,324				5,388
Property, plant and mine development, net			17,472				15,881
Investments (Note 17)			1,397				1,472
Stockpiles and ore on leach pads (Note 19)			2,775				2,271
Deferred income tax assets			1,659				1,605
Other long-term assets (Note 20)			896				857
Total assets		$	29,523			$	27,474
LIABILITIES
Debt (Note 21)		$	25			$	689
Accounts payable			612				561
Employee-related benefits			320				307
Income and mining taxes			87				250
Other current liabilities (Note 22)			1,527				2,133
Current liabilities			2,571				3,940
Debt (Note 21)			6,099				3,624
Reclamation and remediation liabilities (Note 4)			1,276				1,169
Deferred income tax liabilities			2,186				2,147
Employee-related benefits			479				459
Other long-term liabilities (Note 22)			396				364
Total liabilities			13,007				11,703
Commitments and contingencies (Note 26)
EQUITY
Common stock			786				784
Additional paid-in capital			8,307				8,408
Accumulated other comprehensive income			595				652
Retained earnings			3,667				3,052
Newmont stockholders’ equity			13,355				12,896
Noncontrolling interests			3,161				2,875
Total equity			16,516				15,771
Total liabilities and equity		$	29,523			$	27,474

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars in millions, except per share, per ounce and per pound amounts)

NOTE 1    BASIS OF PRESENTATION

The interim Condensed Consolidated Financial Statements (“interim statements”) of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”) are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with Newmont’s Consolidated Financial Statements for the year ended December 31, 2011 filed February 24, 2012 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by United States generally accepted accounting principles (“GAAP”) have been condensed or omitted. References to “A$” refer to Australian currency, “NZ$” to New Zealand currency and “$” to United States currency.

NOTE 2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

Goodwill Impairment

In September 2011, ASC guidance was issued related to goodwill impairment. Under the updated guidance, an entity will have the option to first assess qualitatively whether it is necessary to perform the two-step goodwill impairment test. If the Company believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The update does not change how the Company performs the two-step impairment test under previous guidance. The Company’s January 1, 2012 adoption of the guidance had no impact on the Company’s consolidated financial position, results of operations or cash flows.

Fair Value Accounting

In May 2011, ASC guidance was issued related to disclosures around fair value accounting. The updated guidance clarifies different components of fair value accounting including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and disclosing quantitative information about the unobservable inputs used in fair value measurements that are categorized in Level 3 of the fair value hierarchy. The Company’s January 1, 2012 adoption of the updated guidance had no impact on the Company’s consolidated financial position, results of operations or cash flows.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 3    SEGMENT INFORMATION

 

		Sales				Costs Applicable to Sales				Amortization				Advanced Projects and Exploration				Pre-Tax Income (Loss)
Three Months Ended September 30, 2012
Nevada		$	734			$	292			$	61			$	47			$	330
La Herradura			88				31				5				11				39
Other North America			—				—				—				1				(24	)
North America			822				323				66				59				345
Yanacocha			585				185				83				14				254
Conga			—				—				—				9				(12	)
Other South America			—				—				—				15				(10	)
South America			585				185				83				38				232
Boddington:
Gold			281				155				37				NA				NA
Copper			60				39				7				NA				NA
Total			341				194				44				2				98
Batu Hijau:
Gold			24				17				2				NA				NA
Copper			146				99				21				NA				NA
Total			170				116				23				8				10
Other Australia/New Zealand			358				201				34				18				98
Other Asia Pacific			—				—				—				5				(16	)
Asia Pacific			869				511				101				33				190
Ahafo			204				69				18				20				98
Akyem			—				—				—				6				(6	)
Other Africa			—				—				—				3				(4	)
Africa			204				69				18				29				88
Corporate and Other			—				—				4				30				(138	)
Consolidated		$	2,480			$	1,088			$	272			$	189			$	717

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

		Sales				Costs Applicable to Sales				Amortization				Advanced Projects and Exploration				Pre-Tax Income (Loss)
Three Months Ended September 30, 2011
Nevada		$	712			$	267			$	69			$	39			$	333
La Herradura			92				31				6				5				54
Other North America			—				—				3				52				(56	)
North America			804				298				78				96				331
Yanacocha			544				194				67				8				280
Conga			—				—				—				11				(10	)
Other South America			—				—				—				11				(11	)
South America			544				194				67				30				259
Boddington:
Gold			245				112				28				N/A				N/A
Copper			40				28				6				N/A				N/A
Total			285				140				34				3				124
Batu Hijau:
Gold			198				58				14				N/A				N/A
Copper			233				73				16				N/A				N/A
Total			431				131				30				2				258
Other Australia/New Zealand			437				174				36				14				218
Other Asia Pacific			—				—				1				5				3
Asia Pacific			1,153				445				101				24				603
Ahafo			243				71				19				11				134
Akyem			—				—				—				2				(3	)
Other Africa			—				—				—				2				(3	)
Africa			243				71				19				15				128
Corporate and Other			—				—				5				32				(285	)
Consolidated		$	2,744			$	1,008			$	270			$	197			$	1,036

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

		Sales				Costs Applicable to Sales				Amortization				Advanced Projects and Exploration				Pre-Tax Income (Loss)				Total Assets				Capital Expenditures(1)
Nine Months Ended September 30, 2012
Nevada		$	2,028			$	817			$	161			$	124			$	916			$	7,420			$	520
La Herradura			274				96				16				28				130				388				41
Other North America			—				—				—				2				(130	)			204				9
North America			2,302				913				177				154				916				8,012				570
Yanacocha			1,793				523				195				49				936				2,812				392
Conga			—				—				—				48				(51	)			1,617				467
Other South America			—				—				—				59				(54	)			30				—
South America			1,793				523				195				156				831				4,459				859
Boddington:
Gold			843				449				118				N/A				N/A				N/A				N/A
Copper			163				107				25				N/A				N/A				N/A				N/A
Total			1,006				556				143				7				278				4,678				77
Batu Hijau:
Gold			76				47				8				N/A				N/A				N/A				N/A
Copper			406				254				51				N/A				N/A				N/A				N/A
Total			482				301				59				22				42				3,662				98
Other Australia/New Zealand			1,116				573				103				51				378				1,390				214
Other Asia Pacific			—				—				3				15				(20	)			827				12
Asia Pacific			2,604				1,430				308				95				678				10,557				401
Ahafo			693				241				58				42				348				1,350				176
Akyem			—				—				—				15				(16	)			888				305
Other Africa			—				—				—				8				(8	)			6				—
Africa			693				241				58				65				324				2,244				481
Corporate and Other			—				—				13				97				(439	)			4,251				76
Consolidated		$	7,392			$	3,107			$	751			$	567			$	2,310			$	29,523			$	2,387

 

(1)	Includes a decrease in accrued capital expenditures of $7; consolidated capital expenditures on a cash basis were $2,394.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

		Sales				Costs Applicable to Sales				Amortization				Advanced Projects and Exploration				Pre-Tax Income (Loss)				Total Assets				Capital Expenditures(1)
Nine Months Ended September 30, 2011
Nevada		$	1,823			$	763			$	197			$	94			$	744			$	6,820			$	380
La Herradura			238				76				15				14				134				308				55
Other North America			—				—				10				149				(114	)			2,226				74
North America			2,061				839				222				257				764				9,354				509
Yanacocha			1,430				537				186				25				661				2,683				244
Conga			—				—				—				21				(21	)			776				448
Other South America			—				—				—				25				(26	)			36				—
South America			1,430				537				186				71				614				3,495				692
Boddington:
Gold			746				329				87				N/A				N/A				N/A				N/A
Copper			147				83				20				N/A				N/A				N/A				N/A
Total			893				412				107				6				368				4,439				122
Batu Hijau:
Gold			430				122				28				N/A				N/A				N/A				N/A
Copper			844				241				54				N/A				N/A				N/A				N/A
Total			1,274				363				82				3				767				3,690				149
Other Australia/New Zealand			1,227				498				102				36				583				1,169				212
Other Asia Pacific			—				—				2				11				(31	)			415				8
Asia Pacific			3,394				1,273				293				56				1,687				9,713				491
Ahafo			708				216				61				26				389				1,103				71
Akyem			—				—				—				4				(5	)			420				127
Other Africa			—				—				—				5				(9	)			4				—
Africa			708				216				61				35				375				1,527				198
Corporate and Other			—				—				14				83				(584	)			5,050				23
Consolidated		$	7,593			$	2,865			$	776			$	502			$	2,856			$	29,139			$	1,913

 

(1)	Includes an increase in accrued capital expenditures of $132; consolidated capital expenditures on a cash basis were $1,781.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 4    RECLAMATION AND REMEDIATION

At September 30, 2012 and December 31, 2011, $1,149 and $1,070, respectively, were accrued for reclamation obligations relating to mineral properties. In addition, the Company is involved in several matters concerning environmental obligations associated with former, primarily historic, mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. At September 30, 2012 and December 31, 2011, $189 and $170, respectively, were accrued for such obligations. These amounts are also included in Reclamation and remediation liabilities.

The following is a reconciliation of Reclamation and remediation liabilities:

 

		Nine Months  Ended September 30,
		2012				2011
Balance at beginning of period		$	1,240			$	1,048
Additions, changes in estimates and other			106				20
Liabilities settled			(57	)			(24	)
Accretion expense			49				44
Balance at end of period		$	1,338			$	1,088

The current portion of Reclamation and remediation liabilities of $62 and $71 at September 30, 2012 and December 31, 2011, respectively, are included in Other current liabilities (see Note 22).

The Company’s reclamation and remediation expenses consisted of:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Reclamation		$	—			$	(9	)		$	—			$	19
Accretion - operating			14				13				41				38
Accretion - non-operating			3				2				8				6
		$	17			$	6			$	49			$	63

NOTE 5    OTHER EXPENSE, NET

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Hope Bay care and maintenance		$	27			$	—			$	129			$	—
Regional administration			22				18				72				55
Community development			18				6				69				46
Restructuring and other			48				—				48				—
Western Australia power plant			5				3				13				12
Acquisition costs			—				1				12				22
Indonesian value added tax settlement			—				—				—				21
Other			11				8				34				40
		$	131			$	36			$	377			$	196

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 6    OTHER INCOME, NET

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Development projects, net		$	16			$	16			$	49			$	36
Canadian Oil Sands dividends			11				9				31				25
Refinery income, net			20				24				27				30
Reduction of allowance for loan receivable			—				—				21				—
Gain on asset sales, net			2				1				12				4
Interest			2				2				9				8
Gain on sale of investments, net			—				14				—				64
Foreign currency exchange, net			(1	)			39				(4	)			10
Impairment of marketable securities			(7	)			(174	)			(39	)			(175	)
Other			9				(7	)			15				1
		$	52			$	(76	)		$	121			$	3

NOTE 7    EMPLOYEE PENSION AND OTHER BENEFIT PLANS

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Pension benefit costs, net
Service cost		$	7			$	7			$	22			$	19
Interest cost			10				9				31				29
Expected return on plan assets			(11	)			(10	)			(33	)			(31	)
Amortization, net			6				5				20				17
		$	12			$	11			$	40			$	34
		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Other benefit costs, net
Service cost		$	1			$	1			$	2			$	2
Interest cost			1				2				4				4
Amortization, net			—				(1	)			—				(1	)
		$	2			$	2			$	6			$	5

NOTE 8    STOCK BASED COMPENSATION

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Stock options		$	4			$	5			$	11			$	15
Restricted stock units			8				4				19				24
Performance leveraged stock units			2				3				8				7
Strategic stock units			1				—				2				—
		$	15			$	12			$	40			$	46

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 9    INCOME AND MINING TAXES

During the third quarter of 2012, the Company recorded estimated income and mining tax expense of $228, resulting in an effective tax rate of 32%. Estimated income and mining tax expense during the third quarter of 2011 was $371 for an effective tax rate of 36%. The lower effective tax rate in the third quarter of 2012 is a result of the following: (i) composition of income earned in 2012 is more heavily weighted to those jurisdictions for which the Company claims percentage depletion, (2) lower pretax book income in the current year is resulting in a larger favorable tax rate impact from the benefit of percentage depletion, and (iii) a small decrease in the valuation allowance recorded during the current quarter on the Company’s Canadian deferred tax assets generated in 2012 due to care and maintenance expenditures at Hope Bay compared to the prior quarter valuation allowance resulting from the impairment of certain marketable equity securities.

During the first nine months of 2012, estimated income and mining tax expense was $746, resulting in an effective tax rate of 32%. Estimated income and mining tax expense during the first nine months of 2011 was $863 for an effective tax rate of 31%. The slightly higher effective tax rate in the first nine months of 2012 is primarily due to the change in valuation allowances recorded on the Company’s deferred tax assets.

The Company operates in numerous countries around the world and accordingly it is subject to, and pays annual income taxes under, the various income tax regimes in the countries in which it operates. Some of these tax regimes are defined by contractual agreements with the local government, and others are defined by the general corporate income tax laws of the country. The Company has historically filed, and continues to file, all required income tax returns and pay the income taxes reasonably determined to be due. The tax rules and regulations in many countries are highly complex and subject to interpretation. From time to time the Company is subject to a review of its historic income tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the Company’s business conducted within the country involved.

At September 30, 2012, the Company’s total unrecognized tax benefit was $237 for uncertain income tax positions taken or expected to be taken on income tax returns. Of this, $19 represents the amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate.

As a result of the statute of limitations that expire in the next 12 months in various jurisdictions, and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease by approximately $10 to $15 in the next 12 months.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

The Company’s income and mining tax expense differed from the amounts computed by applying the United States statutory corporate income tax rate for the following reasons:

 

		Three Months Ended September 30,																Nine Months Ended September 30,
		2012								2011								2012								2011
Income before income and mining tax and other items						$	717							$	1,036							$	2,310							$	2,856
Tax at statutory rate			35	%		$	251				35	%		$	363				35	%		$	809				35	%		$	1,000
Reconciling items:
Tax benefit generated on change in form of a non-U.S. subsidiary			—				—				—				—				—				—				(2	)%			(65	)
Percentage depletion			(7	)%			(53	)			(4	)%			(45	)			(7	)%			(161	)			(5	)%			(156	)
Change in valuation allowance on deferred tax assets			3	%			19				4	%			38				3	%			65				1	%			38
Other			1	%			11				1	%			15				1	%			33				2	%			46
Income and mining tax expense			32	%		$	228				36	%		$	371				32	%		$	746				31	%		$	863

NOTE 10    DISCONTINUED OPERATIONS

Discontinued operations include Holloway Mining Company, which owned the Holt-McDermott property (“Holt property”) and was sold to St. Andrew Goldfields Ltd. (“St. Andrew”) in 2006. In 2009, the Superior Court issued a decision finding Newmont Canada Corporation (“Newmont Canada”) liable for a sliding scale royalty on production from the Holt property, which was upheld in 2011 by the Ontario Court of Appeal. During the third quarter of 2012, the Company recorded an additional $33 charge, net of tax benefits of $2, to reflect higher gold prices offset by a decrease in future expected production at the Holt property due to new resource estimates. The total charges for the first nine months of 2012 are $104, net of tax benefits of $6.

Net operating cash used in discontinued operations of $12 and $4 in the first nine months of 2012 and 2011, respectively, relate to payments on the Holt property royalty.

NOTE 11    NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Yanacocha		$	73			$	94			$	268			$	226
Batu Hijau			3				85				11				251
Other			4				3				6				(2	)
		$	80			$	182			$	285			$	475

At September 30, 2012 and for all periods presented, Newmont had a 48.5% effective economic interest in PT Newmont Nusa Tenggara (“PTNNT”). PTNNT operates the Batu Hijau copper and gold mine in Indonesia. Based on ASC guidance for variable interest entities, Newmont consolidates PTNNT in its Condensed Consolidated Financial Statements.

Newmont has a 51.35% ownership interest in Minera Yanacocha S.R.L. (“Yanacocha”), with the remaining interests held by Compañia de Minas Buenaventura, S.A.A. (43.65%) and the International Finance Corporation (5%).

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 12    INCOME PER COMMON SHARE

Basic income per common share is computed by dividing income available to Newmont common stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share is computed similarly except that weighted average common shares is increased to reflect all dilutive instruments.

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Net income attributable to Newmont stockholders
Continuing operations		$	400			$	493			$	1,240			$	1,530
Discontinued operations			(33	)			—				(104	)			(136	)
		$	367			$	493			$	1,136			$	1,394
Weighted average common shares:
Basic			496				494				496				494
Effect of employee stock-based awards			1				2				1				1
Effect of convertible notes			2				8				3				7
Diluted			499				504				500				502
Income per common share
Basic:
Continuing operations		$	0.81			$	1.00			$	2.50			$	3.10
Discontinued operations			(0.07	)			—				(0.21	)			(0.28	)
		$	0.74			$	1.00			$	2.29			$	2.82
Diluted:
Continuing operations		$	0.81			$	0.98			$	2.48			$	3.05
Discontinued operations			(0.07	)			—				(0.21	)			(0.27	)
		$	0.74			$	0.98			$	2.27			$	2.78

Options to purchase 2 and 3 million shares of common stock at average exercise prices of $57 and $57 were outstanding at September 30, 2012 and 2011, respectively, but were not included in the computation of diluted weighted average common shares because their effect would have been anti-dilutive.

Under its convertible note indentures, Newmont is required to settle the principal amount of its 2014 and 2017 Convertible Senior Notes in cash and may elect to settle the remaining conversion premium (average share price in excess of the conversion price), if any, in cash, shares or a combination thereof. The effect of contingently convertible instruments on diluted earnings per share is calculated under the net share settlement method in accordance with ASC guidance. The average price of the Company’s common stock exceeded the conversion prices for all periods presented, resulting in additional shares included in the computation of diluted weighted average common shares.

In February 2012, the holders of the Company’s 2012 Convertible Senior Notes exercised their election to convert the notes. The Company elected to pay the $172 conversion premium with cash, and as a result no common shares were issued.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 13    CHANGES IN EQUITY

 

		Nine Months Ended September 30,
		2012				2011
Common stock:
At beginning of period		$	784			$	778
Stock based awards			2				3
At end of period			786				781
Additional paid-in capital:
At beginning of period			8,408				8,279
Conversion premium on convertible notes			(172	)			—
Stock based awards			71				86
Shares issued in exchange for exchangeable shares			—				(1	)
At end of period			8,307				8,364
Accumulated other comprehensive income:
At beginning of period			652				1,108
Other comprehensive income			(57	)			(646	)
At end of period			595				462
Retained earnings:
At beginning of period			3,052				3,180
Net income attributable to Newmont stockholders			1,136				1,394
Dividends paid			(521	)			(321	)
At end of period			3,667				4,253
Noncontrolling interests:
At beginning of period			2,875				2,371
Net income attributable to noncontrolling interests			285				475
Dividends paid			—				(2	)
Other comprehensive income			1				—
At end of period			3,161				2,844
Total equity		$	16,516			$	16,704

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 14    ACQUISITIONS

On April 6, 2011, Newmont completed the acquisition of Fronteer Gold, Inc. (“Fronteer”). Under the Arrangement, shareholders of Fronteer received C$14.00 in cash and one-fourth of a common share in Pilot Gold, which retained certain exploration assets of Fronteer, for each common share of Fronteer. In connection with the acquisition, Newmont incurred transaction costs of $22, which were recorded in Other Expense, net in the first nine months of 2011.

NOTE 15    FAIR VALUE ACCOUNTING

Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

 

Level 1		Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2		Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3		Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

The following table sets forth the Company’s assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

		Fair Value at September 30, 2012
		Total				Level 1				Level 2				Level 3
Assets:
Cash equivalents		$	274			$	274			$	—			$	—
Marketable equity securities:
Extractive industries			1,364				1,364				—				—
Other			8				8				—				—
Marketable debt securities:
Asset backed commercial paper			20				—				—				20
Corporate			8				—				8				—
Auction rate securities			5				—				—				5
Trade receivable from provisional copper and gold concentrate sales, net			237				237				—				—
Derivative instruments, net:
Foreign exchange forward contracts			256				—				256				—
Diesel forward contracts			5				—				5				—
		$	2,177			$	1,883			$	269			$	25
Liabilities:
Boddington contingent consideration			44				—				—				44
Holt property royalty			274				—				—				274
		$	318			$	—			$	—			$	318

The Company’s cash equivalent instruments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash equivalent instruments that are valued based on quoted market prices in active markets are primarily money market securities and U.S. Treasury securities.

The Company’s marketable equity securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The securities are segregated based on industry. The fair value of the marketable equity securities is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.

The Company’s corporate marketable debt securities are valued using quoted market prices in non-active markets and as such are classified within Level 2 of the fair value hierarchy. The Company’s marketable debt securities include investments in auction rate securities and asset backed commercial paper. The Company reviews the fair value for auction rate securities and asset backed commercial paper on a quarterly basis. The auction rate securities are traded in markets that are not active, trade infrequently and have little price transparency. The Company estimated the fair value of the auction rate securities based on weighted average risk calculations using cash flow assumptions discounted approximately 42%, which reflects an estimated discount for lack of marketability. The Company estimated the fair value of its asset backed commercial paper using a probability of return ranging from 13%-74% for each class of notes, which is reflective of information reviewed regarding the separate classes of securities. As a result of utilizing the unobservable inputs noted above in its fair value estimation of the Company’s auction rate securities and asset backed commercial paper, both fair value estimates are classified within Level 3 of the fair value hierarchy.

The Company’s net trade receivable from provisional copper and gold concentrate sales, subject to final pricing, is valued using quoted market prices based on forward curves and, as such, is classified within Level 1 of the fair value hierarchy.

The Company’s derivative instruments are valued using pricing models and the Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs. The Company’s derivatives trade in liquid markets, and as such, model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

The estimated value of the Boddington contingent royalty was determined using a Monte Carlo valuation model which simulates future gold and copper prices and costs applicable to sales. This contingent royalty is capped at $100, and at June 30,2012, the Company increased the accrual to the maximum of $100 using the following long-term price assumptions: 1) $1,500 per ounce gold price, 2) $3.50 per pound copper price, 3) $90 per barrel of oil, and 4) a $1.00 A$/US$ exchange rate. The Company used an approximate 4% discount rate in the model. The contingent royalty liability is classified within Level 3 of the fair value hierarchy.

The estimated fair value of the Holt sliding scale royalty was determined using a Monte Carlo valuation model to simulate future gold prices utilizing a long-term gold price assumption of $1,500 per ounce, various gold production scenarios based on publicly available reserve and resource information for the Holt property and an approximate 3% weighted average discount rate. The sliding scale royalty liability is classified within Level 3 of the fair value hierarchy.

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial assets and liabilities for the nine months ended September 30, 2012:

 

		Auction Rate Securities				Asset Backed Commercial Paper				Total Assets				Boddington Contingent Royalty				Holt Property Royalty				Total Liabilities
Balance at beginning of period		$	5			$	19			$	24			$	54			$	176			$	230
Settlements			—				—				—				(22	)			(12	)			(34	)
Revaluation			—				1				1				12				110				122
Balance at end of period		$	5			$	20			$	25			$	44			$	274			$	318

At September 30, 2012, assets and liabilities classified within Level 3 of the fair value hierarchy represent 1% and 100%, respectively, of total assets and liabilities measured at fair value.

NOTE 16    DERIVATIVE INSTRUMENTS

The Company’s strategy is to provide shareholders with leverage to changes in gold and copper prices by selling its production at spot market prices. Consequently, the Company does not hedge its gold and copper sales. The Company continues to manage certain risks associated with commodity input costs, interest rates and foreign currencies using the derivative market. All of the derivative instruments described below were transacted for risk management purposes and qualify as cash flow or fair value hedges.

Cash Flow Hedges

The foreign currency, diesel and forward starting swap contracts are designated as cash flow hedges, and as such, the effective portion of unrealized changes in market value have been recorded in Accumulated other comprehensive income and are reclassified to earnings during the period in which the hedged transaction affects earnings. Gains and losses from hedge ineffectiveness are recognized in current earnings.

Foreign Currency Contracts

Newmont utilizes foreign currency contracts to reduce the variability of the US dollar amount of forecasted foreign currency expenditures caused by changes in exchange rates. Newmont hedges a portion of the Company’s A$ and NZ$ denominated operating expenditures which results in a blended rate realized each period. The hedging instruments are fixed forward contracts with expiration dates ranging up to five years from the date of issue. The principal hedging objective is reduction in the volatility of realized period-on-period $/A$ and $/NZ$ rates, respectively.

In June 2011, Newmont began hedging a portion of the Company’s A$ denominated capital expenditures related to the Akyem project in Africa utilizing fixed forward contracts with expiration dates up to two years.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

In July 2011, Newmont began hedging a portion of the Company’s A$ denominated capital expenditures related to the planned construction of a mine shaft at Tanami in Australia utilizing foreign currency contracts. The hedging instruments are fixed forward contracts with expiration dates up to three years.

Newmont had the following foreign currency derivative contracts outstanding at September 30, 2012:

 

		Expected Maturity Date
		2012				2013				2014				2015				2016				2017				Total/ Average
A$ Operating Fixed Forward Contracts:
A$ notional (millions)			332				1,130				833				534				298				62				3,189
Average rate ($/A$)			0.93				0.93				0.91				0.89				0.90				0.90				0.92
Expected hedge ratio			84	%			73	%			53	%			35	%			19	%			5	%
A$ Capital Fixed Forward Contracts:
A$ notional (millions)			12				14				59				—				—				—				85
Average rate ($/A$)			0.99				0.98				0.96				—				—				—				0.97
Expected hedge ratio			49	%			87	%			91	%			—				—				—
NZ$ Operating Fixed Forward Contracts:
NZ$ notional (millions)			22				50				16				—				—				—				88
Average rate ($/NZ$)			0.78				0.78				0.78				—				—				—				0.78
Expected hedge ratio			67	%			41	%			18	%			—				—				—

Diesel Fixed Forward Contracts

Newmont hedges a portion of its operating cost exposure related to diesel consumed at its Nevada operations to reduce the variability in realized diesel prices. The hedging instruments consist of a series of financially settled fixed forward contracts with expiration dates up to three years.

Newmont had the following diesel derivative contracts outstanding at September 30, 2012:

 

		Expected Maturity Date
		2012				2013				2014				2015				Total/ Average
Diesel Fixed Forward Contracts:
Diesel gallons (millions)			8				24				11				2				45
Average rate ($/gallon)			2.94				2.93				2.89				2.85				2.92
Expected hedge ratio			69	%			54	%			27	%			8	%

Forward Starting Swap Contracts

During 2011, Newmont entered into forward starting interest rate swap contracts with a total notional value of $2,000. These contracts hedged movements in treasury rates related to a debt issuance that occurred in the first quarter of 2012. On March 8, 2012, Newmont closed its sale of $2,500 senior notes consisting of 3.5% senior notes due 2022 in the principal amount of $1,500 (10-year notes), and 4.875% senior notes due 2042 in the principal amount of $1,000 (30-year notes). As a result, the forward-starting interest rate swaps were settled for $362, of which $349 represented the effective portion of the hedging instrument included in Accumulated other comprehensive income. The net proceeds from the debt issuance were adjusted by the settlement amount of the swap contracts and included as a financing activity in the Condensed Consolidated Statements of Cash Flow.

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

Fair Value Hedges

Interest Rate Swap Contracts

Newmont had $222 fixed to floating swap contracts designated as a hedge against 8 5/8% debentures which matured in May 2011.

Derivative Instrument Fair Values

Newmont had the following derivative instruments designated as hedges at September 30, 2012 and December 31, 2011:

 

		Fair Value
		At September 30, 2012
		Other Current Assets				Other Long- Term Assets				Other Current Liabilities				Other Long- Term Liabilities
Foreign currency exchange contracts:
A$ operating fixed forwards		$	109			$	140			$	—			$	—
A$ capital fixed forwards			3				1				—				—
NZ$ operating fixed forwards			3				—				—				—
Diesel fixed forwards			5				1				1				—
Total derivative instruments (Note 20 and 22)		$	120			$	142			$	1			$	—
		Fair Value
		At December 31, 2011
		Other Current Assets				Other Long- Term Assets				Other Current Liabilities				Other Long- Term Liabilities
Foreign currency exchange contracts:
A$ operating fixed forwards		$	121				112				6				4
A$ capital fixed forwards			—				—				—				1
NZ$ operating fixed forwards			2				—				1				—
Diesel fixed forwards			4				—				2				1
Forward starting interest rate swaps			—				—				399				—
Total derivative instruments (Note 20 and 22)		$	127			$	112			$	408			$	6

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

The following tables show the location and amount of gains (losses) reported in the Company’s Condensed Consolidated Financial Statements related to the Company’s cash flow and fair value hedges and the gains (losses) recorded for the hedged item related to the fair value hedges.

 

		Foreign Currency Exchange Contracts								Diesel Forward Contracts								Forward Starting Swap Contracts
		2012				2011				2012				2011				2012				2011
For the three months ended September 30,
Cash flow hedging relationships:
Gain (loss) recognized in other comprehensive income (effective portion)		$	70			$	(263	)		$	14			$	(7	)		$	—			$	(345	)
Gain (loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)			40				50				2				3				(3	)			—
(Loss) reclassified from Accumulated other comprehensive income into income (ineffective portion) (2)			—				—				—				—				—				(10	)
For the nine months ended September 30,
Cash flow hedging relationships:
Gain (loss) recognized in other comprehensive income (effective portion)		$	156			$	(70	)		$	10			$	3			$	36			$	(356	)
Gain (loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)			125				141				6				12				(7	)			—
Gain (loss) reclassified from Accumulated other comprehensive income into income (ineffective portion) (2)			—				—				—				—				2				(10	)

 

(1)

The gain (loss) for the effective portion of the foreign exchange and diesel cash flow hedges reclassified from Accumulated other comprehensive income is included in Costs applicable to sales. The loss for the effective portion of the forward starting swaps reclassified from Accumulated other comprehensive income is included in Interest Expense.

(2)	The ineffective portion recognized for cash flow hedges is included in Other Income, net.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

		Interest Rate Swap Contracts								8   5/8% Debentures (Hedged Portion)
		2012				2011				2012				2011
For the nine months ended September 30,
Fair value hedging relationships:
Gain (loss) recognized in income (effective portion) (1)		$	—			$	3			$	—			$	(6	)
(Loss) recognized in income (ineffective portion) (2)			—				(2	)			—				—

 

(1)	The gain (loss) recognized for the effective portion of fair value hedges and the underlying hedged debt is included in Interest expense, net.

(2)	The ineffective portion recognized for fair value hedges and the underlying hedged debt is included in Other income, net.

The amount to be reclassified from Accumulated other comprehensive income, net of tax to income for derivative instruments during the next 12 months is a gain of approximately $61.

Provisional Copper and Gold Sales

The Company’s provisional copper and gold sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the gold and copper concentrates at the prevailing indices’ prices at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to final settlement.

London Metal Exchange (“LME”) copper prices averaged $3.50 per pound during the three months ended September 30, 2012, compared with the Company’s recorded average provisional price of $3.53 per pound before mark-to-market adjustments and treatment and refining charges. LME copper prices averaged $3.61 per pound during the nine months ended September 30, 2012, compared with the Company’s recorded average provisional price of $3.60 per pound before mark-to-market adjustments and treatment and refining charges. During the three and nine months ended September 30, 2012, changes in copper prices resulted in a provisional pricing mark-to-market gain of $18 ($0.30 per pound) and gain of $31 ($0.19 per pound), respectively. At September 30, 2012, Newmont had copper sales of 67 million pounds priced at an average of $3.74 per pound, subject to final pricing over the next several months.

The average London P.M. fix for gold was $1,652 per ounce during the three months ended September 30, 2012, compared with the Company’s recorded average provisional price of $1,653 per ounce before mark-to-market adjustments and treatment and refining charges. The average London P.M. fix for gold was $1,652 per ounce during the nine months ended September 30, 2012, compared to the Company’s recorded average provisional price of $1,652 per ounce before mark-to-market adjustments and treatment and refining charges. During the three and nine months ended September 30, 2012, changes in gold prices resulted in a provisional pricing mark-to-market gain of $13 ($9 per ounce) and gain of $17 ($4 per ounce), respectively. At September 30, 2012, Newmont had gold sales of 87,000 ounces priced at an average of $1,777 per ounce, subject to final pricing over the next several months.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 17    INVESTMENTS

 

		At September 30, 2012
		Cost/Equity Basis				Unrealized								Fair/Equity Basis
						Gain				Loss
Current:
Marketable Equity Securities:
Paladin Energy Ltd.		$	59			$	8			$	—			$	67
Other			14				9				(1	)			22
		$	73			$	17			$	(1	)		$	89
Long-term:
Marketable Debt Securities:
Asset backed commercial paper		$	26			$	—			$	(6	)		$	20
Auction rate securities			8				—				(3	)			5
Corporate			6				2				—				8
			40				2				(9	)			33
Marketable Equity Securities:
Canadian Oil Sands Ltd.			314				347				—				661
Gabriel Resources Ltd.			79				29				—				108
Regis Resources Ltd.			36				402				—				438
Other			59				18				(1	)			76
			488				796				(1	)			1,283
Other investments, at cost			11				1				—				12
Investment in Affiliates:
Minera La Zanja S.R.L.			69				—				—				69
		$	608			$	799			$	(10	)		$	1,397

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

		At December 31, 2011
		Cost/Equity Basis				Unrealized								Fair/Equity Basis
						Gain				Loss
Current:
Marketable Equity Securities:
Paladin Energy Ltd.		$	60			$	13			$	—			$	73
Other			15				7				(1	)			21
		$	75			$	20			$	(1	)		$	94
Long-term:
Marketable Debt Securities:
Asset backed commercial paper		$	25			$	—			$	(6	)		$	19
Auction rate securities			7				—				(2	)			5
Corporate			10				1				—				11
			42				1				(8	)			35
Marketable Equity Securities:
Canadian Oil Sands Trust			302				401				—				703
Gabriel Resources Ltd.			76				236				—				312
Regis Resources Ltd.			36				218				—				254
Other			92				16				(17	)			91
			506				871				(17	)			1,360
Other investments, at cost			11				—				—				11
Investment in Affiliates:
Minera La Zanja S.R.L.			66				—				—				66
		$	625			$	872			$	(25	)		$	1,472

Included in Investments at September 30, 2012 and December 31, 2011 are $9 and $11 of long-term marketable debt securities, respectively, and $8 and $4 of long-term marketable equity securities, respectively, that are legally pledged for purposes of settling asset retirement obligations related to the San Jose Reservoir at Yanacocha.

During the three and nine months ended September 30, 2012, the Company recognized impairments for other-than-temporary declines in value of $7 and $39 for marketable equity securities. During the third quarter of 2011, the Company recognized impairments for other-than-temporary declines in value of $148 related to its holdings of Paladin Energy Ltd. and $26 for other marketable equity securities.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

The following tables present the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by length of time that the individual securities have been in a continuous unrealized loss position:

 

		Less than 12 Months								12 Months or Greater								Total
At September 30, 2012		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Marketable equity securities		$	7			$	2			$	—			$	—			$	7			$	2
Asset backed commercial paper			—				—				20				6				20				6
Auction rate securities			—				—				5				3				5				3
		$	7			$	2			$	25			$	9			$	32			$	11
		Less than 12 Months								12 Months or Greater								Total
At December 31, 2011		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Marketable equity securities		$	42			$	18			$	—			$	—			$	42			$	18
Asset backed commercial paper			—				—				19				6				19				6
Auction rate securities			—				—				5				2				5				2
		$	42			$	18			$	24			$	8			$	66			$	26

While the fair values of the Company’s investments in asset backed commercial paper and auction rate securities are below their respective cost, the Company views these declines as temporary. The Company intends to hold its investment in auction rate securities and asset backed commercial paper until maturity or such time that the market recovers and therefore considers these losses temporary.

NOTE 18    INVENTORIES

 

		At September 30, 2012				At December 31, 2011
In-process		$	122			$	159
Concentrate			192				116
Precious metals			39				12
Materials, supplies and other			489				427
		$	842			$	714

NOTE 19    STOCKPILES AND ORE ON LEACH PADS

 

		At September 30, 2012				At December 31, 2011
Current:
Stockpiles		$	560			$	506
Ore on leach pads			160				165
		$	720			$	671
Long-term:
Stockpiles		$	2,384			$	1,904
Ore on leach pads			391				367
		$	2,775			$	2,271

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

		At September 30, 2012				At December 31, 2011
Stockpiles and ore on leach pads:
Nevada		$	649			$	536
La Herradura			39				6
Yanacocha			509				512
Boddington			476				435
Batu Hijau			1,436				1,119
Other Australia/New Zealand			175				161
Ahafo			211				173
		$	3,495			$	2,942

NOTE 20    OTHER ASSETS

 

		At September 30, 2012				At December 31, 2011
Other current assets:
Refinery metal inventory and receivable		$	636			$	796
Prepaid assets			224				93
Derivative instruments			120				127
Restricted cash			—				20
Note receivable			—				12
Other			109				85
		$	1,089			$	1,133
Other long-term assets:
Goodwill		$	188			$	188
Derivative instruments			142				112
Intangible assets			139				147
Restricted cash			98				48
Debt issuance costs			76				59
Income tax receivable			57				142
Other receivables			11				17
Other			185				144
		$	896			$	857

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

(dollars in millions, except per share, per ounce and per pound amounts)

 

NOTE 21    DEBT

 

		At September 30, 2012								At December 31, 2011
		Current				Non-Current				Current				Non-Current
Sale-leaseback of refractory ore treatment plant		$	15			$	—			$	165			$	—
Corporate revolving credit facility			—				—				—				33
2012 Convertible Senior Notes, net