Newmont Mining
Corporation is the worlds largest gold producer with significant assets or operations in the United States, Australia, Peru, Indonesia, Canada, Uzbekistan, Bolivia, New Zealand, Ghana and Mexico. As of December 31, 2004, Newmont had proven and
probable gold reserves of 92.4 million equity ounces and an aggregate land position of approximately 51,500 square miles (133,500 square kilometers). In 2004, we derived more than 65% of our equity gold sales from politically and economically stable
countries, namely the United States, Australia and Canada. Newmont is also engaged in the production of silver, copper and zinc.
Newmont Mining Corporations original predecessor corporation was incorporated in 1921 under the laws of Delaware. On February 13, 2002, at a special
meeting of the stockholders of Newmont, stockholders approved adoption of an Agreement and Plan of Merger that provided for a restructuring of Newmont to facilitate the February 2002 acquisitions described below and to create a more flexible
corporate structure. Newmont merged with an indirect, wholly-owned subsidiary, which resulted in Newmont becoming a wholly-owned subsidiary of a new holding company. The new holding company was renamed Newmont Mining Corporation. There was no impact
to the consolidated financial statements of Newmont as a result of this restructuring and former stockholders of Newmont became stockholders of the new holding company. In this report, Newmont, the Company and we
refer to Newmont Mining Corporation and/or our affiliates and subsidiaries.
On February 16, 2002, Newmont completed the acquisition of Franco-Nevada Mining Corporation Limited, a Canadian company, pursuant to a Plan of Arrangement. On February 20, 2002, Newmont gained control of Normandy
Mining Limited, an Australian company, through an off-market bid for all of the ordinary shares of Normandy. On February 26, 2002, when Newmonts off-market bid for Normandy expired, Newmont had a relevant interest in more than 96% of
Normandys outstanding shares. Newmont exercised compulsory acquisition rights under Australian law to acquire all of the remaining shares of Normandy in April 2002. The results of operations of Normandy and Franco-Nevada have been included in
this Annual Report and Newmonts financial statements from February 16, 2002 forward.
In November 2003, Newmont completed a public offering of 25 million shares of common stock, receiving proceeds of approximately $1.0 billion.
For the years ended December 31, 2004, 2003, and 2002, Newmont had revenues of $4.52 billion, $3.16 billion, and $2.62
billion, respectively. In 2004, 2003 and 2002, Newmont had net income applicable to common shares of $434.5 million, $475.7 million and $154.3 million, respectively.
(1)
Newmonts corporate headquarters are in Denver, Colorado, USA.
(1)
All references to dollars, U.S.$, or $ in this report refer to United States currency unless otherwise specified. References to
A$ are to Australian currency, CDN$ to Canadian currency, NZD$ to New Zealand currency, IDR to Indonesian currency and CHF to Swiss currency.
For additional information, see Item 7, Managements Discussion and Analysis of Consolidated
Financial Condition and Results of Operations.
Segment Information, Export Sales, etc.
Newmont predominantly operates in a single industry, namely exploration for and production of gold and copper. Newmonts major operations are in North America, South America, Indonesia and Australia/New Zealand. Newmont also has two
significant development projects in Ghana, West Africa. Newmont also has a Merchant Banking Segment and an Exploration Segment. See Note 25 to the Consolidated Financial Statements for information relating to our business segments, our domestic and
export sales, and our customers.
Products
Gold
General.
Newmont sold
7.0 million equity ounces of gold in 2004, 7.4 million equity ounces in 2003 and 7.6 million equity ounces in 2002. References in this report to equity ounces or equity pounds mean that portion of gold or base metals,
respectively, produced, sold, or included in proven and probable reserves that is attributable to our ownership or economic interest. For the years ended December 31, 2004, 2003 and 2002, 81%, 98% and 98%, respectively, of Newmonts revenues
were attributable to gold sales.
Approximately 39% of
Newmonts equity gold sales in 2004 and 2003 came from North American operations and 61% came from overseas operations. Of Newmonts 2004 equity gold sales, approximately 22% came from Yanacocha and 7% from Indonesia. As of December 31,
2004, approximately 46% of our total long-lived assets were related to operations outside North America, with 19% of that total in Indonesia and 11% in Peru.
Most of Newmonts revenue comes from the sale of refined gold in the international market. The end product at each of Newmonts gold operations,
however, is generally doré bars. In certain limited circumstances Newmont sells doré directly to a customer, but generally, because doré is an alloy consisting mostly of gold but also containing silver, copper and other metals,
doré bars are sent to refiners to produce bullion that meets the required market standard of 99.95% pure gold. Under the terms of refining agreements, the doré bars are refined for a fee, and Newmonts share of the refined gold
and the separately-recovered silver are credited to Newmonts account or delivered to buyers, except in the case of the doré produced from Newmonts operation in Uzbekistan. Doré from that operation is refined locally and the
refined gold is physically returned to Newmont for sale in international markets.
Newmont has interests in two gold refining businesses: a 40% interest in the AGR Matthey joint venture in Australia, which is one of the worlds largest gold refineries and the largest distributor into the Asian
market; and a 50% interest in European Gold Refineries SA in Switzerland, which owns 100% of a gold refining business and 66.65% of a gold distribution business.
Gold Uses.
Gold has two main categories of useproduct fabrication and investment.
Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. Gold investors buy gold bullion, official coins and high-karat jewelry.
Gold Supply.
The worldwide supply of gold
consists of a combination of new production from mining and the draw-down of existing stocks of bullion and fabricated gold held by governments, financial institutions, industrial organizations and private individuals. In recent years, mine
production has accounted for 60% to 70% of the total annual supply of gold.
Gold Price.
The following table presents the annual high, low and average
afternoon fixing prices for gold over the past ten years, expressed in U.S. dollars per ounce on the London Bullion Market.
Year
High
Low
Average
1995
$
396
$
372
$
384
1996
$
415
$
367
$
388
1997
$
362
$
283
$
331
1998
$
313
$
273
$
294
1999
$
326
$
253
$
279
2000
$
313
$
264
$
279
2001
$
293
$
256
$
271
2002
$
349
$
278
$
310
2003
$
416
$
320
$
363
2004
$
454
$
375
$
410
2005 (through March 3, 2005)
$
435
$
411
$
424
Source
of Data: Kitco and Reuters
On March 3, 2005, the afternoon fixing price for gold on the London Bullion Market was $430.20 per ounce and the spot market price of gold on the New York
Commodity Exchange was $429.40 per ounce.
Newmont generally
sells its gold or doré at the prevailing market prices during the month in which the gold or doré is delivered to the customer. Newmont recognizes revenue from a sale when the price is determinable, the gold or doré has been
delivered, the title has been transferred to the customer and collection of the sales price is reasonably assured.
Copper
General.
At December 31, 2004, Newmont had a 52.875% economic interest (a 45% ownership interest) in the Batu Hijau mine in
Indonesia, which began production in 1999. Production at Batu Hijau is in the form of a copper/gold concentrate that is sold to smelters for smelting and refining. During 2004, Batu Hijau sold concentrates containing 378.8 million equity pounds of
copper and 396,300 equity ounces of gold. The 100% owned Golden Grove operation in Western Australia produces concentrates that contain copper, gold, lead and zinc. Golden Grove sold concentrates containing 43.5 million pounds of copper during 2004.
Except for hedged commitments (see Note 16 to the Consolidated Financial Statements), the majority of Newmonts copper production is sold under long-term contracts at market prices, and the balance on the spot market. For the years ended
December 31, 2004, 2003 and 2002, 19%, 2% and 1%, respectively, of Newmonts revenues were attributable to copper sales.
Copper Uses.
Refined copper, the final product from the treatment of concentrates, is incorporated into wire and cable
products for use in the construction, electric utility, communications and transportation industries. Copper is also used in industrial equipment and machinery, consumer products and a variety of other electrical and electronic applications and is
used to make brass. Copper substitutes include aluminum, plastics, stainless steel and fiber optics. Refined, or cathode, copper is also an internationally traded commodity.
Copper Price.
The price of copper is quoted on the London Metal Exchange in
terms of dollars per metric ton of high grade copper. The volatility of the copper market is illustrated by the following table, which shows the dollar per pound equivalent of the high, low and average prices of high grade copper on the London Metal
Exchange in each of the last ten years.
Year
High
Low
Average
1995
$
1.47
$
1.23
$
1.33
1996
$
1.29
$
0.83
$
1.04
1997
$
1.23
$
0.77
$
1.03
1998
$
0.85
$
0.65
$
0.75
1999
$
0.84
$
0.61
$
0.71
2000
$
0.91
$
0.73
$
0.82
2001
$
0.83
$
0.60
$
0.72
2002
$
0.77
$
0.64
$
0.71
2003
$
1.05
$
0.70
$
0.81
2004
$
1.49
$
1.06
$
1.30
2005 (through March 3, 2005)
$
1.54
$
1.39
$
1.46
Source
of Data: London Metal Exchange
On March 3, 2005, the closing price of high grade copper was $1.51 per pound on the London Metal Exchange.
Hedging Activities
Newmont
generally avoids gold hedging. Newmonts philosophy is to provide shareholders with leverage to changes in metal prices by selling its gold production at market prices. Newmont has, on a limited basis, entered into derivative contracts to
protect the selling price for certain anticipated gold and copper production and to manage risks associated with commodities, interest rates and foreign currencies.
At the time of Normandys acquisition, three of Normandys affiliates had substantial derivative instrument
positions. Normandy entered into gold forward sales contracts with fixed and floating gold lease rates, but did not enter into contracts that required margin calls and had no outstanding long-dated sold call options.
Following the acquisition, and in accordance with Newmonts philosophy
regarding gold hedging, the Normandy hedge positions were reduced by approximately 9.6 million ounces from February 16, 2002 to December 31, 2004. Gold forward sales contracts and other committed hedging obligations were reduced by 7.5
million ounces by delivering production into the contracts or through early close-outs. Similarly, uncommitted contracts for 2.1 million ounces were either delivered into, were allowed to lapse or were closed out early. As of December 31, 2004, the
Normandy hedge positions had been reduced to 324,750 uncommitted ounces with a negative mark-to-market valuation of $9 million.
During the year ended December 31, 2004, Newmont entered into copper option collar contracts.
For additional information, see Hedging in Item 7A, Quantitative and
Qualitative Disclosures about Market Risk, and Note 16 to the Consolidated Financial Statements.
Merchant Banking
Merchant
Banking is a reportable segment for financial reporting purposes. Merchant Banking, also referred to as Newmont Capital, manages a Royalty Portfolio, an Equity Portfolio, and a Downstream Gold Refining business, and engages in Value
Realization activities (managing interests in oil and gas, iron ore, and coal properties as well as providing in-house investment banking and advisory services).
Merchant Banking manages Newmonts Royalty Portfolio. Royalties generally offer a natural hedge
against lower gold prices by providing free cash flow from a diversified set of assets with limited operating, capital or environmental risk while retaining upside exposure to further exploration discoveries and reserve expansions. Merchant Banking
seeks to grow Newmonts royalty portfolio in a number of different ways, and looks for opportunities to acquire existing royalties from third parties or to create them in connection with transactions. Merchant Banking also identifies current
Newmont properties or exploration targets for sale if they are incompatible with our core objectives. In the case of a sale, Merchant Banking often seeks to retain royalty or other future participation rights in addition to cash or other
consideration received in the sale. Through this process, Newmont intends to continue to benefit from any discoveries made by other operators on lands on which we have a royalty, and to obtain revenues from the properties without incurring operating
or capital risk.
In 2004, Newmonts royalty interests and
investments generated $65.8 million in
Royalty and dividend income
. Newmont has royalty interests in Barrick Gold Corporations Goldstrike and Eskay Creek mines, Placer Domes Henty and Bald Mountain mines and Stillwater
Minings Stillwater and East Boulder palladium-platinum mines, among others. Newmont also has a significant oil and gas royalty portfolio in western Canada. During the year, new royalties were added through property transactions and asset
sales. A land lease program in Nevada is accelerating exploration of non-core lands with Newmont retaining royalties and future participation rights. For additional information regarding Newmonts royalty portfolio, see Item 2, Properties,
Royalty Properties, below.
As of December 31, 2004, Merchant
Bankings Equity Portfolio had a market value of approximately $0.5 billion. The Equity Portfolio is primarily composed of our investments in Kinross Gold Corporation, Canadian Oil Sands Trust and Gabriel Resources, Ltd.
Merchant Banking also manages our interests in downstream gold refining and
distribution businesses (40% interest in AGR Matthey Joint Venture (AGR) and 50% interest in European Gold Refineries (EGR)). Merchant Banking earned $2.6 million in
Equity income of affiliates
through its investments
in AGR and EGR in 2004.
Merchant Bankings Value
Realization activities include managing the reserve delineation program on our 100% owned heavy oil leases in Alberta, Canada, and advancing our other interests in coal, iron ore and natural gas.
Merchant Banking provides advisory services to Newmont to assist it in
managing its portfolio of operating and property interests. The Merchant Banking group helps Newmont maximize net asset value per share and increase cash flow, earnings and reserves by working with Newmonts exploration, operations and finance
teams to prioritize near-term goals within longer-term strategies. Merchant Banking is engaged in developing value optimization strategies for operating and non-operating assets, business development activities, potential merger and acquisition
analysis and negotiations, monetizing inactive exploration properties, capitalizing on Newmonts proprietary technology and know-how and acting as an internal resource for other corporate groups to improve and maximize business outcomes. In
2004, Merchant Bankings assistance was provided in the sale of non-core properties including Bronzewing in Australia, Perama in Greece and Midwest Uranium in Canada. In addition, Merchant Banking participated in the restructuring of Australian
Magnesium Corporation, which eliminated all remaining Newmont obligations.
A key aspect of these advisory services is assisting Newmont in extracting economies of scale with its partners and neighboring mines. Merchant Banking continues to evaluate district optimization opportunities in
Nevada, Australia and Canada, covering a broad range of alternatives, including asset exchanges, unitization, joint ventures, partnerships, sales, spinouts and buyouts.
Exploration
Exploration is a
reportable segment for financial reporting purposes. Newmonts exploration group is responsible for all activities, regardless of location, associated with the Companys world-wide efforts to discover mineralized material and
advance such mineralized material into proven and probable reserves.
Exploration work is conducted in areas surrounding our existing mines for the purpose of locating additional deposits and determining mine geology, and in
other prospective gold regions globally. Our exploration teams employ state-of-the-art technology, including airborne geophysical data acquisition systems, satellite location devices and field-portable imaging systems, as well as geochemical and
geological prospecting methods, to identify prospective targets. Newmont spent $192.4 million in 2004, $115.2 million in 2003 and $88.9 million in 2002 on
Exploration, research and development
.
As of December 31, 2004, Newmont had proven and probable reserves of 92.4
million equity ounces. As a result of exploration efforts and the assumption of a higher gold price, Newmont added 12.4 million equity ounces to proven and probable reserves in 2004, with 11.3 million ounces of depletion, divestitures and
reclassifications during the year.
In Nevada, exploration
efforts resulted in proven and probable reserves of 34.0 million equity ounces as of December 31, 2004, after depletion of 3.0 million equity ounces during 2004.
In Peru, equity gold reserves increased to 16.6 million ounces, after depletion of 2.0 million ounces and a reclassification
of 2.0 million ounces to mineralized material not in reserves at Cerro Quilish. At Minas Conga, 4.5 million equity ounces of gold and 1.1 billion equity pounds of copper were added to proven and probable reserves. Minas Conga is a development
project that currently consists of two gold-copper porphyry deposits located northeast of the Minera Yanacocha operating area in the provinces of Celendin, Cajamarca and Hualgayoc.
In Australia/New Zealand, the Company depleted 1.9 million equity ounces during 2004. Australia/New Zealand had proven and
probable reserves of 15.1 million equity ounces at December 31, 2004.
At Batu Hijau, positive mine optimization efforts resulted in proven and probable reserves of 6.3 billion equity pounds of copper and 7.2 million equity ounces of gold as of December 31, 2004, which approximated 2003 reserves,
notwithstanding depletion of approximately 450 million equity pounds of copper and 500,000 equity ounces of gold.
In addition, exploration and mine development efforts in 2004 focused on the Ahafo and Akyem projects in Ghana, substantially increasing proven and
probable reserves there by 3.0 million and 1.1 million, respectively. As of December 31, 2004, the Company reported reserves of 10.6 million ounces at Ahafo and 5.4 million equity ounces at Akyem.
For additional information, see Item 2, Properties, Proven and Probable
Reserves.
Licenses and Concessions
Other
than operating licenses for our mining and processing facilities, there are no third party patents, licenses or franchises material to Newmonts business. In many countries, however, we conduct our mining and exploration activities pursuant to
concessions granted by, or under contract with, the host government. These countries include, among others, Australia, Bolivia, Canada, Ghana, Indonesia, Peru, New Zealand, Mexico and Uzbekistan. The concessions and contracts are subject to the
political risks associated with foreign operations. See Item 1A, Risk Factors, Risks Related to Newmont Operations, below. For a more detailed description of our Indonesian Contracts of Work, see Item 2, Properties, below.
Condition of Physical Assets and Insurance
Our business is capital intensive, requiring ongoing capital investment for the replacement, modernization or expansion of equipment and facilities. For more information, see Item 7, Managements Discussion and
Analysis of Consolidated Financial Condition and Results of Operations, Liquidity and Capital Resources, below.
We maintain insurance policies against property loss and business interruption and insure against risks
that are typical in the operation of our business, in amounts that we believe to be reasonable. Such insurance, however, contains exclusions and limitations on coverage, particularly with respect to environmental liability and political risk. There
can be no assurance that claims would be paid under such insurance policies in connection with a particular event. See Item 1A, Risk Factors, Risks Related to Newmont Operations, below.
Environmental Matters
Newmonts United States mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment, including the Clean Air Act; the Clean Water Act; the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Endangered Species Act; the Federal Land Policy and Management Act; the National Environmental Policy Act; the Resource Conservation
and Recovery Act; and related state laws. These laws and regulations are continually changing and are generally becoming more restrictive. Newmonts activities outside the United States are also subject to governmental regulations for the
protection of the environment. In general, environmental regulations have not had, and are not expected to have, a material adverse impact on Newmonts operations or our competitive position.
We conduct our operations so as to protect public health and environment and
believe our operations are in compliance with applicable laws and regulations in all material respects. Each operating Newmont mine has a reclamation plan in place that meets all applicable legal and regulatory requirements. We have made, and expect
to make in the future, expenditures to comply with such laws and regulations. We have made estimates of the amount of such expenditures, but cannot precisely predict the amount of such future expenditures. Estimated future reclamation costs are
based principally on legal and regulatory requirements. At December 31, 2004, $410.3 million was accrued for reclamation costs relating to currently producing mineral properties.
Newmont is also 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. We believe that the related environmental obligations associated with these sites are similar in nature with respect to the
development of remediation plans, their risk profile and the activities required to meet general environmental standards. Based upon our best estimate of our liability for these matters, $74.9 million was accrued as of December 31, 2004 for such
obligations associated with properties previously owned or operated by Newmont or our subsidiaries. These amounts are included in
Other current liabilities
and
Reclamation and remediation liabilities.
Depending upon the ultimate
resolution of these matters, we believe that it is reasonably possible that the liability for these matters could be as much as 81% greater or 34% lower than the amount accrued as of December 31, 2004. The amounts accrued for these matters are
reviewed periodically based upon facts and circumstances available at the time. Changes in estimates are charged to costs and expenses in the period estimates are revised.
For a discussion of the most significant reclamation and remediation activities, see Item 7, Managements Discussion
and Analysis of Consolidated Financial Condition and Results of Operations, and Notes 15 and 27 to the Consolidated Financial Statements, below.
Employees
There were
approximately 14,000 people employed by Newmont and our affiliates worldwide at December 31, 2004.
Forward-Looking Statements
Certain statements contained in this report (including information incorporated by reference) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provided for under these sections. Our
forward-looking statements include, without limitation:
Statements regarding future earnings, and the sensitivity of earnings to gold and other metal prices;
Estimates of future mineral production and sales, for specific operations and on a consolidated basis;
Estimates of future production costs and other expenses, for specific operations and on a consolidated basis;
Estimates of future cash flows and the sensitivity of cash flows to gold and other metal prices;
Estimates of future capital expenditures and other cash needs, for specific operations and on a consolidated basis, and expectations as to the funding thereof;
Statements as to the projected development of certain ore deposits, including estimates of development and other capital costs, financing plans for these deposits, and expected
production commencement dates;
Estimates of future costs and other liabilities for certain environmental matters;
Estimates of reserves, and statements regarding future exploration results and reserve replacement;
Statements regarding modifications to hedge positions;
Statements regarding future transactions relating to portfolio management or rationalization efforts; and
Estimates regarding timing of future capital expenditures, production or closure activities.
Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected or implied
by those forward-looking statements. Such risks include, but are not limited to: the price of gold and copper; currency fluctuations; geological and metallurgical assumptions; operating performance of equipment, processes and facilities; labor
relations; timing of receipt of necessary governmental permits or approvals; domestic and foreign laws or regulations, particularly relating to the environment and mining; domestic and international economic and political conditions; the ability of
Newmont to obtain or maintain necessary financing; and other risks and hazards associated with mining operations. More detailed information regarding these factors is included in Item 1, Business, Item 1A, Risk Factors, and elsewhere throughout this
report. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements.
All subsequent written and oral forward-looking statements attributable to Newmont or to persons acting on its behalf are expressly qualified in their
entirety by these cautionary statements. Newmont disclaims any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable
securities laws.
Available Information
Newmont
maintains an internet web site at
www.newmont.com.
Newmont makes available, free of charge, through the Investor Information section of the web site, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, Section 16 filings and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. Newmont has provided same day access to such reports through its
web site since November 15, 2002. Newmonts Corporate Governance Guidelines, the charters of key committees of its Board of Directors and its Code of Business Ethics and Conduct are also available on the web site. Any of the foregoing
information is available in print to any stockholder who requests it by contacting Newmonts Investor Relations Department.
The Company filed with the New York Stock Exchange (NYSE) on May 24, 2004, the annual
certification by its Chief Executive Officer, certifying that, as of the date of the certification, he was not aware of any violation by the Company of the NYSEs corporate governance listing standards, as required by Section 303A.12(a) of
the NYSE Listed Company Manual. The Company has filed the required certifications under Section 302 of the Sarbanes-Oxley Act of 2002 regarding the quality of its public disclosures as Exhibits 31.1 and 31.2 to this report.
ITEM 1A. RISK FACTORS
Every investor or potential investor in Newmont should carefully consider the following risks, which have been separated into two groups:
Risks related to the mining industry generally; and
Risks related to Newmonts operations.
Risks Related to the Mining Industry Generally
A Substantial or Extended Decline in Gold or Copper Prices Would Have a Material Adverse Effect on Newmont
Newmonts business is dependent on the prices of gold and copper, which are affected by numerous factors beyond Newmonts control. Factors
tending to put downward pressure on the prices of gold and copper include:
Sales or leasing of gold by governments and central banks;
A strong U.S. dollar;
Global and regional recession or reduced economic activity;
Speculative trading;
Decreased demand for industrial uses, use in jewelry or investment;
High supply from production, disinvestment and scrap;
Sales by producers in forward transactions and other hedging transactions; and
Devaluing local currencies (relative to gold priced in U.S. dollars) leading to lower production costs and higher production in certain regions.
Any drop in the prices of gold or copper adversely impacts our revenues,
profits and cash flows, particularly in light of our philosophy of avoiding gold hedging. Newmont has recorded asset write-downs in prior years as a result of low gold prices and may experience additional asset impairments as a result of low gold or
copper prices in the future.
In addition, sustained low gold
or copper prices can:
Reduce revenues further through production cutbacks due to cessation of the mining of deposits or portions of deposits that have become uneconomic at the then-prevailing gold or
copper price;
Halt or delay the development of new projects;
Reduce funds available for exploration, with the result that depleted reserves are not replaced; and/or
Reduce existing reserves, by removing ores from reserves that cannot be economically mined or treated at prevailing prices.
Also see the discussion in Item 1, Business, Gold or Copper Price.
Gold and Copper Producers Must Continually Obtain Additional Reserves
Gold and copper producers must continually replace reserves depleted by
production. Depleted reserves must be replaced by expanding known ore bodies or by locating new deposits in order for producers to maintain production levels over the long term. Exploration is highly speculative in nature, involves many risks and
frequently is unproductive. No assurances can be given that any of our new or ongoing exploration programs will result in new mineral producing operations. Once mineralization is discovered, it may take many years from the initial phases of drilling
until production is possible, during which time the economic feasibility of production may change.
Estimates of Proven and Probable Reserves Are Uncertain
Estimates of proven and probable reserves are subject to considerable uncertainty. Such estimates are, to a large extent,
based on interpretations of geologic data obtained from drill holes and other sampling techniques. Producers use feasibility studies to derive estimates of operating costs based upon anticipated tonnage and grades of ore to be mined and processed,
the predicted configuration of the ore body, expected recovery rates of metals from the ore, comparable facility, equipment, operating costs, and other factors. Actual operating costs and economic returns on projects may differ significantly from
original estimates. Further, it may take many years from the initial phase of drilling before production is possible and, during that time, the economic feasibility of exploiting a discovery may change.
Increased Costs Could Affect Profitability
Costs at any particular mining location frequently are subject to variation
from one year to the next due to a number of factors, such as changing ore grade, metallurgy and revisions to mine plans in response to the physical shape and location of the ore body. In addition, costs are affected by the price of commodities such
as fuel and electricity. Such commodities are at times subject to volatile price movements, including increases that could make production at certain operations less profitable. A material increase in costs at any significant location could have a
significant effect on Newmonts profitability.
Mining Accidents or Other Adverse Events at a Mining Location Could Reduce Our Production Levels
At any of Newmonts operations, production may fall below historic or estimated levels as a result of mining accidents such as a pit wall failure in
an open pit mine, or cave-ins or flooding at underground mines. In addition, production may be unexpectedly reduced at a location if, during the course of mining, unfavorable ground conditions or seismic activity are encountered; ore grades are
lower than expected; the physical or metallurgical characteristics of the ore are less amenable to mining or treatment than expected; or our equipment, processes or facilities fail to operate properly or as expected.
Mining Companies Are Subject to Extensive Environmental Laws and
Regulations
Newmonts exploration, mining and
processing operations are regulated in all countries in which we operate under various federal, state, provincial and local laws relating to the protection of the environment, which generally include air and water quality, hazardous waste management
and reclamation. Delays in obtaining or failure to obtain government permits and approvals may adversely impact our operations. The regulatory environment in which Newmont operates could change in ways that would substantially increase costs to
achieve compliance, or otherwise could have a material adverse effect on Newmonts operations or financial position. For a more detailed discussion of potential environmental liabilities, see the discussion in Environmental Matters, Note 27 to
the Consolidated Financial Statements.
Our Operations Outside North America and Australia Are Subject to Risks of Doing Business Abroad
Exploration, development and production activities outside of North America and Australia are potentially subject to political and economic risks,
including:
Cancellation or renegotiation of contracts;
Disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the Foreign Corrupt Practices Act;
Changes in foreign laws or regulations;
Royalty and tax increases or claims by governmental entities, including retroactive claims;
Expropriation or nationalization of property;
Currency fluctuations (particularly in countries with high inflation);
Foreign exchange controls;
Restrictions on the ability of local operating companies to sell gold offshore for U.S. dollars, or on the ability of such companies to hold U.S. dollars or other foreign currencies
in offshore bank accounts;
Import and export regulations, including restrictions on the export of gold;
Restrictions on the ability to pay dividends offshore;
Risk of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism;
Risk of loss due to disease and other potential endemic health issues; and
Other risks arising out of foreign sovereignty over the areas in which our operations are conducted.
Consequently, Newmonts exploration, development and production activities outside of North America and Australia may
be substantially affected by factors beyond Newmonts control, any of which could materially adversely affect Newmonts financial position or results of operations. Furthermore, in the event of a dispute arising from such activities,
Newmont may be subject to the exclusive jurisdiction of courts outside North America or Australia, which could adversely affect the outcome of a dispute.
Newmont has substantial investments in Indonesia, a nation that since 1997 has undergone financial crises and devaluation of its currency, outbreaks of
political and religious violence, changes in national leadership, and the secession of East Timor, one of its former provinces. These factors heighten the risk of abrupt changes in the national policy toward foreign investors, which in turn could
result in unilateral modification of concessions or contracts, increased taxation, denial of permits or permit renewals or expropriation of assets. If this were to occur with respect to the Batu Hijau Contract of Work, Newmonts financial
condition and results of operations could be materially adversely affected.
In July 2004, a criminal complaint was filed against P.T. Newmont Minahasa Raya (PTNMR), the Newmont subsidiary that operated the Minahasa mine in Indonesia, alleging environmental pollution relating to
submarine tailings placement into nearby Buyat Bay. The Indonesian police detained five PTNMR employees during September and October of 2004. The police investigation and the detention of PTNMRs employees was declared illegal by the South
Jakarta District Court in December of 2004, and the police have appealed that decision to the Indonesian Supreme Court. A civil lawsuit, which was filed by three residents of Buyat Pante, a village located near the Minahasa mine, was settled without
payment to the plaintiffs in December 2004. In addition, on March 9, 2005, the Indonesian Ministry of the Environment reportedly filed a civil lawsuit against PTNMR and its President Director in relation to these allegations.
Independent sampling and testing of Buyat Bay water and fish, as well as area
residents, conducted by the World Health Organization and the Australian Commonwealth Scientific and Industrial Research Organization,
confirm that PTNMR has not polluted the Buyat Bay environment, and, therefore, has not adversely affected the fish in the Bay or the health of nearby
residents. The Company remains steadfast that it has not caused pollution or health problems and will continue to vigorously defend itself against these allegations. However, Newmont cannot predict the outcome of these actions or whether additional
legal actions may occur. Any of these actions could adversely affect our ability to operate in Indonesia.
During the last several years, Minera Yanacocha, of which Newmont owns a 51.35% interest, has been the target of numerous local political protests,
including ones that blocked the road between the Yanacocha mine complex and the city of Cajamarca in Peru. During September 2004, individuals from the Cajamarca region conducted a sustained blockade of the road in protest of drilling activities at
Cerro Quilish, one of the ore deposits within the Yanacocha mine complex. Yanacocha suspended all drilling activities at Cerro Quilish, and the blockade was resolved. At the request of Yanacocha, the Cerro Quilish drilling permit was revoked in
November 2004. Newmont has reassessed the challenges involved in obtaining required permits for Cerro Quilish primarily related to increased community concerns. Based upon this reassessment, Newmont has reclassified the deposits 1.98 million
equity gold ounces from proven and probable reserves to mineralized material not in reserves as of December 31, 2004. We cannot predict whether these incidents will continue, nor can we predict the governments continuing positions on foreign
investment, mining concessions, land tenure, environmental regulation or taxation. The continuation or intensification of protests or a change in prior governmental positions could adversely affect operations in Peru.
Recent violence committed by radical elements in Indonesia and other
countries, and the presence of U.S. forces in Iraq and Afghanistan, may increase the risk that operations owned by U.S. companies will be the target of further violence. If any of Newmonts operations were so targeted it could have an adverse
effect on our business.
Our Success May Depend on Our
Social and Environmental Performance
Newmonts
ability to operate successfully in communities around the world will likely depend on our ability to develop, operate and close mines in a manner that is consistent with the health and safety of our employees, the protection of the environment, and
the creation of long-term economic and social opportunities in the communities in which we operate. Newmont has implemented a management system designed to promote continuous improvement in health and safety, environmental performance and community
relations. However, our ability to operate may be adversely impacted by accidents or events detrimental (or perceived to be detrimental) to the health and safety of our employees, the environment or the communities in which we operate.
Remediation Costs for Environmental Liabilities May Exceed the
Provisions We Have Made
Newmont has conducted
extensive remediation work at two inactive sites in the United States. At one of these sites, remediation requirements have not been finally determined, and, therefore, the final cost cannot be determined. At a third site in the United States, an
inactive uranium mine and mill formerly operated by a subsidiary of Newmont, remediation work at the mill is ongoing, but remediation at the mine is subject to dispute and has not yet commenced. The environmental standards that may ultimately be
imposed at this site remain uncertain and there is a risk that the costs of remediation may exceed the provision that has been made for such remediation by a material amount.
Whenever a previously unrecognized remediation liability becomes known or a previously estimated cost is increased, the
amount of that liability or additional cost can materially reduce net income in that period.
The Use of Hedging Instruments May Prevent Gains Being Realized from Subsequent Price Increases
Newmont does not intend to enter into material new gold hedging positions and intends to continue to decrease gold hedge positions over time by
opportunistically delivering gold into our existing hedge contracts, or
by seeking to eliminate our hedge position when economically attractive. Nonetheless, Newmont currently has gold hedging positions and may, from
time-to-time, enter into hedge contracts for copper, other metals or commodities, interest rates or foreign currencies. In 2004, Newmont entered into copper hedging positions covering approximately 459 million pounds of copper. If the gold, copper
or other metal price rises above the price at which future production has been committed under these hedge instruments, Newmont will have an opportunity loss. However, if the gold, copper or other metal price falls below that committed price,
Newmonts revenues will be protected to the extent of such committed production. In addition, we may experience losses if a hedge counterparty defaults under a contract when the contract price exceeds the gold, copper or other metal price.
For a more detailed description of the Newmont hedge
positions, see the discussion in Hedging in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, and Note 16 to the Consolidated Financial Statements.
Currency Fluctuations May Affect Costs
Currency fluctuations may affect the costs that we incur at our operations. Gold is sold throughout the world based
principally on the U.S. dollar price, but a portion of Newmonts operating expenses are incurred in local currencies. The appreciation of non-U.S. dollar currencies against the U.S. dollar can increase the costs of gold production in U.S.
dollar terms at mines located outside the United States, making such mines less profitable. The currencies that primarily impact Newmonts results of operations are the Australian and Canadian dollars.
During 2004, the Australian and Canadian dollars strengthened by an average
of 13% and 7%, respectively, against the U.S. dollar. This increased U.S. dollar reported operating costs in Australia and Canada by approximately $56.6 million and $4.8 million, respectively. For additional information, see Item 7,
Managements Discussion and Analysis of Consolidated Financial Condition and Results of Operations, Results of Operations, Foreign Currency Exchange Rates, below. For a more detailed description of how currency exchange rates may affect costs,
see discussion in Foreign Currency in Item 7A, Quantitative and Qualitative Disclosures About Market Risk.
Our Level of Indebtedness May Affect Our Business
As of December 31, 2004, Newmont had debt of $1.6 billion, as compared to $1.1 billion as of December 31, 2003. Our level of indebtedness could
have important consequences for our operations, including:
Newmont may need to use a large portion of its cash flow to repay principal and pay interest on our debt, which will reduce the amount of funds available to finance our operations
and other business activities;
Newmonts debt level may make us vulnerable to economic downturns and adverse developments in Newmonts businesses and markets; and
Newmonts debt level may limit our ability to pursue other business opportunities, borrow money for operations or capital expenditures in the future or implement our business
strategy.
Newmont expects to be able to pay
principal and interest on our debt by utilizing cash flow from operations and Newmonts ability to meet these payment obligations will depend on our future financial performance, which will be affected by financial, business, economic and other
factors. Newmont will not be able to control many of these factors, such as economic conditions in the markets in which Newmont operates. Newmont cannot be certain that our future cash flow from operations will be sufficient to allow us to pay
principal and interest on our debt and meet our other obligations. If cash flow from operations is insufficient, we may be required to refinance all or part of our existing debt, sell assets, utilize existing cash balances, borrow more money or
issue additional equity. We cannot be sure that we will be able to do so on commercially reasonable terms, if at all.
Our Interest in the Batu Hijau Mine in Indonesia May Be Reduced Under the Contract of Work
Under the Batu Hijau Contract of Work with the
Indonesian government, beginning in 2005 and continuing through 2010, a portion of each foreign shareholders equity interest in the project must be offered for sale to the Indonesian government or to Indonesian nationals. The price at which
such interest must be offered for sale to the Indonesian parties is the highest of the then-current replacement cost, the price at which shares of the project company would be accepted for listing on the Jakarta Stock Exchange, or the fair market
value of such interest in the project company as a going concern. An Indonesian national currently owns a 20% interest in Batu Hijau, which would require Newmont and Sumitomo, collectively, to offer a 3% interest to the Indonesian government or to
Indonesian nationals in 2006. Pursuant to this provision of the Batu Hijau Contract of Work, it is possible that the ownership interest of the Newmont/Sumitomo partnership in Batu Hijau could be reduced to 49% by the end of 2010.
Occurrence of Events for Which We Are Not Insured May Affect Our Cash
Flow and Overall Profitability
We maintain insurance
policies to protect ourselves against certain risks related to our operations. This insurance is maintained in amounts that we believe to be reasonable depending upon the circumstances surrounding each identified risk. However, Newmont may elect not
to have insurance for certain risks because of the high premiums associated with insuring those risks or for various other reasons; in other cases, insurance may not be available for certain risks. Some concern always exists with respect to
investments in parts of the world where civil unrest, war, nationalist movements, political violence or economic crisis are possible. These countries may also pose heightened risks of expropriation of assets, business interruption, increased
taxation and a unilateral modification of concessions and contracts. Newmont does not maintain insurance policies against political risk. Occurrence of events for which Newmont is not insured may affect our cash flow and overall profitability.
Our Business Depends on Good Relations with Our
Employees
Newmont could experience labor disputes,
work stoppages or other disruptions in production that could adversely affect us. At December 31, 2004, unions represented approximately 20% of our worldwide work force. On that date, Newmont had 1,098 employees at its Carlin, Nevada operations, 211
employees in Canada at its Golden Giant operations, 2,727 employees in Indonesia at its Batu Hijau operations, 41 employees in New Zealand at its Martha operation, 325 employees in Bolivia at its Kori Kollo operation, 628 employees at its Australia
operations, and 552 employees in Peru at its Yanacocha operation, working under a collective bargaining agreement or similar labor agreement. Currently there are labor agreements in effect for all of these workers.
Our Earnings Could Be Affected by the Prices of Other Commodities
The earnings of Newmont also could be affected by the
prices of other commodities such as fuel and other consumable items, although to a lesser extent than by the price of gold or copper. The prices of these commodities are affected by numerous factors beyond Newmonts control.
Title to Some of Our Properties May Be Defective or Challenged
Although we have conducted title reviews of our
properties, title review does not necessarily preclude third parties from challenging our title. While Newmont believes that it has satisfactory title to its properties, some risk exists that some titles may be defective or subject to challenge. In
addition, certain of our Australian properties could be subject to native title or traditional landowner claims, but such claims would not deprive us of the properties. For information regarding native title or traditional landowner claims, see the
discussion under the Australia section of Item 2, Properties, below.
We compete with other mining companies to attract and retain key executives
and other employees with technical skills and experience in the mining industry. We also compete with other mining companies for rights to mine properties containing gold and other minerals. There can be no assurance that Newmont will continue to
attract and retain skilled and experienced employees, or to acquire additional rights to mine properties.
Certain Factors Outside of Our Control May Affect Our Ability to Support the Carrying Value of Goodwill
At December 31, 2004, the carrying value of our goodwill was approximately
$3.0 billion or 24% of our total assets. Such goodwill has been assigned to our Merchant Banking ($1.6 billion) and Exploration ($1.1 billion) Segments, and to various mine site reporting units ($0.3 billion in the aggregate). This goodwill arose in
connection with our February 2002 acquisitions of Normandy and Franco-Nevada, and it represents the excess of the aggregate purchase price over the fair value of the identifiable net assets of Normandy and Franco-Nevada. We evaluate, on at least an
annual basis, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. This evaluation involves a comparison of the fair value of our reporting units to
their carrying values.
Based on valuations of the Merchant
Banking and Exploration Segments, the Company concluded that the fair values significantly exceeded the respective carrying values as of December 31, 2004. The fair values of the reporting units are based in part on certain factors that may be
partially or completely outside of our control, such as the investing environment, the discovery of proven and probable reserves, commodity prices and other factors. In addition, certain of the assumptions underlying the December 31, 2004 Merchant
Banking and Exploration valuations may not be easily achieved by the Company, even though such assumptions were based on historical experience and the Company considers such assumptions to be reasonable under the circumstances.
At December 31, 2004, the $1.6 billion carrying value of the Merchant Banking
Segment goodwill represented approximately 65% of the carrying value of the total assets of the Merchant Banking Segment. The December 31, 2004 discounted cash flow analysis for the equity portfolio sub-segment of the Merchant Banking Segment
assumed: (i) a discount rate of 9%; (ii) a time horizon of ten years; (iii) pre-tax returns on investment ranging from 35% starting in 2005 and gradually declining to 15% in 2012 through 2014; (iv) an initial equity portfolio investment of
approximately $0.5 billion; (v) capital infusions of $50 million annually for the next three years; and (vi) a terminal value of approximately $2.2 billion. The December 31, 2004 discounted cash flow analysis for the royalty portfolio sub-segment of
the Merchant Banking Segment assumed: (i) a discount rate of 9%; (ii) a time horizon of ten years; (iii) an annual growth rate of 5% in the royalty portfolio; and (iv) a pre-tax rate of return on investment of 13%. The December 31, 2004 discounted
cash flow analysis for the portfolio management sub-segment of the Merchant Banking Segment assumed: (i) a discount rate of 9%; (ii) a time horizon of ten years; and (iii) a pre-tax advisory fee of 5% on approximately $0.5 billion of transactions
and value-added activities in 2005, with the dollar amount of such transactions and activities increasing by 5% annually thereafter. The December 31, 2004 discounted cash flow analysis for the value realization sub-segment of the Merchant Banking
Segment assumed: (i) a discount rate of 9%; (ii) a time horizon of ten years; and (iii) a pre-tax annual return on investments of $4.2 million. The December 31, 2004 discounted cash flow analysis assumed a combined terminal value for the royalty
portfolio, portfolio management and downstream gold refining sub-segments of approximately $0.7 billion.
At December 31, 2004, the $1.1 billion carrying value of the Exploration Segment goodwill represented approximately 98% of the carrying value of the total
assets of the Exploration Segment. Based on the review of historical additions to proven and probable reserves and on managements expectation of the growth rate and levels of reserve additions that could be expected to continue in the future,
the discounted cash flow model developed to value the Exploration Segment at December 31, 2004 assumed that (i) the Exploration Segment
would be responsible for 11.0 million ounces of additions to proven and probable reserves in 2005; (ii) such additions would increase by 5% annually; and
(iii) approximately 9.1%, 8.7%, 8.3% and 7.9% of additions in years 2005, 2006, 2007 and 2008, respectively, would represent ounces that had previously been valued in the Normandy purchase accounting. In addition, the discounted cash flow model for
the Exploration Segment assumed, among other matters: (i) a 16-year time horizon, including a seven-year time lapse between additions to proven and probable reserves and the initiation of production and a five-year production period; (ii) a discount
rate of 8%; (iii) a terminal value of approximately $5.8 billion; (iv) an average gold price of $375 per ounce during the time horizon; (v) total cash costs per ounce of $230; and (vi) capital costs of $50 per ounce. The Company believes that any
model used to value the Exploration Segment will need to take into account the relatively long time horizon required to evaluate the activities of the Exploration Segment.
In the absence of any mitigating valuation factors, the Companys failure to achieve one or more of the December 31,
2004 valuation assumptions will over time result in an impairment charge. Accordingly, no assurance can be given that significant non-cash impairment charges will not be recorded in the future due to possible declines in the fair values of our
reporting units. For a more detailed description of the estimates and assumptions involved in assessing the recoverability of the carrying value of goodwill, see Item 7, Managements Discussion and Analysis of Consolidated Financial Condition
and Results of Operations, Critical Accounting Policies, below.
Our Ability to Recognize the Benefits of Deferred Tax Assets is Dependant on Future Cash Flows and Taxable Income
The Company recognizes the expected future tax benefit from deferred tax assets when the tax benefit is considered to be more likely than not of being
realized. Otherwise, a valuation allowance is applied against deferred tax assets. Assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income. Estimates of
future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the
Company to realize the deferred tax assets recorded at the balance date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the Company operates could limit the Companys ability to obtain the future tax
benefits represented by its deferred tax assets recorded at the balance sheet date. At December 31, 2004, the Company recorded $173.6 million and $491.7 million of current and long-term deferred tax assets, respectively.
ITEM 2. PROPERTIES
Gold and Copper Processing Methods
Gold is extracted from naturally-oxidized ores by either heap leaching or milling, depending on the amount of gold contained in the ore and the amenability of the ore to treatment. Higher grade oxide ores are generally processed through
mills, where the ore is ground into a fine powder and mixed with water in slurry, which then passes through a cyanide leaching circuit. Lower grade oxide ores are generally processed using heap leaching. Heap leaching consists of stacking crushed or
run-of-mine ore on impermeable pads, where a weak cyanide solution is applied to the top surface of the heap to dissolve the gold. In both cases, the gold-bearing solution is then collected and pumped to process facilities to remove the gold by
collection on carbon or by zinc precipitation directly from leach solutions.
Gold contained in ores that are not naturally oxidized can be directly milled if the gold is amenable to cyanidization, generally known as free milling ores. Ores that are not amenable to cyanidization, known as
refractory ores, require more costly and complex processing techniques than oxide or free milling ore. Higher-grade refractory ores are processed through either roasters or autoclaves. Roasters heat finely ground ore with air and oxygen to a high
temperature, burn off the carbon and oxidize the sulfide minerals that prevent efficient leaching. Autoclaves use heat, oxygen and pressure to oxidize sulfide minerals in the ore.
Some gold-bearing sulfide ores may be processed through a flotation plant or by bio-milling. In
flotation, ore is finely ground, turned into slurry, then placed in a tank known as a flotation cell. Chemicals are added to the slurry causing the gold-containing sulfides to float in air bubbles to the top of the tank, where they can be separated
from waste particles that sink to the bottom. The sulfides are removed from the cell and converted into a concentrate that can then be processed in an autoclave or roaster to recover the gold. Bio-milling incorporates patented technology that
involves inoculation of suitable crushed ore on a leach pad with naturally occurring bacteria strains, which oxidize the sulfides over a period of time. The ore is then processed through an oxide mill.
At Batu Hijau, mined ore containing copper and gold is crushed to a coarse
size at the mine and then transported from the mine via conveyor to a concentrator. The ore is finely ground and then treated by successive stages of flotation, resulting in a concentrate of copper sulfides containing approximately 30% copper. The
concentrate is transferred by pipeline to port facilities. At the port, the concentrate is dewatered and stored for later reclaiming and loading onto ships for transport to smelters.
Newmont Properties
Production Properties
Set forth
below is a description of the significant production properties of Newmont and its subsidiaries. Total cash costs and total production costs for each operation are presented in a table in the next section of this Item 2. Total cash costs and total
production costs represent measures of performance that are not calculated in accordance with generally accepted accounting principles (GAAP). Management uses these non-GAAP financial measures to analyze the cash generating capacities
and performance of Newmonts mining operations. For a reconciliation of these non-GAAP measures to
Costs Applicable to Sales
as calculated and presented under GAAP, see Item 2, Properties, Operating Statistics.
North America
Nevada.
Newmont has been mining gold in Nevada
since 1965. Newmonts Nevada operations include Carlin, located west of the city of Elko on the geologic feature known as the Carlin Trend, the Twin Creeks mine approximately 15 miles north of Golconda, the Lone Tree Complex near the town of
Valmy, and the Midas mine near the town of the same name. Newmont also participates in the Turquoise Ridge joint venture with Placer
Dome, which utilizes mill capacity at Twin Creeks. The Phoenix gold/copper project located 10 miles south of Battle Mountain, is under construction with
production expected in mid-2006.
Gold sales from
Newmonts Nevada operations totaled approximately 2.4 million equity ounces for 2004. Ore was mined from 13 open pit mines and four underground mines in 2004. In 2005, initial production will commence at Leeville on the Carlin Trend, the first
shaft accessed mine constructed by Newmont in Nevada. Ore production is expected to begin in late 2005 with an annual production rate of 450,000 to 500,000 ounces. At Phoenix, construction commenced in 2004 for this gold/copper project. Upon
completion in mid-2006, 370,000 to 420,000 ounces of gold and 16 to 40 million pounds of copper will be produced annually.
At year-end 2004, Newmont reported 34 million equity ounces of gold reserves in Nevada. These reserves are distributed 80% at open pit mines and 20% in
underground mines. Process methods assumed over the reserve base are 74% refractory and 26% oxide. Refractory ores require more complex, higher cost processing methods. Refractory ore treatment facilities generated 66% of Nevadas gold
production in 2004, compared with 71% in 2003, and 66% in 2002. In 2005, the percentage of production from refractory treatment facilities is expected to be approximately 67%. Thereafter, the percentage of production from refractory ores is expected
to range between 69%75%.
Newmonts Nevada
operations produce gold from a variety of ore types requiring different processing techniques depending on economic and metallurgical characteristics. To schedule the best use of processing capacity, the Company uses a linear programming model to
guide the flow of both mining sequence selection and routing of ore streams to various plants. Higher-grade oxide ores are processed by conventional milling and cyanide leaching at Carlin (Mill 5), Twin Creeks (Juniper) and Lone Tree. Lower-grade
material with suitable cyanide solubility is treated on heap leach pads at Carlin, Twin Creeks and Lone Tree. Higher-grade refractory ores are processed through either a roaster at Carlin (Mill 6) or through autoclaves at Twin Creeks (Sage) and Lone
Tree. Lower-grade refractory ores are processed by a flotation plant at Lone Tree and either bio-oxidation/flotation or direct flotation at Mill 5. Ore from the Midas mine is processed by conventional milling and Merrill-Crowe zinc precipitation.
Activated carbon from the various leaching circuits is treated to produce gold ore at Carlin and Twin Creeks. Zinc precipitate at Midas is refined on-site.
Newmont owns, or controls through long-term mining leases and unpatented mining claims, all of the minerals and surface area within the boundaries of the
present Nevada mining operations (except for Turquoise Ridge and Getchell described below). The long-term leases extend for at least the anticipated mine life of those deposits. With respect to a significant portion of the Gold Quarry mine at
Carlin, Newmont owns a 10% undivided interest in the mineral rights and leases the remaining 90%, on which Newmont pays a royalty equivalent to 18% of the mineral production. The remainder of the Gold Quarry mineral rights are wholly-owned or
controlled by Newmont, in some cases subject to additional royalties. With respect to certain smaller deposits in the Winnemucca Region, Newmont is obligated to pay royalties on production to third parties that vary from 2% to 5% of production.
Newmont has a 25% interest in a joint venture with a
subsidiary of Placer Dome Inc. to operate the Turquoise Ridge and Getchell mines. Newmont has an agreement to provide up to 2,000 tons per day of milling capacity at Newmonts Twin Creeks facility to the joint venture. Placer Dome is the
operator of the joint venture for mining and ore delivery to process. Gold sales of 40,700 ounces were attributed to Newmont in 2004, based on its 25% ownership interest.
Newmont has an ore sale agreement with Barrick Goldstrike Mines to provide feed to the facilities operated by Barrick on the
Carlin Trend. The agreement provides for the sale of whole ore to Barrick. Newmont recognizes attributed gold sales net of the sale price, resulting in gold sales of 28,200 ounces in 2004.
Canada.
Newmonts Canadian operations
include two underground mines. The Golden Giant mine (100% owned) is located approximately 25 miles (40 kilometers) east of Marathon in Ontario, Canada, and has been in production since 1985. The Holloway mine is located approximately 35 miles (56
kilometers) east of Matheson
in Ontario, and about 400 miles (644 kilometers) northeast of Golden Giant, and has been in production since 1996. The Holloway mine is owned by a joint
venture in which Newmont has an 84.65% interest. The remaining 15.35% interest is held by Teddy Bear Valley Mines. In 2004, the Golden Giant mine sold 160,000 equity ounces of gold, and the Holloway mine sold 67,400 equity ounces of gold.
Mexico.
Newmont has a 44%
interest in the La Herradura mine, which is located in Mexicos Sonora desert. La Herradura is operated by Industriales Peñoles. The mine is an open pit operation with run-of-mine heap leach recovery. La Herradura sold 68,800 equity
ounces of gold in 2004.
South America
Peru.
The properties of
Minera Yanacocha S.R.L. (Yanacocha) are located approximately 375 miles (604 kilometers) north of Lima and 30 miles (48 kilometers) north of the city of Cajamarca. Yanacocha began production in 1993. Newmont holds a 51.35% interest in
Yanacocha. The remaining interests are held by Compañia de Minas Buenaventura, S.A.A. (43.65%) and the International Finance Corporation (5%).
Yanacocha has mining rights with respect to a large land position. Yanacochas mining rights were acquired through assignments of concessions granted
by the Peruvian government to a related entity. These mining concessions provide for both the right to explore and exploit. However, Yanacocha must first obtain the respective exploration and exploitation permits, which are generally granted in due
course. Yanacocha may retain mining concessions indefinitely by paying annual fees and, during exploitation, complying with production obligations or paying assessed fines. Mining concessions are freely assignable or transferable. In 2000, Newmont
and Buenaventura consolidated their land holdings in northern Peru, folding them into Yanacocha. The consolidation increased Yanacochas land position from 100 to 535 square miles.
The Yanacocha operations contain the Minas Conga deposit, for which a feasibility study was completed in 2004. Yanacocha
added 8.7 million ounces of gold (4.5 million equity ounces) and 2.2 billion pounds of copper (1.1 million equity pounds) to proven and probable reserves at Minas Conga in 2004.
Yanacocha has five separate open pit mines, Carachugo, San José, Maqui Maqui, Cerro Yanacocha and La Quinua.
Reclamation and/or backfilling activities in the mining areas of Carachugo, San José and Maqui Maqui are currently underway. Cerro Yanacocha and La Quinua are still active pits. In addition, Yanacocha has four leach pads and three processing
facilities. Yanacochas gold sales for 2004 totaled 3.04 million ounces (1.56 million equity ounces).
Cerro Quilish is one of the ore deposits within the Yanacocha complex. In July 2004, Yanacocha received a drilling permit for the Cerro Quilish deposit
and commenced drilling activities to further define the deposit. During September 2004, individuals from the Cajamarca region conducted a sustained blockade of the road between the City of Cajamarca and the mine site, in protest of these exploration
activities. Yanacocha suspended all drilling activities at Cerro Quilish and the blockade was resolved. At the request of Yanacocha, the Cerro Quilish drilling permit was revoked in November 2004. Yanacocha has reassessed the challenges involved in
obtaining required permits for Cerro Quilish primarily related to increased community concerns. Based upon this reassessment, Yanacocha has reclassified 3.9 million ounces (1.98 million equity ounces) of gold from proven and probable reserves to
mineralized material not in reserves as of December 31, 2004.
Bolivia.
The Kori Kollo open pit mine is on a high plain in northwestern Bolivia near Oruro, on government mining concessions issued to a Bolivian corporation, Empresa Minera Inti Raymi S.A.
(Inti Raymi), in which Newmont has an 88% interest. The remaining 12% is owned by Mrs. Beatriz Rocabado. Inti Raymi owns and operates the mine. In 2004, the mine sold 21,700 equity ounces of gold. Mining was completed and the mill
closed in October 2003. Production has continued from residual leaching. Inti Raymi will begin processing oxide ores on leach pads from the Kori Chaca pit and reprocessing high-grade tailings on a new leach pad in 2005.
Prior to the acquisition of Normandy, Newmont owned a 50% interest in the Pajingo mine. The remaining 50% interest in
Pajingo, and all other Australian and New Zealand properties described in this report, were acquired as part of the acquisition of Normandy in February 2002.
In Australia, mineral exploration and mining titles are granted by the individual states or territories. Mineral titles may also be subject to native
title legislation. In 1992, the High Court of Australia held that Aboriginal people who have maintained a continuing connection with their land according to their traditions and customs may hold certain rights in respect of the land, such rights
commonly referred to as native title. Since the High Courts decision, Australia has passed legislation providing for the protection of native title and established procedures for Aboriginal people to claim these rights. The fact that native
title is claimed with respect to an area, however, does not necessarily mean that native title exists, and disputes may be resolved by the courts.
Generally, under native title legislation, all mining titles granted before January 1, 1994 are valid. Titles granted between January 1, 1994 and December
23, 1996, however, may be subject to invalidation if they were not obtained in compliance with applicable legislative procedures, though subsequent legislation has validated some of these titles. After December 23, 1996, mining titles over areas
where native title is claimed to exist became subject to legislative processes that generally give native title claimants the right to negotiate with the title applicant for compensation and other conditions. Native title holders do not
have a veto over the granting of mining titles, but if agreement cannot be reached, the matter can be referred to the National Native Title Tribunal for decision.
Newmont does not expect that native title claims will have a material adverse effect on any of its operations in Australia.
The High Court of Australia determined in an August 2002 decision, which refined and narrowed the scope of native title, that native title does not subsist in minerals in Western Australia and that the rights granted under a mining title would, to
the extent inconsistent with asserted native title rights, operate to extinguish those native title rights. Generally, native title is only an issue for Newmont with respect to obtaining new mineral titles or moving from one form of title to
another, for example, from an exploration title to a mining title. In these cases, the requirements for negotiation and the possibility of paying compensation may result in delay and increased costs for mining in the affected areas. Similarly, the
process of conducting Aboriginal heritage surveys to identify and locate areas or sites of Aboriginal cultural significance can result in additional costs and delay in gaining access to land for exploration and mining-related activities.
In Australia, various ad valorem royalties are paid to state and
territorial governments, typically based on a percentage of gross revenues.
Pajingo.
The Pajingo mine is an underground mine located approximately 93 miles (150 kilometers) southwest of Townsville, Queensland and 45 miles (72 kilometers) south of the local
township of Charters Towers. Prior to the Normandy acquisition, Newmont owned a 50% interest in Pajingo. Following the Normandy acquisition, Newmont owns 100% of Pajingo. In 2004, Pajingo sold 251,400 equity ounces of gold.
Yandal.
In 2004, the Yandal operations
consisted of the Bronzewing and Jundee mines situated approximately 435 miles (700 kilometers) northeast of Perth in Western Australia. The operations sold 379,300 equity ounces of gold in 2004. Newmont owns a 100% interest in Newmont Yandal
Operations Pty Ltd, which owns and operates the Yandal mines and nearby mineral exploration licenses. The Wiluna mine, previously part of the Yandal operations, was sold in December 2003. The Bronzewing mine was sold during the third quarter of
2004.
Tanami.
The Tanami
operations include The Granites treatment plant and associated mining operations, which are located in the Northern Territory approximately 342 miles (550 kilometers) northwest of Alice Springs, adjacent to the Tanami highway, and the Dead Bullock
Soak mining operations, approximately 25 miles (40 kilometers) west of The Granites. The Tanami operations also include the Groundrush deposit. Mining at the Groundrush open pit was completed in September 2004. Processing of stockpiles will continue
through the first
quarter of 2005. The Tanami operations have been wholly-owned since April 2003, when Newmont acquired the minority interests in Newmont NFM by means of a
scheme of arrangement and buy-back offer under Australian law.
The operations are predominantly focused on the Callie underground mine at Dead Bullock Soak, with mill feed supplemented by production stockpiles from the Dead Bullock Soak open pit and Windy Hill at The Granites. Ore from all of these
operations is processed through The Granites plant with the exception of ore from Groundrush, which is processed through the Tanami plant. During 2004, the Tanami operations sold 658,000 equity ounces of gold.
Kalgoorlie.
The Kalgoorlie operations comprise
the Fimiston open pit (commonly referred to as the Super Pit) and Mt. Charlotte underground mine at Kalgoorlie-Boulder, 373 miles (600 kilometers) east of Perth. The mines are managed by Kalgoorlie Consolidated Gold Mines Pty Ltd for the joint
venture owners, Newmont and Barrick Gold Corporation, each of which holds a 50% interest. The Super Pit is Australias largest gold mine, in terms of both gold production and total annual mining volume. During 2004, the Kalgoorlie operations
sold 468,400 equity ounces of gold.
Martha.
The Martha open pit mine is located within the town of Waihi, located approximately 68 miles (110 kilometers) southeast of Auckland, New Zealand. Newmont acquired the minority interests in the Martha
mine in April 2003, giving it 100% ownership. During 2004, development commenced on the Favona underground deposit. Production from the Favona mine is scheduled for 2006. The operation sold 130,500 equity ounces of gold during 2004. The Martha mine
does not currently pay royalties. Under new royalty arrangements, a royalty will apply to the Favona mine. The royalty rate is the greater of 1% of gross revenues from gold and silver sales, or 5% of accounting profit.
Boddington.
Boddington is located 81 miles (130
kilometers) southeast of Perth in Western Australia. Boddington is owned by Newmont (44.4%), Anglo Gold Limited (33.3%) and Newcrest Mining Limited (22.2%). An updated feasibility study for the primary ore body is expected to be completed by the end
of 2005, and restructuring of current management arrangements is under discussion.
Golden Grove.
Golden Grove is located in Western Australia, approximately 217 miles (350 kilometers) north of Perth. The principal products are zinc and copper concentrates. Golden Grove
has two underground mines at the Scuddles and Gossan Hill deposits. Golden Grove sold 43.5 million pounds of copper, 114.8 million pounds of zinc and 19,300 ounces of by-product gold during 2004.
Indonesia
Newmont operates Batu Hijau, a producer of copper/gold concentrates, in
Indonesia. The Minahasa gold operation completed production in 2004.
Batu Hijau.
Newmont has a 45% ownership interest in Batu Hijau. Newmonts interest is held through a partnership with an affiliate of Sumitomo Corporation. Newmont has a 56.25% interest in the partnership
and the Sumitomo affiliate holds the remaining 43.75%. The partnership, in turn, owns 80% of P.T. Newmont Nusa Tenggara (PTNNT), the subsidiary that owns Batu Hijau. The remaining 20% interest in PTNNT is a carried interest held by P.T.
Pukuafu Indah, an unrelated Indonesian company. Through September 30, 2004, PTNNT recorded cumulative losses, therefore, Newmont has historically reported a 56.25% economic interest in Batu Hijau. As a result of higher metal prices, improved
operating and financial results, and increased life of mine expectations regarding production, costs and economics, PTNNTs cumulative losses had been recovered by the fourth quarter of 2004, thereby allowing for the payment of dividends. Under
existing shareholder agreements, the Indonesian shareholder will be entitled to receive 6% of any dividends paid by PTNNT until such time as a loan to the Indonesia shareholder is fully repaid (including accrued interest). Newmont, therefore,
decreased its reported interest in Batu Hijau to 52.875%, reflecting 56.25% of the 94% of PTNNTs dividends payable to the Newmont/Sumitomo partnership.
Prior to January 1, 2004, we accounted for our investment in Batu Hijau as an equity investment due to
each of PTNNT shareholders significant participating rights in Batu Hijaus business. Newmont has identified the Batu Hijau operation as a variable interest entity because of certain capital structures and contractual relationships.
Newmont has also determined that it is the primary beneficiary of Batu Hijau. Therefore, pursuant to FIN 46R, Newmont began to consolidate Batu Hijau effective January 1, 2004. See Note 3 to the Consolidated Financial Statements for more
information.
Batu Hijau is located on the island of Sumbawa,
approximately 950 miles (1,529 kilometers) east of Jakarta. Batu Hijau is a large porphyry copper/gold deposit, which Newmont discovered in 1990. Development and construction activities began in 1997 and start-up took place in late 1999. In 2004,
copper sales were 378.8 million equity pounds, while gold sales were 396,300 equity ounces.
In Indonesia, rights are granted to foreign investors to explore for and to develop mineral resources within defined areas through Contracts of Work entered into with the Indonesian government. In 1986, Newmont
entered into a Contract of Work with the central government covering Batu Hijau, under which Newmont was granted the exclusive right to explore in the contract area, construct any required facilities, extract and process the mineralized materials,
and sell and export the minerals produced, subject to certain requirements including Indonesian government approvals and payment of royalties to the government. Under the Contract of Work, PTNNT has the right to continue operating the project for 30
years from operational start-up, or longer if approved by the Indonesian government.
Under the Batu Hijau Contract of Work, beginning in 2005, and continuing through 2010, a portion of the project must be offered for sale to the Indonesian government or to Indonesian nationals, equal to the difference
between the following percentages and the percentage of shares already owned by the Indonesian government or Indonesian nationals (if such number is positive): 15%, by the end of the 2005; 23%, by the end of 2006; 30%, by the end of 2007; 37%, by
the end of 2008, 44%, by the end of 2009; and 51%, by the end of 2010. The price at which such interest must be offered for sale to the Indonesian parties is the highest of the then-current replacement cost, the price at which shares of the project
company would be accepted for listing on the Jakarta Stock Exchange, or the fair market value of such interest as a going concern.
An Indonesian national currently owns a 20% interest in Batu Hijau, which would require Newmont and Sumitomo to offer a 3% interest in Batu Hijau to the
Indonesian government or to Indonesian nationals in 2006. Pursuant to this provision, it is possible that the ownership interest of the Newmont/Sumitomo partnership in Batu Hijau could be reduced to 49% by the end of 2010.
Minahasa.
Newmont owns 80% of Minahasa. The
remaining 20% interest is a carried interest held by P.T. Tanjung Serapung, an unrelated Indonesian company. Prior to November 2001, 100% of Minahasas gold production was attributed to Newmont. As of November 2001, Newmont had recouped a
sufficient amount of its investment in Minahasa to entitle the Indonesian shareholder to receive 6% of any dividends distributed after that date. As a result, 94% of Minahasas gold production has been attributed to Newmont since November 2001.
Minahasa, on the island of Sulawesi, approximately 1,500 miles
(2,414 kilometers) northeast of Jakarta, was a Newmont discovery. Production began in 1996 and mining was completed in late 2001. The remaining stockpiles were processed by August 2004. In 2004, Minahasa sold 70,200 equity ounces of gold. See Note
27 to the Consolidated Financial Statements for additional information regarding Minahasa.
Central Asia
Zarafshan.
Newmont has a 50% interest in the Zarafshan-Newmont Joint Venture in Uzbekistan. Ownership of the remaining 50% interest is divided between the State Committee for Geology and Mineral Resources and
the Navoi Mining and Metallurgical Combine, each a state entity of Uzbekistan. The joint venture produces gold by crushing and leaching ore from existing stockpiles of low-grade oxide material from the nearby
government-owned Muruntau mine, located in the Kyzylkum Desert. The gold produced by Zarafshan-Newmont is sold in international markets for U.S. dollars.
Zarafshan-Newmont sold 210,100 equity ounces of gold in 2004.
The State Committee and Navoi furnish ore to Zarafshan-Newmont under an ore supply agreement. Under the agreement, the State Committee and Navoi are obligated to deliver 242.5 million tons of ore to Zarafshan- Newmont from various areas of
the stockpiles designated into four different Zones under the agreement. As of December 31, 2004, approximately 140.1 million tons of ore have been delivered, leaving a balance of 102.4 million tons to be delivered from Zone 4.
Initially, ore from all Zones was to be delivered regardless of the gold price and the price of the ore was dependent on the grade of ore delivered. In May 2003, the parties amended the grade and pricing structure of the ore supply agreement with
respect to ore to be delivered from Zone 4. Under the May 2003 amendment the parties agreed to a mine plan designed to achieve an average grade of at least 0.036 ounce per ton for ore from Zone 4. The amount paid for this ore is dependent on the
average grade of ore and the average gold price during the period in which the ore is processed. In the event the State Committee and Navoi supply ore from Zone 4 having an average grade less than 0.036 ounce per ton in a given month and the average
gold price during such month is less than $320 per ounce, the price of such ore will be discounted. At certain combinations of low ore grade and at gold prices less than $320 per ounce, the computed price may result in a credit to Zarafshan-Newmont,
which will be offset against free cash distributions or future ore purchase payments due to the State Committee and Navoi.
Ovacik.
The Ovacik mine, located in western Turkey 12 miles from the Aegean Sea and 66 miles (106 kilometers) north of the
city of Izmir, commenced production in May 2001 and sold 110,000 equity ounces of gold during 2004. Newmont acquired the Ovacik mine in February 2002 as part of the Normandy acquisition. In August 2004, the Ovacik mine suspended operations as a
result of a court decision ordering suspension of operating permits pending completion of certain additional permitting requirements and the submission of an updated environmental impact assessment. On March 1, 2005, the Ovacik mine was sold to a
subsidiary of Koza Davetiye, a Turkish conglomerate. For additional information, see Item 7, Managements Discussion and Analysis of Consolidated Financial Condition and Results of Operations, Results of Operations, below.
Africa
Newmont has two advanced development projects in Ghana, West Africa. The
Ahafo project, located in the Brong Ahafo Region of Ghana, is 100% owned by Newmont following the acquisition of the remaining 50% of the Ntotoroso property from Moydow Mines International, Inc. in December 2003. Camp and infrastructure construction
has commenced, as well as earth works preparation for the mill, the tailings facility and the water storage dam. Initial development costs at Ahafo are estimated at approximately $440 million, with gold production expected to commence in the second
half of 2006. The Ahafo project is anticipated to generate steady-state annual gold sales of approximately 500,000 ounces, with higher production in the initial years. At December 31, 2004, the Ahafo project had reserves of 10.6 million ounces of
gold.
Newmont also has an 85% interest in the Akyem project,
located in the Eastern Region of Ghana. At year-end, the Akyem project had 5.4 million equity ounces of gold reserves. The remaining 15% interest is held by Kenbert Mines Limited. Newmont is currently updating and optimizing the feasibility study
for Akyem with a view to making a development decision by mid-2005. Kenberts interest is a carried interest until completion of the feasibility update and optimization.
In December 2003, Ghanas Parliament unanimously ratified an Investment Agreement between Newmont and the Government of
Ghana. The Agreement establishes a fixed fiscal and legal regime, including fixed royalty and tax rates, for the life of any Newmont project in Ghana. Under the Agreement, Newmont will pay corporate income tax at a rate up to 32.5% and fixed gross
royalties on gold production of 3.0% (3.6% for any production from forest reserve areas). The Government of Ghana is also entitled to receive 10% of a projects net cash flow after Newmont has recouped its investment and may acquire up to 20%
of a projects equity at fair market value on or after the 15
th
anniversary of such projects commencement
of production. The Investment Agreement also contains commitments with respect to job training for local Ghanaians, community development, purchasing of local goods and services and environmental protection.
Batu Hijau was accounted for using the equity method in 2003 and 2002, and was not included in the Companys weighted average total cash costs
per ounce for such years. 2003 and 2002 production costs per ounce/pound reflect the pro forma change to co-product accounting effective January 1, 2004. Co-product
accounting for copper and gold includes production costs identifiable for each product (royalties, freight, smelting and refining) and allocates the
remaining costs in proportion to the sales revenue generated by each product. Newmonts economic interest decreased to 52.875% from 56.25% on October 1, 2004.
Australia/New Zealand
Batu Hijau
(1)
Year Ended December 31,
2004
2003
2002
2004
2003
2002
Ounces produced (000)
1,818.7
2,092.3
1,854.1
718.8
600.8
492.5
Equity ounces produced (000):
Oxide
1,235.8
1,547.7
1,353.8
N/A
N/A
N/A
Refractory
582.9
523.7
426.2
398.5
337.9
277.0
1,818.7
2,071.4
1,780.0
398.5
337.9
277.0
Equity ounces sold (000)
1,887.6
1,998.1
1,792.4
396.3
328.9
278.0
Production costs per ounce:
Direct mining and production costs
$
259
$
227
$
187
$
110
$
140
$
127
Deferred stripping and other costs
(1
)
(7
)
(8
)
9
(36
)
(14
)
Cash operating costs
258
220
179
119
104
113
Royalties and production taxes
14
14
10
9
17
9
Total cash costs
272
234
189
128
121
122
Reclamation/accretion expense and other
3
1
5
1
4
3
Total costs applicable to sales
275
235
194
129
125
125
Depreciation, depletion and amortization
67
60
74
40
54
54
Total production costs
$
342
$
295
$
268
$
169
$
179
$
179
Other Indonesia
Central Asia
Year Ended December 31,
2004
2003
2002
2004
2003
2002
Tons mined (000 dry short tons):
Open pit
N/A
N/A
N/A
4,659
5,975
4,296
Tons milled/processed (000):
Oxide
N/A
N/A
N/A
331
533
361
Refractory
441
697
717
N/A
N/A
N/A
Leach
N/A
N/A
N/A
7,894
8,080
7,867
Average ore grade: (oz/ton)
Oxide
N/A
N/A
N/A
0.320
0.343
0.364
Refractory
0.158
0.156
0.213
N/A
N/A
N/A
Leach
N/A
N/A
N/A
0.042
0.043
0.053
Average mill recovery rate:
Oxide
N/A
N/A
N/A
95.4
%
94.3
%
92.9
%
Refractory
90.5
%
91.0
%
90.9
%
N/A
N/A
N/A
(1)
See footnote (1) to operating statistics related to gold production and sales table above.
The following table details Newmonts operating statistics related to copper and zinc production and
sales.
Batu Hijau
(1)
Golden Grove
Year Ended December 31,
2004
2003
2002
2004
2003
2002
Dry tons processed (000)
54,243
49,819
51,754
1,366
1,406
1,273
Average copper grade
0.75
%
0.72
%
0.72
%
3.1
%
4.6
%
4.7
%
Average copper recovery rate
87.8
%
88.6
%
89.0
%
88.1
%
90.9
%
90.7
%
Average zinc grade
N/A
N/A
N/A
10.4
%
12.4
%
13.9
%
Average zinc recovery rate
N/A
N/A
N/A
88.8
%
89.9
%
87.7
%
Copper pounds produced (000)
716,939
634,123
657,664
40,684
57,799
60,973
Equity copper pounds produced (000)
397,510
356,694
369,936
40,684
57,799
60,973
Equity copper pounds sold (000)
378,801
343,378
362,253
43,467
74,303
44,754
Zinc pounds produced (000)
N/A
N/A
N/A
101,917
120,425
114,806
Zinc pounds sold (000)
N/A
N/A
N/A
114,835
104,711
111,177
Copper cash cost per pound
$
0.60
$
0.46
$
0.45
$
0.90
$
0.59
$
0.57
Copper total production cost per pound
$
0.74
$
0.60
$
0.58
$
1.23
$
0.79
$
0.86
Zinc cash cost per pound
N/A
N/A
N/A
$
0.38
$
0.19
$
0.24
Zinc total production cost per pound
N/A
N/A
N/A
$
0.50
$
0.31
$
0.31
(1)
See footnote (1) to operating statistics related to gold production and sales table above.
Reconciliation of Non-GAAP Measures
For all periods presented, total cash costs include charges for mining ore and waste associated with current period production, processing ore through milling and leaching facilities, by-product credits, production taxes, royalties and
other cash costs. Certain gold mines produce silver as a by-product. Proceeds from the sale of by-products are reflected as credits to total cash costs. With the exception of Yanacocha and Golden Grove, such by-product sales have not been
significant to the economics or profitability of the Companys mining operations. See Item 7, Managements Discussion and Analysis of Consolidated Financial Condition and Results of Operations. All of these charges and by-product credits
are included in
Costs applicable to sales.
Charges for reclamation are also included in
Costs applicable to sales,
but are not included in total cash costs. Reclamation charges are included in total production costs, together with
total cash costs and
Depreciation, depletion and amortization.
A reconciliation of total cash costs to
Costs applicable to sales
in total and by segment is provided below. Total production costs provide an indication of earnings before
interest expense and taxes for Newmonts share of mining properties, when taking into account the average realized price received for production sold, as this measure combines
Costs applicable to sales
plus
Depreciation, depletion and
amortization,
net of minority interest.
Total cash costs
per ounce is a measure intended to provide investors with information about the cash generating capacities of these mining operations. Newmonts management uses this measure for the same purpose and for monitoring the performance of its mining
operations. This information differs from measures of performance determined in accordance with GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with GAAP. This measure was
developed in conjunction with gold mining companies associated with the Gold Institute, a non-profit industry group no longer in existence, in an effort to provide a level of comparability; however, Newmonts measures may not be comparable to
similarly titled measures of other companies.
Reconciliation of
Costs applicable to sales-Base Metals
to total cash costs per base metal pound
(unaudited):
Batu Hijau
Golden Grove
For the Year Ended December 31, 2004
Total
Copper
Zinc
(dollars in millions except per ounce amounts)
Costs applicable to sales per financial statements
$
304.7
$
61.8
$
38.7
$
23.1
Minority Interest
(140.7
)
Reclamation/accretion expense
(1.7
)
(0.6
)
(0.3
)
(0.3
)
Write-downs of inventories, stockpiles and ore on leach pads
(8.2
)
(2.9
)
(5.3
)
Purchased ore, smelting and refining and other
66.0
29.3
3.8
25.5
Total cash cost for per pound calculation
228.3
82.3
39.3
43.0
Reclamation/accretion expense and other
1.7
0.3
0.2
0.1
Depreciation, depletion and amortization
89.3
28.2
14.0
14.2
Minority interest and other
(39.9
)
Total production cost for per pound calculation
$
279.4
$
110.8
$
53.5
$
57.3
Equity total pounds sold (000)
378,801
N/A
43,467
114,835
Equity total cash cost per pound sold
$
0.60
N/A
$
0.90
$
0.38
Equity total production cost per pound sold
$
0.74
N/A
$
1.23
$
0.50
Golden Grove
2003
2002
For the Year Ended December 31,
Total
Copper
Zinc
Total
Copper
Zinc
(dollars in millions except per ounce amounts)
Costs applicable to sales per financial statements
$
43.5
$
37.4
$
6.1
$
27.7
$
18.4
$
9.3
Write-downs of stockpiles, ore on leach pads and inventories
(7.2
)
(3.9
)
(3.3
)
(0.4
)
(0.3
)
(0.1
)
Purchased concentrate cost
(6.1
)
(6.1
)
Reclamation/accretion expense
(0.4
)
(0.2
)
(0.2
)
Smelting and refining
33.5
10.6
22.9
24.7
7.5
17.2
Total cash costs for per pound calculation
63.3
43.9
19.4
52.0
25.6
26.4
Reclamation/accretion expense and other
(1.0
)
(0.6
)
(0.4
)
(1.7
)
(1.1
)
(0.6
)
Depreciation, depletion and amortization
29.1
15.7
13.4
22.9
13.9
9.0
Total production cost for per pound calculation
$
91.4
$
59.0
$
32.4
$
73.2
$
38.4
$
34.8
Equity total pounds sold (000)
N/A
74,303
104,711
N/A
44,754
111,177
Equity total cash cost per pound sold
N/A
$
0.59
$
0.19
N/A
$
0.57
$
0.24
Equity total production cost per pound sold
N/A
$
0.79
$
0.31
N/A
$
0.86
$
0.31
Royalty Properties
The
following is a description of Newmonts principal royalty interests, all of which were acquired as a result of the Franco-Nevada acquisition. Newmonts royalty interests are generally in the form of a net smelter return (NSR)
royalty, which provides for the payment either in cash or physical metal (in kind) of a specified percentage of production, less certain specified transportation and refining costs. In some cases, Newmont owns a net profit interest
(NPI) pursuant to which Newmont is entitled to a specified percentage of the net profits, as defined in each case, from a particular mining operation. The majority of NSR royalty revenue and NPI revenue can be received in kind (generally
in the form of gold bullion) at the option of Newmont. Newmont also has a significant oil and gas royalty portfolio in Western Canada. In 2004, Newmonts
Royalty and dividend income
was $65.8 million.
Nevada-Goldstrike
. Newmont holds various NSR
and NPI royalties at the Goldstrike properties (Betze-Post and Meikle mines) located on the Carlin Trend in northern Nevada. The Betze-Post and Meikle mines are owned and operated by a subsidiary of Barrick Gold Corporation. Newmont received $23.2
million in royalty income from the Goldstrike properties in 2004.
The Betze-Post mine is a conventional open pit operation. The Betze-Post property consists of various
claim blocks and Newmonts royalty interest in each claim block is different, ranging from 0% to 4% for the NSRs and 0% to 6% for the NPIs. The Meikle mine is an underground operation comprising the Meikle, Rodeo and Griffin deposits, located
one mile north of the Betze-Post mine, with which it shares the Goldstrike processing facilities. Newmont holds a 4% NSR and a 5% NPI over 1,280 acres of the claims that cover most of the Meikle, Rodeo and Griffin deposits. Newmont is not obligated
to fund any portion of the cost associated with the Betze-Post or the Meikle mines.
Montana-Stillwater.
Newmont holds a 5% NSR royalty on a portion of the Stillwater mine and all of the East Boulder mine, both located near Nye, Montana and owned and operated by
Stillwater Mining Company. Newmont received $8.2 million in royalty income from the Stillwater properties in 2004. Stillwater produces palladium, platinum, and associated metals (platinum group metals or PGMs) from a geological formation known as
the J-M Reef. Stillwater is the only significant producer of PGMs outside of South Africa and Russia. The J-M Reef is an extensive mineralized zone containing PGMs, which has been traced over a strike length of approximately 28 miles. To date, the
majority of production has been from the Stillwater mine, with East Boulder commencing production during 2001. For the year 2004, an average of approximately 81% of the total production from the Stillwater mine and 100% of the total production from
the East Boulder mine was subject to Newmonts royalty. Because Newmonts royalty does not apply to a portion of the Stillwater properties the percentage of future production from the royalty lands will vary from year to year.
Canada-Oil and Gas Interests
. Newmonts
oil and gas royalty portfolio covers 1.8 million gross acres of producing and non-producing lands located in western Canada and the Canadian Arctic. The average royalty on these lands is 6%. Newmont received $23.5 million in royalty income from
these properties in 2004.
Investment Interests
Canadian Oil Sands Trust
. In 2004, Newmont purchased marketable equity securities of Canadian Oil Sands Trust for approximately $199.6 million. Canadian Oil Sands Trust is traded on the Toronto Stock Exchange.
As of December 31, 2004, the market value of Newmonts interest in the trust was approximately $336.9 million.
Gabriel Resources, Ltd.
In 2004, Newmont purchased marketable equity securities of Gabriel Resources Ltd., a Canadian
mineral exploration company traded on the Toronto Stock Exchange, for approximately $19.2 million. Gabriel Resources, Ltd. owns 80% of the Rosia Montana project in Romania. As of December 31, 2004, the market value of Newmonts interest in
Gabriel Resources was approximately $19.4 million.
Kinross
Gold Corporation.
As a result of a combination of Kinross Gold Corporation, Echo Bay Mines Ltd. and TVX Gold Inc. in January 2003, Newmont acquired a 13.8% interest in the restructured Kinross. During the third quarter of
2003, Newmont sold approximately 28 million Kinross shares representing 66% of its investment for total cash proceeds of $224.6 million, and recorded a net loss of $7.4 million. At June 30, 2004, Newmont recognized a $38.5 million impairment charge
on its investment in Kinross in
(Loss) gain on investments, net
for an other-than-temporary decline in value in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. Newmont
classified the remaining balance of its investment in Kinross as short-term, available-for-sale marketable securities at December 31, 2004. At December 31, 2004, the market value of the Kinross investment was approximately $101.5 million.
Proven and Probable Reserves
Newmont had proven and probable equity gold reserves of 92.4 million ounces as of December 31, 2004.
Gold reserves for 2004 were calculated at a $350, A$550 or NZD$650 per ounce gold price, except at Boddington and Kalgoorlie, where gold reserves were
calculated using a gold price of A$425 and A$560, per ounce, respectively. Newmonts 2004 reserves would decline by approximately 7%, or 6.0 million ounces, if
calculated at a $325 per ounce gold price. An increase in the gold price to $375 per ounce would increase reserves by approximately 6% or 5.3 million ounces.
At year-end 2004, Newmonts North American equity gold
reserves were 35.0 million ounces (including 34.0 million equity ounces in Nevada). Outside of North America, year-end equity gold reserves were 57.4 million ounces, including 15.1 million ounces in Australia/New Zealand, 16.6 million
ounces in Peru and 16.0 million ounces in Ghana.
Newmonts equity copper reserves at year-end 2004 were 8.9 billion pounds. Except at Boddington, copper reserves were calculated at a price of $0.90 or A$1.45 per pound.
Newmonts equity zinc reserves at year-end 2004 were 730 million pounds. Zinc reserves were calculated at a price of
A$0.62 per pound.
Under Newmonts current mining plans,
all reserves are located on fee property or mining claims or will be depleted during the terms of existing mining licenses or concessions, or where applicable, any assured renewal or extension periods for the licenses or concessions.
Proven and probable reserves are based on extensive drilling, sampling, mine
modeling and metallurgical testing from which economic feasibility has been determined. The price sensitivity of reserves depends upon several factors including grade, metallurgical recovery, operating cost, waste-to-ore ratio and ore type.
Metallurgical recovery rates vary depending on the metallurgical properties of each deposit and the production process used. The reserve tables below list the average metallurgical recovery rate for each deposit, which takes into account the several
different processing methods to be used. The cut-off grade, or lowest grade of mineralized material considered economic to process, varies with material type, metallurgical recoveries and operating costs.
The proven and probable reserve figures presented herein are estimates based
on information available at the time of calculation. No assurance can be given that the indicated levels of recovery of gold, copper and zinc will be realized. Ounces of gold or pounds of copper or zinc in the proven and probable reserves are
calculated without regard to any losses during metallurgical treatment. Reserve estimates may require revision based on actual production experience. Market price fluctuations of gold, copper and zinc, as well as increased production costs or
reduced metallurgical recovery rates, could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves.
Reserves are published once each year and will be recalculated as of December
31, 2005, for the entire Company, taking into account metal prices, divestments and depletion as well as any acquisitions and additions to reserves based on results of exploration, mine optimization and development work performed during 2005.
The following tables detail Newmonts gold proven and probable reserves
(1)
reflecting only those reserves owned by Newmont on December 31, 2004 or 2003:
The term reserve means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve
determination.
The term economically, as used in the definition of reserve, means that profitable extraction or production has been established or analytically demonstrated in a full
feasibility study to be viable and justifiable under reasonable investment and market assumptions.
The term legally, as used in the definition of reserve, does not imply that all permits needed for mining and processing have been obtained or that other legal issues
have been completely resolved. However, for a reserve to exist, the Company must have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at
a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with the Companys current mine plans.
The term proven reserves means reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (b) grade and/or
quality are computed from the results of detailed sampling; and (c) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that size, shape, depth and mineral content of reserves
are well established.
The term probable reserves means reserves for which quantity and grade are computed from information similar to that used for proven reserves, but the sites for sampling
are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
Proven and probable reserves were calculated using different cut-off grades. The term cut-off grade means the lowest grade of mineralized material that can be included
in the reserves in a given deposit. Cut-off grades vary between deposits depending upon prevailing economic conditions, mineability of the deposit, amenability of the ore to gold extraction, and type of milling or leaching facilities available.
2004 reserves were calculated at a $350, A$550 or NZD$650 per ounce gold price unless otherwise noted. 2003 reserves were calculated at a $325, A$545 or NZD$665 per ounce gold price
unless otherwise noted.
(2)
Tonnages are after allowances for losses resulting from mining methods. Tonnages are rounded to the nearest hundred thousand.
(3)
Ounces or pounds are estimates of metal contained in ore tonnages and are before allowances for processing losses. Metallurgical recovery rates represent the
estimated amount of metal to be recovered through metallurgical extraction processes. Ounces are rounded to the nearest ten thousand.
(4)
Cut-off grades utilized in 2004 were as follows: oxide leach material not less than 0.006 ounce per ton; oxide mill material not less than 0.060 ounce per ton;
refractory leach material not less than 0.026 ounce per ton; refractory mill material not less than 0.021 ounce per ton.
(5)
Includes undeveloped reserves at Castle Reef, North Lantern and Emigrant deposits for combined total undeveloped reserves of 1,450,000 ounces.
(6)
Deposit is currently undeveloped except for minor leach production. Construction of facilities began in November 2004.
(7)
Includes partially developed reserves at Leeville, which contains a total reserve of 2,610,000 ounces.
(8)
Also contains reserves of over 18 million and 24 million ounces of silver at December 31, 2004 and 2003, respectively, with a metallurgical recovery rate of 91% and
93%, respectively.
(9)
Reserve estimates provided by Placer Dome, the operator of the Turquoise Ridge Joint Venture.
(10)
Stockpiles are primarily material that has been set aside to allow processing of higher grade material in the mills. Stockpiles increase or decrease depending on
current mine plans. Stockpiles are reported separately where tonnage or contained ounces are greater than 5% of the total site reported reserves and contained ounces are greater than 100,000 ounces.
(11)
Material in-process represents that material on leach pads at the end of the year from which gold remains to be recovered. Material in-process is reported separately
where tonnage or contained ounces are greater than 5% of the total site reported reserves and contained ounces are greater than 100,000 ounces.
(12)
Cut-off grade utilized in 2004 of not less than 0.155 ounce per ton.
(13)
Percentage reflects Newmonts weighted equity interest from 84.65% interest in the Holloway Joint Venture and 100% interest in remaining reserves. In 2003, this
percentage was 91.5%. Property includes currently undeveloped reserves at the Blacktop deposit of 80,000 ounces. Cut-off grade utilized in 2004 of not less than 0.126 ounce per ton.
(14)
Cut-off grade utilized in 2004 of not less than 0.009 ounce per ton.
(15)
Reported reserves are based on Newmonts 51.35% equity interest. Yanacocha is
consolidated on a 100% basis for accounting purposes, then the minority interests of our partners are recognized. Reserves include currently undeveloped deposits at Corimayo and Chaquicocha Sur, which contain a combined undeveloped reserve of
2,970,000 equity ounces. Cut-off grade utilized in 2004 of not less than 0.006 ounce per ton.
(16)
Deposit is undeveloped. Cut-off grade and recoveries vary depending on the gold and copper content. Cut-off grade used for reserve reporting in 2004 was equivalent
to 0.016 ounce per ton.
(17)
Reserves at Kori Chaca containing a total reserve of 300,000 equity ounces are currently being developed. Cut-off grade utilized in 2004 of not less than 0.010 ounce
per ton.
As in 2003, reserves were calculated at a A$425 per ounce gold price, and accounted for on an equity basis. Deposit is currently undeveloped. Cut-off grade utilized
in 2004 of not less than 0.011 ounce per ton.
(19)
Gold reported in reserves is contained within zinc and copper ore bodies. Cut-off grade and recoveries vary depending on the copper, gold and zinc content. The
cut-off grades used for reserve reporting in 2004 were equivalent to 2.4% copper and 7.9% zinc.
(20)
Reserve based on A$560 per ounce gold price for 2004 and A$545 for 2003. Percentage reflects Newmonts equity interest. Pro-rata consolidated for accounting
purposes. Cut-off grade utilized in 2004 of not less than 0.026 ounce per ton.
(21)
Cut-off grade utilized in 2004 of not less than 0.093 ounce per ton.
(22)
Cut-off grade utilized in 2004 of not less than 0.045 ounce per ton.
(23)
Cut-off grade utilized in 2004 of not less than 0.021 ounce per ton.
(24)
Includes currently undeveloped reserves at the Favona deposit containing 350,000 ounces. Cut-off grade utilized in 2004 of not less than 0.022 ounce per ton.
(25)
Production is in the form of a copper/gold concentrate. Cut-off grade and recoveries vary
depending on the gold and copper content. The cut-off grade used for reserve reporting in 2004 was equivalent to 0.28% copper.
(26)
Percentage reflects Newmonts economic interest in remaining reserves.
(27)
Property sold March 1, 2005. Cut-off grade utilized in 2004 of not less than 0.092 ounce per ton.
(28)
Material made available to Zarafshan-Newmont for processing from designated stockpiles or from other specified sources. Tonnage and gold content of material made
available to Zarafshan-Newmont for processing from such designated stockpiles or from other specified sources are guaranteed by state entities of Uzbekistan.
(29)
Deposits are currently undeveloped. Construction of facilities began in November 2004. Cut-off grade utilized in 2004 of not less than 0.014 ounce per ton.
(30)
Deposit is undeveloped. Cut-off grade utilized in 2004 of not less than 0.013 ounce per ton.
(31)
Property sold in 2004.
(32)
Processing of remaining stockpiles was completed in August 2004.
The following tables detail Newmonts base metal proven and probable reserves
(1)
reflecting only those reserves owned by Newmont on December 31, 2004 or 2003:
December 31, 2004
Proven Reserves
Probable Reserves
Proven and Probable Reserves
Deposits/Districts
Newmont
Share (%)
Tonnage
(2)
(000 tons)
Grade
(%)
Millions of
Pounds
(3)
Tonnage
(2)
(000 tons)
Grade
(%)
Millions of
Pounds
(3)
Tonnage
(2)
(000 tons)
Grade
(%)
Millions of
Pounds
(3)
Metallurgical
Recovery
(3)
Copper
Phoenix, Nevada
(4)
100.00
%
216,700
0.15
660
216,700
0.15
660
67
%
Minas Conga, Peru
(5)
51.35
%
190,600
0.30
1,140
190,600
0.30
1,140
90
%
Batu Hijau
(6)
52.875
%
148,700
0.50
1,480
440,200
0.47
4,120
588,900
0.48
5,600
86
%
Batu Hijau, Stockpiles
(6)
52.875
%
86,500
0.38
660
86,500
0.38
660
80
%
Total Batu Hijau, Indonesia
52.875
%
148,700
0.50
1,480
526,700
0.45
4,780
675,400
0.46
6,260
85
%
Boddington, Western Australia
(7)
44.44
%
61,000
0.12
140
129,700
0.13
330
190,700
0.12
470
84
%
Golden Grove, Western Australia
100.00
%
3,100
2.91
180
5,600
1.60
180
8,700
2.07
360
88
%
Total Copper
212,800
0.42
1,800
1,069,300
0.33
7,090
1,282,100
0.35
8,890
84
%
Zinc
(8)
Golden Grove, Western Australia
100.00
%
900
11.8
200
1,800
14.7
530
2,700
13.8
730
91
%
Total Zinc
900
11.8
200
1,800
14.7
530
2,700
13.8
730
91
%
December 31, 2003
Proven Reserves
Probable Reserves
Proven and Probable Reserves
Deposits/Districts
Newmont
Share (%)
Tonnage
(2)
(000 tons)
Grade
(%)
Millions of
Pounds
(3)
Tonnage
(2)
(000 tons)
Grade
(%)
Millions of
Pounds
(3)
Tonnage
(2)
(000 tons)
Grade
(%)
Millions of
Pounds
(3)
Metallurgical
Recovery
(3)
Copper
Phoenix, Nevada
100.00
%
159,600
0.13
420
159,600
0.13
420
63
%
Batu Hijau, Indonesia
52.875
%
227,700
0.52
2,350
387,600
0.51
3,940
615,300
0.51
6,290
89
%
Boddington, Western Australia
(7)
44.44
%
61,000
0.12
140
129,700
0.13
330
190,700
0.12
470
84
%
Golden Grove, Western Australia
100.00
%
1,900
2.6
100
5,900
2.1
250
7,800
2.2
350
88
%
Total Copper
290,600
0.43
2,590
682,800
0.37
4,940
973,400
0.39
7,530
Zinc
(8)
Golden Grove, Western Australia
100.00
%
600
10.8
140
1,200
13.8
340
1,800
12.8
480
91
%
Total Zinc
600
10.8
140
1,200
13.8
340
1,800
12.8
480
(1)
See footnote (1) to the Gold Proven and Probable Reserve tables above. Copper reserves are calculated at a $0.90 or A$1.45 per pound copper price unless otherwise
noted. 2003 reserves were calculated at a $0.75 or A$1.35 per pound copper price unless otherwise noted.
(2)
See footnote (2) to the Gold Proven and Probable Reserves Tables above.
(3)
See footnote (3) to the Gold Proven and Probable Reserves Tables above. Pounds are rounded to the nearest ten million. Tonnage amounts are rounded to the nearest one
hundred thousand.
(4)
Deposit is currently undeveloped except for minor gold leach production. Construction of facilities began in November 2004.
Percentage reflects Newmonts economic interest in remaining reserves.
Stockpiles are primarily material that has been set aside to allow processing of higher grade material in the mills. Stockpiles increase or decrease depending on current mine plans.
Stockpiles are reported separately where tonnage or contained metal are greater than 5% of the total site reported reserves.
(7)
As in 2003, reserves are calculated at a A$1.25 per pound copper price, and accounted for on an equity basis. Deposit is undeveloped.
(8)
Zinc reserves are calculated at a A$0.62 per pound zinc price. 2003 reserves were calculated at a A$0.71 per pound zinc price. Tonnage amounts are rounded to the
nearest one hundred thousand and zinc pounds are rounded to the nearest ten million.
The following table details Newmonts reconciliation of December 2004 and December 2003 Gold Proven and Probable Reserves:
Newmont Equity
Contained Ounces
(in millions)
December 31, 2003
91.3
Depletion
(1)
(8.3
)
Divestments/Other
(2)
(3.0
)
Revisions and Additions
(3)
12.4
December 31, 2004
92.4
(1)
Reserves mined and processed in 2004.
(2)
Includes 1.0 million ounces from the sale of the Perama property. In addition, 1.98 million ounces at Cerro Quilish were reclassified from proven and probable
reserves to mineralized material not in reserves.
(3)
Due to reserve conversions, optimizations, model updates and updated unit costs and recoveries.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see Note 27 to the Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended December 31, 2004.
Newmonts executive officers as of March 3, 2005 were:
Name
Age
Office
Wayne W. Murdy
60
Chairman and Chief Executive Officer
Pierre Lassonde
57
President
David H. Francisco
55
Executive Vice President, Operations
Bruce D. Hansen
47
Senior Vice President and Chief Financial Officer
Russell Ball
36
Vice President and Controller
Britt D. Banks
43
Vice President and General Counsel
Paul J. Dowd
55
Vice President, Australian Operations
Thomas L. Enos
53
Vice President, International Operations
Robert J. Gallagher
54
Vice President, Indonesian Operations
David Harquail
48
Vice President, Merchant Banking
Donald G. Karras
51
Vice President, Taxes
Thomas P. Mahoney
50
Vice President and Treasurer
Richard M. Perry
46
Vice President, North American Operations
Carlos Santa Cruz
49
Vice President, South American Operations
There are no family
relationships by blood, marriage or adoption among any of the above executive officers of Newmont. All executive officers are elected annually by the Board of Directors of Newmont to serve for one year or until his respective successor is elected
and qualified. The Arrangement Agreement between Newmont and Franco-Nevada provided that Mr. Lassonde would become the President of Newmont upon our acquisition of Franco-Nevada. There is no arrangement or understanding between any of the above
executive officers and any other person pursuant to which he was selected as an executive officer.
Mr. Murdy has been Chairman of the Board of Newmont since January 2002 and Chief Executive Officer thereof since January 2001. Mr. Murdy was President of
Newmont from July 1999 to February 2002. He served as Executive Vice President and Chief Financial Officer from July 1996 to July 1999, and Senior Vice President and Chief Financial Officer from December 1992 to July 1996. Mr. Murdy was elected to
the Board of Directors of Newmont in September 1999.
Mr.
Lassonde became President of Newmont in February 2002 and was elected a director in March 2002. Previously he served as President and Co-Chief Executive Officer of Franco-Nevada from September 1999 to February 2002 and as President of Franco-Nevada
from October 1982 to February 2002. He also served as President and Chief Executive Officer of Euro-Nevada Mining Corporation from 1985 to September 1999, when it amalgamated with Franco-Nevada. He has served as a director of Franco-Nevada since
October 1982 and was a director of Normandy Mining Limited from May 2001 to March 2002.
Mr. Francisco was elected Executive Vice President, Operations of Newmont in July 1999. He served as Senior Vice President, International Operations from May 1997 to July 1999. Previously, he served as Vice President,
International Operations from July 1995 to May 1997.
Mr.
Hansen was elected Senior Vice President and Chief Financial Officer of Newmont in July 1999. He served as Vice President, Project Development from May 1997 to July 1999. Previously, he served as Senior Vice President, Corporate Development of Santa
Fe Pacific Gold Corporation from April 1994 to May 1997.
Mr.
Ball was elected Vice President and Controller of Newmont in August 2004. Previously, he served as Group Executive, Investor Relations, May 2002 to August 2004 and Finance Director, Indonesia, from June 2001 to April 2002.
Mr. Banks was elected Vice President and General Counsel of Newmont in May
2001. He served as Secretary from April 2001 to April 2004. He served as Associate General Counsel of Newmont from July 1996 to May 2001.
Mr. Dowd was elected Vice President, Australian Operations, of Newmont in December 2004, having served as
Vice President, Operational Development, Health and Safety since July 2002. Mr. Dowd served as Group Executive, Operations of Normandy Mining Limited from May 1999 to July 2002.
Mr. Enos was elected Vice President, International Operations of Newmont in December 2002. Previously, he served as Vice
President of Newmont and Managing Director of Newmont Indonesia Limited from May 2002 to November 2002. He served as Vice President, Indonesian Operations from July 1998 to May 2002. He served as Vice President and General Manager of Newmonts
Carlin operations from May 1996 to July 1998.
Mr. Gallagher
was elected Vice President, Indonesian Operations, in April 2004, having served as Managing Director, Newmont Indonesia Limited since November 2002. He served as General Manager of Newmonts Batu Hijau operations in Indonesia from April 2001 to
November 2002 and Director of Operations thereof from August 2000 to April 2001. Previously, he served as Vice President Operations at Vengold Inc. from 1993 to August 2000.
Mr. Harquail was elected Vice President, Merchant Banking, in April 2004, having served as President and Managing Director
of Newmont Capital Limited since May 2002 and Vice President of Newmont since September 2003. Previously, he served as Senior Vice President of Franco-Nevada Mining Corporation Limited from May 1998 to February 2002. Prior to May 1998, Mr. Harquail
was a Vice President of Franco-Nevada.
Mr. Karras has served
as Vice President, Taxes of Newmont since November 1992.
Mr.
Mahoney was elected Vice President and Treasurer of Newmont in May 2002. He served as Treasurer of Newmont from May 2001 to May 2002. Previously, he served as Assistant Treasurer from March 1997 to May 2001. He served as Assistant Treasurer,
International from April 1994 to March 1997.
Mr. Perry has
served as Vice President, North American Operations, of Newmont since April 2001. He served as General Manager of Newmonts Batu Hijau copper and gold mine in Sumbawa, Indonesia from October 1998 to April 2001.
Mr. Santa Cruz has served as Vice President, South American Operations, of
Newmont since August 2001. He served as General Manager of Minera Yanacocha S.R.L. from 1997 to 2001, and as Assistant General Manager thereof from 1995 to 1997.