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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 March 31, 2013

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 492,319,340 shares of common stock outstanding on April 22, 2013 (and 4,893,906 exchangeable shares).

 

 

 

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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			38
		Overview			38
		Selected Financial and Operating Results			40
		Consolidated Financial Results			41
		Results of Consolidated Operations			46
		Liquidity and Capital Resources			49
		Environmental			52
		Accounting Developments			52
		Non-GAAP Financial Measures			53
		Safe Harbor Statement			56
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			56
ITEM 4.		CONTROLS AND PROCEDURES			59
		PART II
ITEM 1.		LEGAL PROCEEDINGS			60
ITEM 1A.		RISK FACTORS			60
ITEM 2.		ISSUER PURCHASES OF EQUITY SECURITIES			60
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES			60
ITEM 4.		MINE SAFETY DISCLOSURES			60
ITEM 5.		OTHER INFORMATION			61
ITEM 6.		EXHIBITS			61
SIGNATURES					62
EXHIBIT INDEX					63

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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
		March 31,
		2013				2012
Sales (Note 3)		$	2,177			$	2,683
Costs and expenses
Costs applicable to sales (1) (Note 3)			1,044				1,017
Amortization (Note 3)			267				231
Reclamation and remediation (Note 4)			18				16
Exploration			59				88
Advanced projects, research and development			52				102
General and administrative			56				54
Other expense, net (Note 5)			100				120
			1,596				1,628
Other income (expense)
Other income, net (Note 6)			26				33
Interest expense, net			(65	)			(52	)
			(39	)			(19	)
Income before income and mining tax and other items			542				1,036
Income and mining tax expense (Note 7)			(181	)			(343	)
Equity income (loss) of affiliates			(4	)			(19	)
Income from continuing operations			357				674
Income (loss) from discontinued operations (Note 8)			—				(71	)
Net income			357				603
Net income attributable to noncontrolling interests (Note 9)			(42	)			(113	)
Net income attributable to Newmont stockholders		$	315			$	490
Net income attributable to Newmont stockholders:
Continuing operations		$	315			$	561
Discontinued operations			—				(71	)
		$	315			$	490
Income per common share (Note 10)
Basic:
Continuing operations		$	0.63			$	1.13
Discontinued operations			—				(0.14	)
		$	0.63			$	0.99
Diluted:
Continuing operations		$	0.63			$	1.11
Discontinued operations			—				(0.14	)
		$	0.63			$	0.97
Cash dividends declared per common share		$	0.425			$	0.35

 

(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

STATEMENTS OF CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(unaudited, in millions)

 

		Three Months Ended March 31,
		2013				2012
		(in millions)
Net income		$	357			$	603
Other comprehensive income (loss):
Unrealized loss on marketable securities, net of $38 and $23 tax benefit, respectively			(52	)			(40	)
Foreign currency translation adjustments			(12	)			10
Change in pension and other post-retirement benefits, net of $5 and $2 tax expense, respectively			5				4
Change in fair value of cash flow hedge instruments, net of $15 and $(26) tax benefit (expense), respectively
Net change from periodic revaluations			21				69
Net amount reclassified to income			(24	)			(35	)
Net unrecognized (loss) gain on derivatives			(3	)			34
Other comprehensive income			(62	)			8
Comprehensive income		$	295			$	611
Comprehensive income attributable to:
Newmont stockholders		$	254			$	496
Noncontrolling interests			41				115
		$	295			$	611

 

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)

 

		Three Months Ended
		March 31,
		2013				2012
Operating activities:
Net income		$	357			$	603
Adjustments:
Amortization			267				231
Stock based compensation and other non-cash benefits			19				17
Reclamation and remediation			18				16
Loss from discontinued operations			—				71
Impairment of marketable securities			4				24
Deferred income taxes			(11	)			(55	)
Gain on asset sales, net			(1	)			(10	)
Other operating adjustments and write-downs			74				72
Net change in operating assets and liabilities (Note 23)			(288	)			(356	)
Net cash provided from continuing operations			439				613
Net cash used in discontinued operations			(6	)			(4	)
Net cash provided from operations			433				609
Investing activities:
Additions to property, plant and mine development			(510	)			(696	)
Acquisitions, net			(8	)			(11	)
Sale of marketable securities			1				—
Purchases of marketable securities			(1	)			(143	)
Proceeds from sale of other assets			25				12
Other			(14	)			(17	)
Net cash used in investing activities			(507	)			(855	)
Financing activities:
Proceeds from debt, net			80				3,346
Repayment of debt			—				(1,907	)
Payment of conversion premium on debt			—				(172	)
Proceeds from stock issuance, net			1				2
Sale of noncontrolling interests			32				—
Acquisition of noncontrolling interests			(6	)			—
Dividends paid to common stockholders			(211	)			(173	)
Other			(1	)			(2	)
Net cash provided from (used in) financing activities			(105	)			1,094
Effect of exchange rate changes on cash			(4	)			4
Net change in cash and cash equivalents			(183	)			852
Cash and cash equivalents at beginning of period			1,561				1,760
Cash and cash equivalents at end of period		$	1,378			$	2,612

 

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 March 31,				At December 31,
		2013				2012
ASSETS
Cash and cash equivalents		$	1,378			$	1,561
Trade receivables			212				283
Accounts receivable			553				577
Investments (Note 15)			75				86
Inventories (Note 16)			846				796
Stockpiles and ore on leach pads (Note 17)			956				786
Deferred income tax assets			297				195
Other current assets (Note 18)			1,309				1,661
Current assets			5,626				5,945
Property, plant and mine development, net			18,151				18,010
Investments (Note 15)			1,361				1,446
Stockpiles and ore on leach pads (Note 17)			2,952				2,896
Deferred income tax assets			473				481
Other long-term assets (Note 18)			888				872
Total assets		$	29,451			$	29,650
LIABILITIES
Debt (Note 19)		$	10			$	10
Accounts payable			590				657
Employee-related benefits			290				339
Income and mining taxes			109				51
Other current liabilities (Note 20)			1,653				2,084
Current liabilities			2,652				3,141
Debt (Note 19)			6,379				6,288
Reclamation and remediation liabilities (Note 4)			1,465				1,457
Deferred income tax liabilities			862				858
Employee-related benefits			598				586
Other long-term liabilities (Note 20)			370				372
Total liabilities			12,326				12,702
Commitments and contingencies (Note 25)
EQUITY
Common stock			788				787
Additional paid-in capital			8,407				8,330
Accumulated other comprehensive income			429				490
Retained earnings			4,270				4,166
Newmont stockholders’ equity			13,894				13,773
Noncontrolling interests			3,231				3,175
Total equity			17,125				16,948
Total liabilities and equity		$	29,451			$	29,650

 

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, 2012 filed February 22, 2013 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$” refer to Australian currency, “C$” to Canadian currency and “NZ$” to New Zealand currency.

On March 12, 2013, Newmont completed the sale of the Hope Bay Project to TMAC Resources Inc. (“TMAC”). At March 31, 2013, Newmont held a 49.9% voting interest in TMAC and an economic interest of 70.4%. The Company has made available a $15 credit facility due June 2014. Newmont has identified TMAC as a Variable Interest Entity (“VIE”) under FASB Accounting Standards Codification (“ASC”)—Consolidation guidance. Based upon the ASC guidance for VIEs, and the ownership structure, Newmont has determined that it has a controlling financial interest in TMAC and is therefore the primary beneficiary. As such, Newmont consolidated TMAC in its consolidated financial statements. TMAC has indicated that they anticipate raising funds at an undetermined date through an initial public offering (“IPO”). Should such an IPO occur, which there can be no assurance of such offering occurring, it is expected that Newmont’s ownership will be reduced and Newmont would reevaluate whether or not it is still required to consolidate under the applicable ASC guidance.

NOTE 2    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

Reporting of Amounts reclassified out of Accumulated Other Comprehensive Income

In February 2013, ASC guidance was issued related to items reclassified from Accumulated Other Comprehensive Income. The new standard requires either in a single note or parenthetically on the face of the financial statements: (i) the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and (ii) the income statement line items affected by the reclassification. Adoption of the new guidance, effective for the fiscal year beginning January 1, 2013, had no impact on the consolidated financial position, results of operations or cash flows.

Disclosures about Offsetting Assets and Liabilities

In November 2011, ASC guidance was issued related to disclosures about offsetting assets and liabilities. The new standard requires disclosures to allow investors to better compare financial statements prepared under U.S. GAAP with financial statements prepared under IFRS. In January 2013, an update was issued to further clarify that the disclosure requirements are limited to derivatives, repurchase agreements, and securities lending transactions to the extent that they are (i) offset in the financial statements or (ii) subject to an enforceable master netting arrangement or similar agreement. Adoption of the new guidance, effective for the fiscal year beginning January 1, 2013, had no impact on the consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Pronouncements

Foreign Currency Matters

In March 2013, ASC guidance was issued related to Foreign Currency Matters to clarify the treatment of cumulative translation adjustments when a parent sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. The updated guidance also resolves the diversity in practice for the treatment of business combinations achieved in stages in a foreign entity. The update is effective prospectively for the Company’s fiscal year beginning January 1, 2014. The Company does not expect the updated guidance to have an impact on the 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

The Company’s reportable segments are based upon the Company’s management structure that is focused on the geographic region for the Company’s operations. Segment results for 2012 have been retrospectively revised to reflect an organizational change, effective in the first quarter of 2013, that moved the Indonesia operations to a separately managed region. Geographic regions now include North America, South America, Australia/New Zealand, Indonesia, Africa and Corporate and Other. The financial information relating to the Company’s segments is as follows:

 

		Sales				Costs Applicable to Sales				Amortization				Advanced Projects and Exploration				Pre-Tax Income (Loss)				Total Assets				Capital Expenditures(1)
Three Months Ended March 31, 2013
Nevada		$	570			$	272			$	59			$	25			$	209			$	7,680			$	106
La Herradura			90				40				6				6				37				476				19
Other North America			—				—				—				1				(46	)			190				—
North America			660				312				65				32				200				8,346				125
Yanacocha			455				158				70				13				195				3,063				48
Conga			—				—				—				1				1				1,646				86
Other South America			—				—				—				5				(6	)			101				21
South America			455				158				70				19				190				4,810				155
Boddington:
Gold			329				174				42
Copper			65				48				10
Total			394				222				52				—				114				4,627				25
Other Australia/New Zealand			392				232				46				12				93				2,187				41
Australia/New Zealand			786				454				98				12				207				6,814				66
Batu Hijau:
Gold			11				7				2
Copper			70				47				9
Total			81				54				11				6				(4	)			3,854				23
Other Indonesia			—				—				—				—				3				4				—
Indonesia			81				54				11				6				(1	)			3,858				23
Ahafo			195				66				17				13				96				1,501				60
Akyem			—				—				—				3				(5	)			1,066				68
Other Africa			—				—				—				3				(3	)			1				—
Africa			195				66				17				19				88				2,568				128
Corporate and Other			—				—				6				23				(142	)			3,055				—
Consolidated		$	2,177			$	1,044			$	267			$	111			$	542			$	29,451			$	497

 

(1)	Includes a decrease in accrued capital expenditures of $13; consolidated capital expenditures on a cash basis were $510.

 

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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)
Three Months Ended March 31, 2012
Nevada		$	723			$	267			$	53			$	34			$	369			$	7,092			$	157
La Herradura			93				32				5				6				45				371				21
Other North America			—				—				—				—				(52	)			175				—
North America			816				299				58				40				362				7,638				178
Yanacocha			594				161				50				17				349				2,745				93
Conga			—				—				—				27				(27	)			1,254				147
Other South America			—				—				—				25				(25	)			74				27
South America			594				161				50				69				297				4,073				267
Boddington:
Gold			298				137				32
Copper			61				30				6
Total			359				167				38				3				143				4,661				23
Other Australia/New Zealand			427				190				37				21				185				1,993				73
Australia/New Zealand			786				357				75				24				328				6,654				96
Batu Hijau:
Gold			34				19				3
Copper			172				85				16
Total			206				104				19				7				48				3,671				33
Other Indonesia			—				—				—				—				(1	)			2				—
Indonesia			206				104				19				7				47				3,673				33
Ahafo			281				96				24				11				150				1,277				50
Akyem			—				—				—				4				(5	)			653				85
Other Africa			—				—				—				2				(2	)			5				—
Africa			281				96				24				17				143				1,935				135
Corporate and Other			—				—				5				33				(141	)			4,988				11
Consolidated		$	2,683			$	1,017			$	231			$	190			$	1,036			$	28,961			$	720

 

(1)	Includes an increase in accrued capital expenditures of $24; consolidated capital expenditures on a cash basis were $696.

 

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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

The Company’s Reclamation and remediation expense consisted of:

 

		Three Months Ended March 31,
		2013				2012
Accretion - operating		$	15			$	14
Accretion - non-operating			3				2
		$	18			$	16

At March 31, 2013 and December 31, 2012, $1,350 and $1,341, 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 March 31, 2013 and December 31, 2012, $195 and $198, 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:

 

		Three Months Ended March 31,
		2013				2012
Balance at beginning of period		$	1,539			$	1,240
Additions, changes in estimates and other			(3	)			105
Liabilities settled			(9	)			(28	)
Accretion expense			18				16
Balance at end of period		$	1,545			$	1,333

The current portion of Reclamation and remediation liabilities of $80 and $82 at March 31, 2013 and December 31, 2012, respectively, are included in Other current liabilities (see Note 20).

NOTE 5    OTHER EXPENSE, NET

 

		Three Months Ended March 31,
		2013				2012
TMAC transaction costs		$	45			$	—
Regional administration			18				21
Community development			13				31
Restructuring and other			9				—
Western Australia power plant			4				4
World Gold Council Dues			1				3
Hope Bay care and maintenance			(2	)			50
Other			12				11
		$	100			$	120

 

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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 March 31,
		2013				2012
Canadian Oil Sands		$	10			$	9
Interest			4				5
Derivative ineffectiveness, net			3				2
Refinery income, net			3				5
Development projects, net			1				14
Gain on asset sales, net			1				10
Reduction of allowance for loan receivable			—				21
Foreign currency exchange, net			(3	)			(15	)
Impairment of marketable securities			(4	)			(24	)
Other			11				6
		$	26			$	33

NOTE 7    INCOME AND MINING TAXES

During the first quarter of 2013, the Company recorded estimated income and mining tax expense of $181 resulting in an effective tax rate of 33%. Estimated income and mining tax expense during the first quarter of 2012 was $343 for an effective tax rate of 33%.

The Company’s income and mining tax expense differed from the statutory rate of 35% for the following reasons:

 

		Three Months Ended March 31,
		2013								2012
Income before income and mining tax and other items						$	542							$	1,036
Tax on income at 35% statutory rate			35	%		$	190				35	%		$	363
Reconciling items:
Percentage depletion			(7	)			(41	)			(7	)			(74	)
Change in valuation allowance on deferred tax assets			1				6				3				32
Other			4				26				2				22
Income and mining tax expense			33	%		$	181				33	%		$	343

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 March 31, 2013, the Company’s total unrecognized tax benefit was $402 for uncertain income tax positions taken or expected to be taken on income tax returns. Of this, $126 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 $15 to $20 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)

 

NOTE 8    DISCONTINUED OPERATIONS

Discontinued operations include Holloway Mining Company, which owned the Holt-McDermott property (“Holt property”) that 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 first quarter of 2012, the Company recorded an additional $71 charge, net of tax benefits of $4, to reflect an increase in future expected production at the Holt property due to new reserve and resource estimates published by St. Andrew.

Net operating cash used in discontinued operations of $6 and $4 in the first quarter of 2013 and 2012 relates to payments on the Holt property royalty.

NOTE 9    NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

		Three Months Ended March 31,
		2013				2012
Minera Yanacocha		$	57			$	98
TMAC			(12	)			—
Batu Hijau			(3	)			13
Other			—				2
		$	42			$	113

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%).

Newmont has a 70.4% economic ownership interest in TMAC, with remaining interests held by various outside investors.

Newmont has a 48.5% effective economic interest in PT Newmont Nusa Tenggara (“PTNNT”) with remaining interests held by various Indonesian entities, in accordance with PTNNT’s Contract of Work. 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.

 

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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 10    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 March 31,
		2013				2012
Net income attributable to Newmont stockholders		$	315			$	490
Weighted average common shares (millions):
Basic			497				495
Effect of employee stock-based awards			1				2
Effect of convertible notes			—				7
Diluted			498				504
Net income attributable to Newmont stockholders per common share
Basic:
Continuing operations		$	0.63			$	1.13
Discontinued operations			—				(0.14	)
		$	0.63			$	0.99
Diluted:
Continuing operations		$	0.63			$	1.11
Discontinued operations			—				(0.14	)
		$	0.63			$	0.97

Options to purchase 4 and 1 million shares of common stock at average exercise prices of $49 and $59 were outstanding at March 31, 2013 and 2012, respectively, but were not included in the computation of diluted weighted average common shares because their exercise prices exceeded the average price of the Company’s common stock for the respective periods presented.

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 11    EMPLOYEE PENSION AND OTHER BENEFIT PLANS

 

		Three Months Ended March 31,
		2013				2012
Pension benefit costs, net
Service cost		$	9			$	7
Interest cost			10				10
Expected return on plan assets			(12	)			(11	)
Amortization, net			8				6
		$	15			$	12
		Three Months Ended March 31,
		2013				2012
Other benefit costs, net
Service cost		$	1			$	1
Interest cost			1				1
		$	2			$	2

NOTE 12    STOCK BASED COMPENSATION

 

		Three Months Ended March 31,
		2013				2012
Stock options		$	3			$	4
Restricted stock units			9				5
Performance leveraged stock units			2				3
		$	14			$	12

NOTE 13    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).

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.

 

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

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

 

		Fair Value at March 31, 2013
		Total				Level 1				Level 2				Level 3
Assets:
Cash equivalents		$	61			$	61			$	—			$	—
Marketable equity securities:
Extractive industries			1,304				1,304				—				—
Other			4				4				—				—
Marketable debt securities:
Asset backed commercial paper			23				—				—				23
Corporate			13				—				13				—
Auction rate securities			5				—				—				5
Trade receivable from provisional copper and gold concentrate sales, net			126				126				—				—
Derivative instruments, net:
Foreign exchange forward contracts			236				—				236				—
Diesel forward contracts			3				—				3				—
		$	1,775			$	1,495			$	252			$	28
Liabilities:
Boddington contingent consideration			33				—				—				33
Holt property royalty			234				—				—				234
		$	267			$	—			$	—			$	267

The fair values of the derivative instruments in the table above are presented on a net basis. The gross amounts related to the fair value of the derivatives instruments above are included in the Derivatives Instruments Note (see Note 14). All other Fair Value disclosures in the above table are presented on a gross basis.

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 marketable corporate debt securities are mainly comingled fund investments that are classified within Level 2 with the unit of account considered to be at the fund level. Therefore, the investments are classified as Level 2 of the fair value hierarchy.

The Company’s marketable debt securities also 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. See table below which sets forth a summary of the quantitative and qualitative information related to the significant unobservable inputs used in the calculation of the fair value.

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. The Boddington contingent royalty is classified within Level 3 of the fair value hierarchy. See table below which sets forth a summary of the quantitative and qualitative information related to the significant unobservable inputs used in the calculation of the fair value.

The estimated fair value of the Holt sliding scale royalty was determined using a Monte Carlo valuation model. The sliding scale royalty liability is classified within Level 3 of the fair value hierarchy. See table below which sets forth a summary of the quantitative and qualitative information related to the significant unobservable inputs used in the calculation of the fair value.

The following table sets forth a summary of the quantitative and qualitative information related to the unobservable inputs used in the calculation of the Company’s Level 3 financial assets and liabilities for the three months ended March 31, 2013:

 

Description		At March 31, 2013				Valuation technique		Unobservable input		Range/Weighted average
Auction Rate Securities		$	5			Discounted cash flow		Weighted average recoverability rate			58	%
Asset Backed Commercial Paper			23			Discounted cash flow		Recoverability rate			72-88	%
Boddington Contingent Consideration			33			Monte Carlo		Discount rate			4	%
								LT Gold price		$	1,500
								LT Copper price		$	3.50
Holt property royalty			234			Monte Carlo		Weighted average discount rate			3	%
								LT Gold price		$	1,500

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 financial assets and liabilities for the year ended March 31, 2013:

 

		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			$	41			$	240			$	281
Settlements			—								—				(8	)			(6	)			(14	)
Revaluation			—				4				4				—				—				—
Balance at end of period		$	5			$	23			$	28			$	33			$	234			$	267

At March 31, 2013, assets and liabilities classified within Level 3 of the fair value hierarchy represent 2% and 100%, respectively, of total assets and liabilities measured at fair value.

 

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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 14    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.

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 three years.

Newmont had the following foreign currency derivative contracts outstanding at March 31, 2013:

 

		Expected Maturity Date
		2013				2014				2015				2016				2017				2018				Total/ Average
A$ Operating Fixed Forward Contracts:
A$ notional (millions)			959				1,035				737				490				208				14				3,443
Average rate ($/A$)			0.95				0.93				0.92				0.92				0.92				0.92				0.93
Expected hedge ratio			80	%			67	%			48	%			32	%			13	%			4	%
A$ Capital Fixed Forward Contracts:
A$ notional (millions)			3				—				—				—				—				—				3
Average rate ($/A$)			0.96				—				—				—				—				—				0.96
Expected hedge ratio			36	%			—				—				—				—				—
NZ$ Operating Fixed Forward Contracts:
NZ$ notional (millions)			55				35				3				—				—				—				93
Average rate ($/NZ$)			0.80				0.80				0.79				—				—				—				0.80
Expected hedge ratio			60	%			30	%			11	%			—				—				—

 

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

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

 

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 March 31, 2013:

 

		Expected Maturity Date
		2013				2014				2015				2016				Total/ Average
Diesel Fixed Forward Contracts:
Diesel gallons (millions)			20				18				8				1				47
Average rate ($/gallon)			2.92				2.88				2.79				2.76				2.88
Expected hedge ratio			61	%			41	%			19	%			5	%

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.

Derivative Instrument Fair Values

Newmont had the following derivative instruments designated as hedges at March 31, 2013 and December 31, 2012:

 

		Fair Value
		At March 31, 2013
		Other Current Assets				Other Long- Term Assets				Other Current Liabilities				Other Long- Term Liabilities
Foreign currency exchange contracts:
A$ operating fixed forwards		$	105			$	130			$	—			$	1
NZ$ operating fixed forwards			2				—				—				—
Diesel fixed forwards			2				1				—				—
Total derivative instruments (Note 18 and 20)		$	109			$	131			$	—			$	1

 

		Fair Value
		At December 31, 2012
		Other Current Assets				Other Long- Term Assets				Other Current Liabilities				Other Long- Term Liabilities
Foreign currency exchange contracts:
A$ operating fixed forwards		$	108				143				—				1
NZ$ operating fixed forwards			2				—				—				—
Diesel fixed forwards			2				1				1				1
Total derivative instruments (Note 18 and 20)		$	112			$	144			$	1			$	2

 

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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 hedges.

 

		Foreign Currency Exchange  Contracts								Diesel  Forward Contracts								Forward  Starting Swaps
		2013				2012				2013				2012				2013				2012
For the three months ended March 31,
Cash flow hedging relationships:
Gain recognized in other comprehensive income (effective portion)		$	18			$	62			$	3			$	12			$	—			$	36
Gain(loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)			38				47				1				3				(3	)			(1	)
Gain recognized in income (ineffective portion) (2)			—				—				3				—				—				2

 

(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.

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 $58.

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.

LME copper prices averaged $3.60 per pound during the first quarter of 2013, consistent with the Company’s recorded average provisional price before mark-to-market losses and treatment and refining charges. During the first quarter of 2013, changes in copper prices resulted in a provisional pricing mark-to-market loss of $9 ($0.21 per pound). At March 31, 2013, Newmont had copper sales of 38 million pounds priced at an average of $3.45 per pound, subject to final pricing over the next several months.

The average London P.M. fix for gold was $1,632 per ounce during the first quarter of 2013, consistent with the Company’s recorded average provisional price before mark-to-market gains and treatment and refining charges. During the first quarter of 2013, changes in gold prices resulted in a provisional pricing mark-to-market gain of $3 ($2 per ounce). At March 31, 2013, Newmont had gold sales of 104,000 ounces priced at an average of $1,598 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 15    INVESTMENTS

 

		At March 31, 2013
		Cost/Equity Basis				Unrealized								Fair/Equity Basis
						Gain				Loss
Current:
Marketable Equity Securities:
Paladin Energy Ltd.		$	60			$	—			$	(8	)		$	52
Other			16				9				(2	)			23
		$	76			$	9			$	(10	)		$	75
Long-term:
Marketable Debt Securities:
Asset backed commercial paper		$	24			$	—			$	(1	)		$	23
Auction rate securities			7				—				(2	)			5
Corporate			13				—				—				13
			44				—				(3	)			41
Marketable Equity Securities:
Canadian Oil Sands Ltd.			303				332				—				635
Gabriel Resources Ltd.			76				45				—				121
Regis Resources Ltd.			166				255				—				421
Other			52				9				(5	)			56
			597				641				(5	)			1,233
Other investments, at cost			13				—				—				13
Investment in Affiliates:
Euronimba Ltd.			3				—				—				3
Minera La Zanja S.R.L.			71				—				—				71
		$	728			$	641			$	(8	)		$	1,361

 

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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, 2012
		Cost/Equity Basis				Unrealized								Fair/Equity Basis
						Gain				Loss
Current:
Marketable Equity Securities:
Paladin Energy Ltd.		$	60			$	—			$	(3	)		$	57
Other			17				14				(2	)			29
		$	77			$	14			$	(5	)		$	86
Long-term:
Marketable Debt Securities:
Asset backed commercial paper		$	25			$	—			$	(6	)		$	19
Auction rate securities			7				—				(2	)			5
Corporate			14				—				—				14
			46				—				(8	)			38
Marketable Equity Securities:
Canadian Oil Sands Trust			310				318				—				628
Gabriel Resources Ltd.			78				42				—				120
Regis Resources Ltd.			166				352				—				518
Other			51				14				—				65
			605				726				—				1,331
Other investments, at cost			12				—				—				12
Investment in Affiliates:
Minera La Zanja S.R.L.			65				—				—				65
		$	728			$	726			$	(8	)		$	1,446

 

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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 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 March 31, 2013		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Marketable equity securities		$	75			$	15			$	—			$	—			$	75			$	15
Asset backed commercial paper			—				—				23				1				23				1
Auction rate securities			—				—				5				2				5				2
		$	75			$	15			$	28			$	3			$	103			$	18
		Less than 12 Months								12 Months or Greater								Total
At December 31, 2012		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Marketable equity securities		$	79			$	5			$	—			$	—			$	79			$	5
Asset backed commercial paper			—				—				19				6				19				6
Auction rate securities			—				—				5				2				5				2
		$	79			$	5			$	24			$	8			$	103			$	13

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 16    INVENTORIES

 

		At March  31, 2013				At December  31, 2012
In-process		$	119			$	143
Concentrate			180				152
Precious metals			50				31
Materials, supplies and other			497				470
		$	846			$	796

NOTE 17    STOCKPILES AND ORE ON LEACH PADS

 

		At March  31, 2013				At December  31, 2012
Current:
Stockpiles		$	714			$	602
Ore on leach pads			242				184
		$	956			$	786
Long-term:
Stockpiles		$	2,582			$	2,514
Ore on leach pads			370				382
		$	2,952			$	2,896

 

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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 March 31,				At December 31,
		2013				2012
Stockpiles and ore on leach pads:
Nevada		$	757			$	699
La Herradura			67				57
Yanacocha			540				498
Boddington			491				474
Batu Hijau			1,631				1,543
Other Australia/New Zealand			175				173
Ahafo			241				235
Akyem			6				3
		$	3,908			$	3,682

NOTE 18    OTHER ASSETS

 

		At March 31,				At December 31,
		2013				2012
Other current assets:
Refinery metal inventory and receivable		$	844			$	1,183
Prepaid assets			234				213
Derivative instruments			109				112
Restricted cash			7				12
Other			115				141
		$	1,309			$	1,661
Other long-term assets:
Goodwill		$	188			$	188
Intangible assets			138				136
Derivative instruments			131				144
Income tax receivable			105				92
Restricted cash			93				90
Debt issuance costs			70				73
Other receivables			10				9
Other			153				140
		$	888			$	872

 

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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 19    DEBT

 

		At March 31, 2013								At December 31, 2012
		Current				Non-Current				Current				Non-Current
2014 Convertible Senior Notes, net			—				541				—				535
2017 Convertible Senior Notes, net			—				476				—				471
2019 Senior Notes, net			—				897				—				897
2022 Senior Notes, net			—				1,490				—				1,489
2035 Senior Notes, net			—				598				—				598
2039 Senior Notes, net			—				1,087				—				1,087
2042 Senior Notes, net			—				992				—				992
Ahafo project finance facility			10				35				10				35
PTNNT revolving credit facility			—				260				—				180
Other capital leases			—				3				—				4
		$	10			$	6,379			$	10			$	6,288

Scheduled minimum debt repayments are $10 for the remainder of 2013, $552 in 2014, $11 in 2015, $11 in 2016, $742 in 2017 and $5,063 thereafter.

NOTE 20    OTHER LIABILITIES

 

		At March 31,				At December 31,
		2013				2012
Other current liabilities:
Refinery metal payable		$	844			$	1,183
Accrued operating costs			261				336
Accrued capital expenditures			159				172
Interest			83				74
Reclamation and remediation liabilities			80				82
Deferred income tax			65				65
Royalties			41				42
Holt property royalty			23				21
Boddington contingent consideration			11				26
Taxes other than income and mining			8				14
Other			78				69
		$	1,653			$	2,084
Other long-term liabilities:
Holt property royalty		$	211			$	219
Income and mining taxes			70				65
Power supply agreements			46				46
Boddington contingent consideration			22				15
Other			21				27
		$	370			$	372

 

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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 21    CHANGES IN EQUITY

 

		Three Months Ended March 31,
		2013				2012
Common stock:
At beginning of period		$	787			$	784
Stock based awards			1				1
At end of period			788				785
Additional paid-in capital:
At beginning of period			8,330				8,408
Conversion premium on convertible notes			—				(172	)
Stock based awards			29				27
Sale of noncontrolling interests			48				—
At end of period			8,407				8,263
Accumulated other comprehensive income:
At beginning of period			490				652
Other comprehensive income			(61	)			6
At end of period			429				658
Retained earnings:
At beginning of period			4,166				3,052
Net income attributable to Newmont stockholders			315				490
Dividends paid			(211	)			(173	)
At end of period			4,270				3,369
Noncontrolling interests:
At beginning of period			3,175				2,875
Net income attributable to noncontrolling interests			42				113
Sale of noncontrolling interests, net			15				—
Other comprehensive income			(1	)			2
At end of period			3,231				2,990
Total equity		$	17,125			$	16,065

 

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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 22    RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME

 

		Unrealized gain on marketable securities, net				Foreign currency translation adjustments				Pension and other post- retirement benefit adjustments				Changes in fair value of cash flow hedge instruments				Total
December 31, 2012		$	542			$	177			$	(276	)		$	47			$	490
Change in other comprehensive income before reclassifications			(55	)			(11	)			—				21				(45	)
Reclassifications from accumulated other comprehensive income			3				—				5				(24	)			(16	)
Net current-period other comprehensive income (loss)			(52	)			(11	)			5				(3	)			(61	)
March 31, 2013		$	490			$	166			$	(271	)		$	44			$	429

 

Details about Accumulated Other Comprehensive Income Components		Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Condensed Consolidated Statement of Income
Unrealized gain on marketable securities:
Impairment of marketable securities		$	4			Other income, net
Total before tax			4
Tax (expense) benefit			(1	)
Net of tax		$	3
Pension liability adjustments:
Amortization, net		$	8			(1)
Total before tax			8
Tax (expense) benefit			(3	)
Net of tax		$	5
Gain (loss) on hedge instruments:
Operating cash flow hedges		$	(39	)		Costs applicable to sales
Forward starting swap hedges			3			Interest expense, net
Total before tax			(36	)
Tax (expense) benefit			12
Net of tax		$	(24	)
Total reclassifications for the period, net of tax		$	(16	)

 

(1)

This accumulated other comprehensive income component is included in General and administrative and costs that benefit the inventory/production process. Refer to Note 2 in the Newmont Annual Report on Form 10-K for the year ended December 31, 2012 for information on costs that benefit the inventory/production process.

 

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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 23    NET CHANGE IN OPERATING ASSETS AND LIABILITIES

Net cash provided from operations attributable to the net change in operating assets and liabilities is composed of the following:

 

		Three Months Ended March 31,
		2013				2012
Decrease (increase) in operating assets:
Trade and accounts receivable		$	115			$	(21	)
Inventories, stockpiles and ore on leach pads			(230	)			(201	)
EGR refinery assets			308				319
Other assets			(20	)			(74	)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities			(144	)			(32	)
EGR refinery liabilities			(308	)			(319	)
Reclamation liabilities			(9	)			(28	)
		$	(288	)		$	(356	)

NOTE 24    CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The following Condensed Consolidating Financial Statements are presented to satisfy disclosure requirements of Rule 3-10(e) of Regulation S-X resulting from the inclusion of Newmont USA Limited (“Newmont USA”), a wholly-owned subsidiary of Newmont, as a co-registrant with Newmont on debt securities issued under a shelf registration statement on Form S-3 filed under the Securities Act of 1933 under which securities of Newmont (including debt securities guaranteed by Newmont USA) may be issued (the “Shelf Registration Statement”). In accordance with Rule 3-10(e) of Regulation S-X, Newmont USA, as the subsidiary guarantor, is 100% owned by Newmont, the guarantees are full and unconditional, and no other subsidiary of Newmont guaranteed any security issued under the Shelf Registration Statement. There are no restrictions on the ability of Newmont or Newmont USA to obtain funds from its subsidiaries by dividend or loan.

At December 31, 2012, errors were identified in the previously reported condensed consolidating financial statements resulting from incorrectly applying the provisions of Rule 3-10(e) of Regulation S-X related to the presentation of the financial information of its subsidiary guarantor, Newmont USA. In the previously reported information, the Company presented Newmont USA on a consolidated basis with its non-guarantor subsidiaries and under Rule 3-10 of Regulation S-X Newmont USA should have presented its investment in subsidiaries based upon its proportionate share of its non-guarantor subsidiaries’ net assets (similar to the equity method of accounting). In addition, the Company corrected the Newmont Mining Corporation column for investments in subsidiaries previously presented in the Eliminations column. The tables following the revised condensed consolidating financial statements illustrate the effects of the errors, which relate to the columns for Newmont Mining Corporation, Newmont USA, Other Subsidiaries and Eliminations, on previously reported condensed consolidating financial information for the three months ended March 31, 2012.

The errors to the Newmont USA column for the incorrect presentation resulted in no change in previously reported line items for net income attributable to Newmont and stockholders’ equity. It did however have a significant impact on the previously reported cash balance, and cash flow from operations, investing and financing activities of Newmont USA as a result of the deconsolidation of its subsidiaries and the one line proportionate accounting pick up. Further, the Other Subsidiaries column changed by corresponding adjustments and to give effect to intercompany balances to include the non-guarantor subsidiaries of Newmont USA and the Eliminations column changes as a result of the above changes. In addition, the Company corrected an error in the Newmont Mining Corporation column related to stockholders’ equity and investment in subsidiaries. This was a result of a gain associated with a partial sale of a subsidiary that was previously included in the Eliminations column. The cash flow statement in the Newmont Mining Corporation column was revised to reflect earnings from subsidiaries, net of dividends received.

 

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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 concluded these errors were not material individually or in the aggregate to any of the previously issued financial statements taken as a whole. These errors had no impact on the consolidated financial statements of Newmont or any debt covenants and had no impact on the ability of Newmont’s subsidiaries to dividend cash to Newmont. The impact of these corrections to the applicable prior year period is reflected in the revised financial information and notes below.

The Company will revise the June 30, 2012 and September 30, 2012 financial statements to reflect the revisions discussed above in the Quarterly Reports on Form 10-Q for the quarterly periods in 2013.

 

		Three Months Ended March 31, 2013
Condensed Consolidating Statement of Income		Newmont Mining Corporation				Newmont USA				Other Subsidiaries				Eliminations				Newmont Mining Corporation Consolidated
Sales		$	—			$	488			$	1,689			$	—			$	2,177
Costs and expenses
Costs applicable to sales (1)			—				220				824				—				1,044
Amortization			—				40				227				—				267
Reclamation and remediation			—				2				16				—				18
Exploration			—				8				51				—				59
Advanced projects, research and development			—				12				40				—				52
General and administrative			—				30				26				—				56
Other expense, net			—				16				84				—				100
			—				328				1,268				—				1,596
Other income (expense)
Other income, net			—				4				22				—				26
Interest income - intercompany			48				7				(2	)			(53	)			—
Interest expense - intercompany			(3	)			—				(50	)			53				—
Interest expense, net			(65	)			(2	)			2				—				(65	)
			(20	)			9				(28	)			—				(39	)
Income before income and mining tax and other items			(20	)			169				393				—				542
Income and mining tax expense			7				(50	)			(138	)			—				(181	)
Equity income (loss) of affiliates			328				115				43				(490	)			(4	)
Income from continuing operations			315				234				298				(490	)			357
Net income			315				234				298				(490	)			357
Net income attributable to noncontrolling interests			—				—				(67	)			25				(42	)
Net income attributable to Newmont stockholders		$	315			$	234			$	231			$	(465	)		$	315
Comprehensive income		$	254			$	238			$	190			$	(387	)		$	295
Comprehensive income attributable to noncontrolling interests			—				—				(66	)			25				(41	)
Comprehensive income attributable to Newmont stockholders		$	254			$	238			$	124			$	(362	)		$	254

 

(1)	Excludes Amortization and Reclamation and remediation.

 

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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)

 

		Three Months Ended March 31, 2012
Condensed Consolidating Statement of Income		Newmont Mining Corporation				Newmont USA				Other Subsidiaries				Eliminations				Newmont Mining Corporation Consolidated
Sales		$	—			$	585			$	2,098			$	—			$	2,683
Costs and expenses
Costs applicable to sales (1)			—				252				765				—				1,017
Amortization			—				36				195				—				231
Reclamation and remediation			—				2				14				—				16
Exploration			—				19				69				—				88
Advanced projects, research and development			—				12				90				—				102
General and administrative			—				19				35				—				54
Other expense, net			—				7				113				—				120
			—				347				1,281				—				1,628
Other income (expense)
Other income, net			2				8				23				—				33
Interest income - intercompany			40				8				(1	)			(47	)			—
Interest expense - intercompany			(5	)			(1	)			(41	)			47				—
Interest expense, net			(51	)			(1	)			—				—				(52	)
			(14	)			14				(19	)			—				(19	)
Income before income and mining tax and other items			(14	)			252				798				—				1,036
Income and mining tax expense			5				(69	)			(279	)			—				(343	)
Equity income (loss) of affiliates			499				241				69				(828	)			(19	)
Income from continuing operations			490				424				588				(828	)			674
Income (loss) from discontinued operations			—				—				(71	)			—				(71	)
Net income			490				424				517				(828	)			603
Net income attributable to noncontrolling interests			—				—				(148	)			35				(113	)
Net income attributable to Newmont stockholders		$	490			$	424			$	369			$	(793	)		$	490
Comprehensive income		$	496			$	425			$	504			$	(814	)		$	611
Comprehensive income attributable to noncontrolling interests			—				—				(150	)			35				(115	)
Comprehensive income attributable to Newmont stockholders		$	496			$	425			$	354			$	(779	)		$	496

 

(1)	Excludes Amortization and Reclamation and remediation.

 

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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)

 

		For the Three Months Ended March 31, 2012
		Newmont USA												Other Subsidiaries												Eliminations
Condensed Consolidating Statement of Income		As Previously Presented				Change				As Currently Presented				As Previously Presented				Change				As Currently Presented				As Previously Presented				Change				As Currently Presented
Sales		$	1,617			$	(1,032	)		$	585			$	1,066			$	1,032			$	2,098			$	—			$	—			$	—
Costs and expenses
Costs applicable to sales			563				(311	)			252				465				300				765				(11	)			11				—
Amortization			130				(94	)			36				101				94				195				—				—				—
Reclamation and remediation			11				(9	)			2				5				9				14				—				—				—
Exploration			53				(34	)			19				35				34				69				—				—				—
Advanced projects, research and development			88				(76	)			12				14				76				90				—				—				—
General and administrative			42				(23	)			19				1				34				35				11				(11	)			—
Other expense, net			47				(40	)			7				73				40				113				—				—				—
																											&nb