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 June 30, 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		80111
Greenwood Village, Colorado		(Zip Code)
(Address of Principal Executive Offices)

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 492,822,946 shares of common stock outstanding on July 18, 2013 (and 4,841,193 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			49
		Overview			49
		Selected Financial and Operating Results			51
		Consolidated Financial Results			52
		Results of Consolidated Operations			58
		Liquidity and Capital Resources			65
		Environmental			67
		Accounting Developments			68
		Non-GAAP Financial Measures			68
		Safe Harbor Statement			75
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			76
ITEM 4.		CONTROLS AND PROCEDURES			78
		PART II
ITEM 1.		LEGAL PROCEEDINGS			79
ITEM 1A.		RISK FACTORS			79
ITEM 2.		ISSUER PURCHASES OF EQUITY SECURITIES			79
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES			79
ITEM 4.		MINE SAFETY DISCLOSURES			79
ITEM 5.		OTHER INFORMATION			80
ITEM 6.		EXHIBITS			80
SIGNATURES					81
EXHIBIT INDEX					82

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PART I—FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS.

NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(unaudited, in millions except per share)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2013				2012				2013				2012
Sales (Note 3)		$	1,993			$	2,229			$	4,170			$	4,912
Costs and expenses
Costs applicable to sales (1) (Note 3)			1,653				1,002				2,697				2,019
Amortization			415				248				682				479
Reclamation and remediation (Note 4)			18				16				36				32
Exploration			76				106				135				194
Advanced projects, research and development			46				82				98				184
General and administrative			54				57				110				111
Write-downs (Note 5)			2,261				—				2,262				—
Other expense, net (Note 6)			77				126				176				246
			4,600				1,637				6,196				3,265
Other income (expense)
Other income, net (Note 7)			50				36				76				69
Interest expense, net			(70	)			(71	)			(135	)			(123	)
			(20	)			(35	)			(59	)			(54	)
Income (loss) before income and mining tax and other items			(2,627	)			557				(2,085	)			1,593
Income and mining tax benefit (expense) (Note 8)			325				(175	)			144				(518	)
Equity loss of affiliates			(3	)			(11	)			(7	)			(30	)
Income (loss) from continuing operations			(2,305	)			371				(1,948	)			1,045
Income (loss) from discontinued operations (Note 9)			74				—				74				(71	)
Net income (loss)			(2,231	)			371				(1,874	)			974
Net loss (income) attributable to noncontrolling interests (Note 10)			212				(92	)			170				(205	)
Net income (loss) attributable to Newmont stockholders		$	(2,019	)		$	279			$	(1,704	)		$	769
Net income (loss) attributable to Newmont stockholders:
Continuing operations		$	(2,093	)		$	279			$	(1,778	)		$	840
Discontinued operations			74				—				74				(71	)
		$	(2,019	)		$	279			$	(1,704	)		$	769
Income (loss) per common share (Note 11)
Basic:
Continuing operations		$	(4.21	)		$	0.56			$	(3.58	)		$	1.69
Discontinued operations			0.15				—				0.15				(0.14	)
		$	(4.06	)		$	0.56			$	(3.43	)		$	1.55
Diluted:
Continuing operations		$	(4.21	)		$	0.56			$	(3.58	)		$	1.67
Discontinued operations			0.15				—				0.15				(0.14	)
		$	(4.06	)		$	0.56			$	(3.43	)		$	1.53
Cash dividends declared per common share		$	0.35			$	0.35			$	0.775			$	0.70

 

(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 (LOSS)

(unaudited, in millions)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Net income (loss)		$	(2,231	)		$	371			$	(1,874	)		$	974
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities, net of $(77), $18, $(115) and $(5) tax benefit and (expense), respectively			(227	)			(273	)			(279	)			(313	)
Foreign currency translation adjustments			(10	)			(10	)			(22	)			—
Change in pension and other post-retirement benefits, net of $3, $2, $8 and $4 tax benefit, respectively			6				4				11				8
Change in fair value of cash flow hedge instruments, net of $(130), $8, $(145) and $(18) tax benefit and (expense), respectively
Net change from periodic revaluations			(258	)			4				(237	)			73
Net amount reclassified to income			(11	)			(24	)			(35	)			(59	)
Net unrecognized gain (loss) on derivatives			(269	)			(20	)			(272	)			14
Other comprehensive income (loss)			(500	)			(299	)			(562	)			(291	)
Comprehensive income (loss)		$	(2,731	)		$	72			$	(2,436	)		$	683
Comprehensive income (loss) attributable to:
Newmont stockholders		$	(2,519	)		$	(18	)		$	(2,265	)		$	478
Noncontrolling interests			(212	)			90				(171	)			205
		$	(2,731	)		$	72			$	(2,436	)		$	683

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)

 

		Six Months Ended
		June 30,
		2013				2012
Operating activities:
Net income (loss)		$	(1,874	)		$	974
Adjustments:
Amortization			682				479
Stock based compensation and other non-cash benefits			38				36
Reclamation and remediation			36				32
Loss (income) from discontinued operations			(74	)			71
Write-downs			2,262				—
Impairment of marketable securities			11				32
Deferred income taxes			(519	)			12
Gain on asset sales, net			(1	)			(10	)
Other operating adjustments and write-downs			632				106
Net change in operating assets and liabilities (Note 24)			(461	)			(768	)
Net cash provided from continuing operations			732				964
Net cash used in discontinued operations			(11	)			(8	)
Net cash provided from operations			721				956
Investing activities:
Additions to property, plant and mine development			(1,120	)			(1,578	)
Acquisitions, net			(13	)			(22	)
Sale of marketable securities			1				106
Purchases of marketable securities			(1	)			(196	)
Proceeds from sale of other assets			49				13
Other			(21	)			(37	)
Net cash used in investing activities			(1,105	)			(1,714	)
Financing activities:
Proceeds from debt, net			987				3,343
Repayment of debt			(534	)			(1,941	)
Payment of conversion premium on debt			—				(172	)
Proceeds from stock issuance, net			2				15
Sale of noncontrolling interests			32				—
Acquisition of noncontrolling interests			(10	)			—
Dividends paid to noncontrolling interests			(2	)			(3	)
Dividends paid to common stockholders			(385	)			(347	)
Other			(3	)			(1	)
Net cash provided from financing activities			87				894
Effect of exchange rate changes on cash			(16	)			1
Net change in cash and cash equivalents			(313	)			137
Cash and cash equivalents at beginning of period			1,561				1,760
Cash and cash equivalents at end of period		$	1,248			$	1,897

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 June 30,				At December 31,
		2013				2012
ASSETS
Cash and cash equivalents		$	1,248			$	1,561
Trade receivables			257				283
Accounts receivable			289				577
Investments (Note 16)			628				86
Inventories (Note 17)			803				796
Stockpiles and ore on leach pads (Note 18)			738				786
Deferred income tax assets			215				195
Other current assets (Note 19)			844				1,661
Current assets			5,022				5,945
Property, plant and mine development, net			16,244				18,010
Investments (Note 16)			485				1,446
Stockpiles and ore on leach pads (Note 18)			2,729				2,896
Deferred income tax assets			1,188				481
Other long-term assets (Note 19)			808				872
Total assets		$	26,476			$	29,650
LIABILITIES
Debt (Note 20)		$	48			$	10
Accounts payable			551				657
Employee-related benefits			261				339
Income and mining taxes			60				51
Other current liabilities (Note 21)			1,278				2,084
Current liabilities			2,198				3,141
Debt (Note 20)			6,726				6,288
Reclamation and remediation liabilities (Note 4)			1,471				1,457
Deferred income tax liabilities			806				858
Employee-related benefits			598				586
Other long-term liabilities (Note 21)			439				372
Total liabilities			12,238				12,702
Commitments and contingencies (Note 26)
EQUITY
Common stock			789				787
Additional paid-in capital			8,431				8,330
Accumulated other comprehensive income (loss)			(71	)			490
Retained earnings			2,077				4,166
Newmont stockholders’ equity			11,226				13,773
Noncontrolling interests			3,012				3,175
Total equity			14,238				16,948
Total liabilities and equity		$	26,476			$	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 June 30, 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(Loss). 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 organizational changes that moved the Indonesia operations to a separately managed region and moved the Hope Bay segment to Corporate and Other. 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)
Three Months Ended June 30, 2013
Nevada		$	558			$	276			$	60			$	28			$	181
La Herradura			71				42				7				15				8
Other North America			—				—				—				—				(2	)
North America			629				318				67				43				187
Yanacocha			420				197				97				10				87
Conga			—				—				—				—				(1	)
Other South America			—				—				—				5				(6	)
South America			420				197				97				15				80
Boddington:
Gold			249				252				59
Copper			49				62				14
Total			298				314				73				—				(2,161	)
Other Australia/New Zealand			332				263				58				12				(175	)
Australia/New Zealand			630				577				131				12				(2,336	)
Batu Hijau:
Gold			15				63				13
Copper			99				413				81
Total			114				476				94				5				(477	)
Other Indonesia			—				—				—				—				(1	)
Indonesia			114				476				94				5				(478	)
Ahafo			200				85				20				11				79
Akyem			—				—				—				2				(2	)
Other Africa			—				—				—				5				(8	)
Africa			200				85				20				18				69
Corporate and Other			—				—				6				29				(149	)
Consolidated		$	1,993			$	1,653			$	415			$	122			$	(2,627	)

 

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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 June 30, 2012
Nevada		$	571			$	258			$	47			$	43			$	217
La Herradura			93				33				6				11				46
Other North America			—				—				—				1				(2	)
North America			664				291				53				55				261
Yanacocha			614				177				62				18				333
Conga			—				—				—				12				(12	)
Other South America			—				—				—				19				(19	)
South America			614				177				62				49				302
Boddington:
Gold			264				157				49
Copper			42				38				12
Total			306				195				61				2				37
Other Australia/New Zealand			331				182				35				22				88
Australia/New Zealand			637				377				96				24				125
Batu Hijau:
Gold			18				11				3
Copper			88				70				14
Total			106				81				17				7				(16	)
Other Indonesia			—				—				—				—				4
Indonesia			106				81				17				7				(12	)
Ahafo			208				76				16				11				100
Akyem			—				—				—				5				(5	)
Other Africa			—				—				—				3				(2	)
Africa			208				76				16				19				93
Corporate and Other			—				—				4				34				(212	)
Consolidated		$	2,229			$	1,002			$	248			$	188			$	557

 

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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)
Six Months Ended June 30, 2013
Nevada		$	1,128			$	548			$	119			$	53			$	390			$	7,822			$	243
La Herradura			161				82				13				21				45				479				64
Other North America			—				—				—				1				(5	)			68				—
North America			1,289				630				132				75				430				8,369				307
Yanacocha			875				355				167				23				282				2,977				89
Conga			—				—				—				1				—				1,700				161
Other South America			—				—				—				10				(12	)			122				37
South America			875				355				167				34				270				4,799				287
Boddington:
Gold			578				426				101
Copper			114				110				24
Total			692				536				125				—				(2,047	)			2,334				54
Other Australia/New Zealand			724				495				104				24				(82	)			1,639				83
Australia/New Zealand			1,416				1,031				229				24				(2,129	)			3,973				137
Batu Hijau:
Gold			26				70				15
Copper			169				460				90
Total			195				530				105				11				(481	)			3,388				56
Other Indonesia			—				—				—				—				2				4				—
Indonesia			195				530				105				11				(479	)			3,392				56
Ahafo			395				151				37				24				175				1,545				116
Akyem			—				—				—				5				(7	)			1,159				159
Other Africa			—				—				—				8				(11	)			1				—
Africa			395				151				37				37				157				2,705				275
Corporate and Other			—				—				12				52				(334	)			3,238				7
Consolidated		$	4,170			$	2,697			$	682			$	233			$	(2,085	)		$	26,476			$	1,069

 

(1)	Includes a decrease in accrued capital expenditures of $51; consolidated capital expenditures on a cash basis were $1,120.

 

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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)

 

		Sales				Costs Applicable to Sales				Amortization				Advanced Projects and Exploration				Pre-Tax Income (Loss)				Total Assets				Capital Expenditures(1)
Six Months Ended June 30, 2012
Nevada		$	1,294			$	525			$	100			$	77			$	586			$	7,280			$	370
La Herradura			186				65				11				17				91				353				29
Other North America			—				—				—				1				(4	)			95				—
North America			1,480				590				111				95				673				7,728				399
Yanacocha			1,208				338				112				35				682				2,775				243
Conga			—				—				—				39				(39	)			1,462				342
Other South America			—				—				—				44				(44	)			24				20
South America			1,208				338				112				118				599				4,261				605
Boddington:
Gold			562				294				81
Copper			103				68				18
Total			665				362				99				5				180				4,640				52
Other Australia/New Zealand			758				372				72				43				273				1,949				137
Australia/New Zealand			1,423				734				171				48				453				6,589				189
Batu Hijau:
Gold			52				30				6
Copper			260				155				30
Total			312				185				36				14				32				3,651				61
Other Indonesia			—				—				—				—				3				5				8
Indonesia			312				185				36				14				35				3,656				69
Ahafo			489				172				40				22				250				1,328				108
Akyem			—				—				—				9				(10	)			750				189
Other Africa			—				—				—				5				(4	)			9				—
Africa			489				172				40				36				236				2,087				297
Corporate and Other			—				—				9				67				(403	)			4,339				17
Consolidated		$	4,912			$	2,019			$	479			$	378			$	1,593			$	28,660			$	1,576

 

(1)	Includes a decrease in accrued capital expenditures of $2; consolidated capital expenditures on a cash basis were $1,578.

 

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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 June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Accretion - operating			15				13				30				27
Accretion - non-operating			3				3				6				5
		$	18			$	16			$	36			$	32

At June 30, 2013 and December 31, 2012, $1,360 and $1,341, respectively, were accrued for reclamation obligations relating to operating 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 June 30, 2013 and December 31, 2012, $188 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:

 

		Six Months Ended June 30,
		2013				2012
Balance at beginning of period		$	1,539			$	1,240
Additions, changes in estimates and other			(3	)			105
Liabilities settled			(24	)			(41	)
Accretion expense			36				32
Balance at end of period		$	1,548			$	1,336

The current portion of Reclamation and remediation liabilities of $77 and $82 at June 30, 2013 and December 31, 2012, respectively, are included in Other current liabilities (see Note 21).

NOTE 5    WRITE-DOWNS

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Property, plant and mine development
Yanacocha		$	—			$	—			$	1			$	—
Boddington			2,107				—				2,107				—
Other Australia/New Zealand			66				—				66				—
Batu Hijau			1				—				1				—
			2,174				—				2,175				—
Other long-term assets
Boddington			31				—				31				—
Other Australia/New Zealand			56				—				56				—
			87				—				87				—
		$	2,261			$	—			$	2,262			$	—

Write-downs totaled $2,261 and $2,262 for the three and six months ended June 30, 2013, respectively. The 2013 write-down was primarily due to a decrease in the Company’s long-term gold and copper price assumptions to $1,400 per ounce and $3.00 per pound, respectively, combined with rising operating costs. These factors represented significant changes in the business, requiring the Company to evaluate for impairment. For purposes of this evaluation, estimates of future cash flows of the individual reporting units were used to determine fair value. The estimated cash flows were derived from life-of-mine plans, developed using long-term pricing reflective of the current price environment and management’s projections for operating costs. Refer to Note 14 for additional information.

 

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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)

 

Due to the above conditions, Goodwill was included in the Company’s impairment analysis. After-tax discounted future cash flows of reporting units with Goodwill were analyzed. Goodwill at Other Australia / New Zealand had a carrying value of $188 at December 31, 2012. As a result of this evaluation, the Company recorded an impairment of $56, resulting in a carrying value of $132 at June 30, 2013.

NOTE 6    OTHER EXPENSE, NET

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Transaction costs		$	—			$	12			$	45			$	12
Regional administration			18				29				36				50
Restructuring and other			21				—				30				—
Community development			17				20				30				51
Western Australia power plant			7				4				11				8
Hope Bay care and maintenance			—				52				(2	)			102
Other			14				9				26				23
		$	77			$	126			$	176			$	246

NOTE 7    OTHER INCOME, NET

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Foreign currency exchange, net		$	40			$	12			$	37			$	(3	)
Canadian Oil Sands			11				11				21				20
Development projects, net			7				19				8				33
Refinery income, net			4				2				7				7
Interest			2				2				6				7
Gain on asset sales, net			—				—				1				10
Reduction of allowance for loan receivable			—				—				—				21
Impairment of marketable securities			(7	)			(8	)			(11	)			(32	)
Derivative ineffectiveness, net			(3	)			(2	)			—				—
Other			(4	)			—				7				6
		$	50			$	36			$	76			$	69

 

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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    INCOME AND MINING TAXES

During the second quarter of 2013, the Company recorded an estimated income and mining tax benefit of $325, resulting in an effective tax rate of 12%. Estimated income and mining tax expense during the second quarter of 2012 was $175 for an effective tax rate of 32%. The lower effective tax rate on the loss in the second quarter of 2013 is a result of the significant decrease in pretax income resulting in a dilution to the impact of percentage depletion and an increase in the Company’s valuation allowance on certain deferred tax assets.

During the first half of 2013, the estimated income and mining tax benefit was $144, resulting in an effective tax rate of 7%. Estimated income and mining tax expense during the first half of 2012 was $518 for an effective tax rate of 33%. The lower effective tax rate on the loss in the first six months of 2013 is primarily due to the result of the significant decrease in pretax income resulting in a dilution to the impact of percentage depletion and an increase in the Company’s valuation allowance on certain deferred tax assets.

A valuation allowance is provided for those deferred tax assets for which it is more likely than not that the related benefits will not be realized. In determining the amount of the valuation allowance, each quarter the Company considers estimated future taxable income as well as feasible tax planning strategies in each jurisdiction to determine if the deferred tax assets are realizable. If it is determined that the Company will not realize all or a portion of its deferred tax assets, it will place or increase a valuation allowance. Conversely, if determined that it will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced.

On the basis of available information at June 30, 2013, including the decrease in the Company’s long-term commodity price assumptions, rising operating cost, and decrease in equity value, the Company concluded that it would not be able to realize the benefit from some of its deferred tax assets; as a result, the Company recorded a significant increase in its valuation allowance. This increase consists of $535 related to U.S. foreign and alternative minimum tax credits and $150 related to stockpile impairments.

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 June 30,																Six Months Ended June 30,
		2013								2012								2013								2012
Income (loss) before income and mining tax and other items						$	(2,627	)						$	557							$	(2,085	)						$	1,593
Tax at statutory rate			35	%		$	(919	)			35	%		$	195				35	%		$	(730	)			35	%		$	558
Reconciling items:
Percentage depletion			2	%			(52	)			(6	)%			(34	)			4	%			(93	)			(7	)%			(108	)
Change in valuation allowance on deferred tax assets			(26	)%			685				2	%			13				(33	)%			691				3	%			46
Other			1	%			(39	)			1	%			1				1	%			(12	)			2	%			22
Income and mining tax expense (benefit)			12	%		$	(325	)			32	%		$	175				7	%		$	(144	)			33	%		$	518

 

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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 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 June 30, 2013, the Company’s total unrecognized tax benefit was $391 for uncertain income tax positions taken or expected to be taken on income tax returns. Of this, $44 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 $5 to $10 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 9    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 half of 2013, the Company recorded a benefit from discontinued operations of $74, net of tax expense of $34, related to a decline in the gold spot price and an increase in discount rates. During the first half of 2012, the Company recorded a $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 $11 and $8 in the first half of 2013 and 2012 relates to payments on the Holt property royalty.

NOTE 10    NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Minera Yanacocha		$	26			$	97			$	83			$	195
TMAC			(2	)			—				(14	)			—
Batu Hijau			(238	)			(5	)			(241	)			8
Other			2				—				2				2
		$	(212	)		$	92			$	(170	)		$	205

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 an affiliate of Sumitomo Corporation of Japan and various Indonesian entities. 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 11    INCOME (LOSS) PER COMMON SHARE

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

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Net income (loss) attributable to Newmont stockholders
Continuing operations		$	(2,093	)		$	279			$	(1,778	)		$	840
Discontinued operations			74				—				74				(71	)
		$	(2,019	)		$	279			$	(1,704	)		$	769
Weighted average common shares (millions):
Basic			497				496				497				496
Effect of employee stock-based awards			—				1				—				1
Effect of convertible notes			—				1				—				5
Diluted			497				498				497				502
Income (loss) per common share
Basic:
Continuing operations		$	(4.21	)		$	0.56			$	(3.58	)		$	1.69
Discontinued operations			0.15				—				0.15				(0.14	)
		$	(4.06	)		$	0.56			$	(3.43	)		$	1.55
Diluted:
Continuing operations		$	(4.21	)		$	0.56			$	(3.58	)		$	1.67
Discontinued operations			0.15				—				0.15				(0.14	)
		$	(4.06	)		$	0.56			$	(3.43	)		$	1.53

Options to purchase 4 and 2 million shares of common stock at average exercise prices of $48 and $58 were outstanding at June 30, 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.

Other outstanding options to purchase 1 million shares of common stock were not included in the computation of diluted weighted average common shares in the second quarter and first half of 2013 because their effect would have been anti-dilutive.

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 12    EMPLOYEE PENSION AND OTHER BENEFIT PLANS

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Pension benefit costs, net
Service cost		$	9			$	8			$	18			$	15
Interest cost			10				11				20				21
Expected return on plan assets			(13	)			(11	)			(25	)			(22	)
Amortization, net			10				8				18				14
		$	16			$	16			$	31			$	28
		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Other benefit costs, net
Service cost		$	1			$	—			$	2			$	1
Interest cost			2				2				3				3
		$	3			$	2			$	5			$	4

NOTE 13    STOCK BASED COMPENSATION

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Stock options		$	2			$	3			$	5			$	7
Restricted stock units			7				6				16				11
Performance leveraged stock units			2				3				4				6
Strategic stock units			3				1				3				1
		$	14			$	13			$	28			$	25

NOTE 14    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 June 30, 2013
		Total				Level 1				Level 2				Level 3
Assets:
Cash equivalents		$	32			$	32			$	—			$	—
Marketable equity securities:
Extractive industries			979				979				—				—
Other			4				4				—				—
Marketable debt securities:
Asset backed commercial paper			22				—				—				22
Corporate			13				—				13				—
Auction rate securities			4				—				—				4
Trade receivable from provisional copper and gold concentrate sales, net			139				139				—				—
		$	1,193			$	1,154			$	13			$	26
Liabilities:
Derivative instruments, net:
Foreign exchange forward contracts		$	168			$	—			$	168			$	—
Diesel forward contracts			3				—				3				—
Boddington contingent consideration			28				—				—				28
Holt property royalty			121				—				—				121
		$	320			$	—			$	171			$	149

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 15). 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. Therefore, the investments are classified as 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 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 six months ended June 30, 2013:

 

Description		At June 30, 2013				Valuation technique		Unobservable input		Range/Weighted average
Auction Rate Securities		$	4			Discounted cash flow		Weighted average recoverability rate			58	%
Asset Backed Commercial Paper			22			Discounted cash flow		Recoverability rate			72-88	%
Boddington Contingent Consideration			28			Monte Carlo		Discount rate			5	%
								Long Term Gold price		$	1,400
								Long Term Copper price		$	3.00
Holt property royalty			121			Monte Carlo		Weighted average discount rate			5	%
								Long Term Gold price		$	1,400

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 six months ended June 30, 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
Unrealized loss			(1	)			—				(1	)			—				—				—
Settlements			—				—				—				(13	)			(11	)			(24	)
Revaluation			—				3				3				—				(108	)			(108	)
Balance at end of period		$	4			$	22			$	26			$	28			$	121			$	149

At June 30, 2013, assets and liabilities classified within Level 3 of the fair value hierarchy represent 2% and 47%, respectively, of total assets and liabilities measured at fair value.

 

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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 June 30, 2013, Newmont recorded write-downs related to Property, plant and equipment, net. (See Note 5). The following table provides information related to assets that were measured at fair value on a nonrecurring basis after initial recognition during the six months ended June 30, 2013:

 

						Fair Value Measurement Using
Description		At June 30, 2013				Level 1				Level 2				Level 3				Total loss
Property, Plant and Mine Development, net		$	16,244				—				—			$	16,244			$	2,175
Goodwill			132				—				—				132				56
Intangible Assets			104				—				—				104				31
		$	16,480			$	—			$	—			$	16,480			$	2,262

The estimated fair values of Property, plant and mine development, net, Goodwill and Intangible assets were determined using the discounted cash flow approach. The value is classified within Level 3 of the fair value hierarchy.

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 nonrecurring Level 3 financial assets at June 30, 2013:

 

Description		At June 30, 2013				Valuation technique		Unobservable input		Range/Weighted       average
Property, plant and mine development, net		$	16,244			Discounted cash flow		Discount rate			4.25	%
								Long Term Gold Price		$	1,400
								Long Term Copper price		$	3.00
								Long Term Exchange rate A$/US$			0.935
Goodwill and Intangible assets			161			Discounted cash flow		Discount rate			3.75-4.25	%
								Long Term Gold Price		$	1,400
								Long Term Copper price		$	3.00
								Long Term Exchange rate A$/US$			0.935

NOTE 15    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 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(loss) 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.

 

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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)

 

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.

Newmont had the following foreign currency derivative contracts outstanding at June 30, 2013:

 

		Expected Maturity Date
																										Total/
		2013				2014				2015				2016				2017				2018				Average
A$ Operating Fixed Forward Contracts:
A$ notional (millions)			656				1,117				847				564				273				44				3,501
Average rate ($/A$)			0.95				0.93				0.92				0.92				0.91				0.89				0.93
Expected hedge ratio			83	%			67	%			51	%			33	%			17	%			7	%
NZ$ Operating Fixed Forward Contracts:
NZ$ notional (millions)			40				50				10				—				—				—				100
Average rate ($/NZ$)			0.80				0.80				0.79				—				—				—				0.80
Expected hedge ratio			63	%			41	%			16	%			—				—				—

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 June 30, 2013:

 

		Expected Maturity Date
																		Total/ Average
		2013				2014				2015				2016
Diesel Fixed Forward Contracts:
Diesel gallons (millions)			14				21				10				2				47
Average rate ($/gallon)			2.90				2.87				2.77				2.70				2.85
Expected hedge ratio			65	%			49	%			25	%			7	%

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 (loss). 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)

 

Derivative Instrument Fair Values

Newmont had the following derivative instruments designated as hedges at June 30, 2013 and December 31, 2012:

 

		Fair Value
		At June 30, 2013
		Other Current Assets				Other Long- Term Assets				Other Current Liabilities				Other Long- Term Liabilities
Foreign currency exchange contracts:
A$ operating fixed forwards		$	16			$	16			$	64			$	133
NZ$ operating fixed forwards			—				—				2				1
Diesel fixed forwards			—				—				2				1
Total derivative instruments (Notes 19 and 21)		$	16			$	16			$	68			$	135
		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 (Notes 19 and 21)		$	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 Swap Contracts
		2013				2012				2013				2012				2013				2012
For the three months ended June 30,
Cash flow hedging relationships:
Gain (loss) recognized in other comprehensive income(loss) (effective portion)		$	(386	)		$	23			$	(6	)		$	(16	)		$	—			$	—
Gain (loss) reclassified from Accumulated other comprehensive income into income(loss) (effective portion) (1)			22				38				(4	)			1				(6	)			(3	)
Gain (Loss) reclassified from Accumulated other comprehensive income into income (ineffective portion) (2)			—				—				(3	)			—				—				—
For the six months ended June 30,
Cash flow hedging relationships:
Gain (loss) recognized in other comprehensive income(loss) (effective portion)		$	(368	)		$	85			$	(4	)		$	(4	)		$	—			$	36
Gain (loss) reclassified from Accumulated other comprehensive income into income(loss) (effective portion) (1)			60				85				—				4				(9	)			(4	)
Gain (loss) reclassified from Accumulated other comprehensive income into income(loss) (ineffective portion) (2)			—				—				—				—				—				2

 

(1)	The gain (loss) recognized for the effective portion of cash flow hedges is included in Cost Applicable to Sales, Write-downs and Interest expense, net.

(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(loss), net of tax to income for derivative instruments during the next 12 months is a loss of approximately $46.

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 $3.25 per pound during the three months ended June 30, 2013, compared with the Company’s recorded average provisional price of $3.22 per pound before mark-to-market adjustments and treatment and refining charges. LME copper prices averaged $3.42 per pound during the six months ended June 30, 2013, compared with the Company’s recorded average provisional price of $3.38 per pound before mark-to-market adjustments and treatment and refining charges. During the three and six months ended June 30, 2013, changes in copper prices resulted in a provisional pricing mark-to-market loss of $15 ($0.27 per pound) and loss of $24 ($0.25 per pound), respectively. At June 30, 2013, Newmont had copper sales of 54 million pounds priced at an average of $3.07 per pound, subject to final pricing over the next several 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 average London P.M. fix for gold was $1,415 per ounce during the three months ended June 30, 2013, compared with the Company’s recorded average provisional price of $1,408 per ounce before mark-to-market adjustments and treatment and refining charges. The average London P.M. fix for gold was $1,523 per ounce during the six months ended June 30, 2013, compared to the Company’s recorded average provisional price of $1,517 per ounce before mark-to-market adjustments and treatment and refining charges. During the three and six months ended June 30, 2013, changes in gold prices resulted in a provisional pricing mark-to-market loss of $24 ($18 per ounce) and loss of $22 ($9 per ounce), respectively. At June 30, 2013, Newmont had gold sales of 88,000 ounces priced at an average of $1,192 per ounce, subject to final pricing over the next several months.

NOTE 16    INVESTMENTS

 

		At June 30, 2013
		Cost/Equity				Unrealized								Fair/Equity
		Basis				Gain				Loss				Basis
Current:
Marketable Equity Securities:
Canadian Oil Sands Ltd.		$	293			$	279			$	—			$	572
Paladin Energy Ltd.			60				—				(17	)			43
Other			15				3				(5	)			13
		$	368			$	282			$	(22	)		$	628
Long-term:
Marketable Debt Securities:
Asset backed commercial paper		$	24			$	—			$	(2	)		$	22
Auction rate securities			7				—				(3	)			4
Corporate			13				—				—				13
			44				—				(5	)			39
Marketable Equity Securities:
Gabriel Resources Ltd.			74				—				(7	)			67
Regis Resources Ltd.			166				91				—				257
Other			44				2				(15	)			31
			284				93				(22	)			355
Other investments, at cost			13				—				—				13
Investment in Affiliates:
Euronimba Ltd.			3				—				—				3
Minera La Zanja S.R.L.			75				—				—				75
		$	419			$	93			$	(27	)		$	485

 

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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 December 31, 2012
		Cost/Equity				Unrealized								Fair/Equity
		Basis				Gain				Loss				Basis
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

Subsequent to June 30, 2013, on July 8, 2013, the Company sold its investment in Canadian Oil Sands Trust for approximately C$608, resulting in a pretax gain of approximately $300 to be recorded in Other income, net.

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 June 30, 2013		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Marketable equity securities		$	143			$	44			$	—			$	—			$	143			$	44
Asset backed commercial paper			—				—				22				2				22				2
Auction rate securities			—				—				4				3				4				3
		$	143			$	44			$	26			$	5			$	169			$	49
		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

 

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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)

 

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 17    INVENTORIES

 

		At June 30, 2013				At December 31, 2012
In-process		$	110			$	143
Concentrate			153				152
Precious metals			29				31
Materials, supplies and other			511				470
		$	803			$	796

The Company recorded write-downs of $12 and $3, classified as components of Costs applicable to sales and Amortization, respectively, for the first half of 2013, to reduce the carrying value of inventories to net realizable value. Of the write-downs in 2013, $1 is related to Nevada, $7 to Boddington, $1 to Other Australia/New Zealand and $6 to Batu Hijau.

NOTE 18    STOCKPILES AND ORE ON LEACH PADS

 

		At June 30, 2013				At December 31, 2012
Current:
Stockpiles		$	517			$	602
Ore on leach pads			221				184
		$	738			$	786
Long-term:
Stockpiles		$	2,475			$	2,514
Ore on leach pads			254				382
		$	2,729			$	2,896

 

		At June 30, 2013				At December 31, 2012
Stockpiles and ore on leach pads:
Nevada		$	829			$	699
La Herradura			78				57
Yanacocha			504				498
Boddington			389				474
Batu Hijau			1,289				1,543
Other Australia/New Zealand			115				173
Ahafo			252				235
Akyem			11				3
		$	3,467			$	3,682

 

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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 recorded write-downs of $555 and $126, classified as components of Costs applicable to sales and Amortization, respectively, for the first half of 2013 to reduce the carrying value of stockpiles and ore on leach pads to net realizable value. The Company recorded write-downs of $22 for the first half of 2012. Of the write-downs in 2013, $83 are related to Yanacocha, $105 to Boddington, $54 to Other Australia/New Zealand and $439 to Batu Hijau. Of the write-downs in 2012, $20 are related to Other Australia/New Zealand and $2 related to Yanacocha.

NOTE 19    OTHER ASSETS

 

		At June 30, 2013				At December 31, 2012
Other current assets:
Refinery metal inventory and receivable		$	530			$	1,183
Prepaid assets			200				213
Derivative instruments