Newmont’s First Quarter Adjusted Net Income(1) Rises to $0.85 Per Share While Operating Cash Flow From Continuing Operations Climbs to $594 Million
DENVER, April 24 /PRNewswire-FirstCall/ — Newmont Mining Corporation today announced strong first quarter results, with gold sales of 1.29 million equity ounces at an average realized gold price of $933 per ounce and costs applicable to sales of $396 per ounce, resulting in Adjusted Net income(1) of approximately $386 million ($0.85 per share), compared to Adjusted Net income(1) of $40 million ($0.09 per share) in the year ago quarter. Net income on a GAAP basis was $370 million ($0.82 per share) during the first quarter, compared to $68 million ($0.15 per share) in the year ago quarter. Newmont also reported cash from continuing operations of $594 million, as compared with $26 million from the year ago quarter.
First Quarter 2008 Highlights: — Revenues increased 59% from the year ago quarter to $1.9 billion with an average realized gold price of $933 per ounce; — Costs applicable to sales(2) declined by 2% to $396 per ounce of gold compared with $404 per ounce of gold in the year ago quarter; — Adjusted Net income(1) increased 865% to $386 million ($0.85 per share) from $40 million ($0.09 per share) in the year ago quarter; — Net cash from continuing operations improved significantly from the year ago quarter to $594 million ($1.31 per share).
Richard O’Brien, President and Chief Executive Officer, said, “We continue to focus on operational execution and improving financial performance as evidenced by our operating margin expansion and earnings growth during the first quarter. Our position as the largest unhedged gold company has benefited our shareholders as we realized 100% of the gold price appreciation with an average realized gold price for the quarter of $933 per ounce. With gold sales in line with our plans and lower costs, our gold operating margin increased to 58%, up from 38% in the year ago quarter, highlighting our leverage to the gold price. As we turn our attention to the second quarter, we expect a successful start-up of both the gold mill at Yanacocha and the power plant in Nevada. The completion of these projects will further enhance our ability to deliver sustainable production at competitive costs.”
The Company’s 2008 annual equity gold sales guidance remains unchanged between 5.1 and 5.4 million ounces at costs applicable to sales of between $425 and $450 per ounce. The Company’s costs applicable to sales forecast for 2008 now assumes an oil price of $90 per barrel and an Australian dollar exchange rate of 0.925 for the balance of the year. Costs applicable to sales would change by approximately $2 per ounce for every $5 change in the oil price and by $5 per ounce for every 0.05 change in the Australian dollar exchange rate. The Company is actively hedging its diesel and Australian dollar exposures.
To view complete financial disclosure, including regional mine statistics, Results of Consolidated Operations(3), Liquidity and Capital Resources, Management’s Discussion & Analysis, the Form 10-Q, and a complete outline of the 2008 Operating and Financial guidance please see http://www.newmont.com/.
(1) See reconciliation from Adjusted Net income to GAAP Net income on page 9 of this earnings release. (2) Excludes amortization and accretion. Beginning in 2008, regional administrative, community development, marketing, and accretion costs have been excluded from costs applicable to sales and 2007 amounts have been reclassified to conform to the 2008 presentation. (3) Regional operating variances from the year ago quarter, as disclosed in the Company’s previous earnings releases, are outlined in the Results of Consolidated Operations section of the Company’s Form 10-Q located at http://www.newmont.com/. Regional Operating Results
In the first quarter of 2008, the Company reported equity gold sales of 1.29 million ounces at costs applicable to sales of $396 per ounce. Equity gold sales were largely in line with management’s expectations as higher than anticipated grades at Jundee and inventory reductions at Yanacocha and Batu Hijau offset shortfalls from the timing of production at Twin Creeks and lower grades and unplanned mill maintenance at Ahafo. The Company’s costs applicable to sales were impacted by increased commodity prices, with higher royalty and tax payments offset by favorable copper and silver by-product credits.
Nevada – Nevada sold 526,000 equity ounces at costs applicable to sales of $409 per ounce during the first quarter. Nevada ended the quarter with higher than anticipated finished goods inventories as well as higher than planned leach ore placement at Twin Creeks and Carlin North, which benefited the first quarter costs applicable to sales and will benefit future gold sales during the year. Recovered ounces were slightly lower than plan due to the timing of ore recoveries at the Twin Creeks leach pads, however, this production is expected to be recovered during the second and third quarters.
Phoenix sold 40,500 equity ounces of gold at costs applicable to sales of $401 per ounce during the first quarter of 2008, compared to 48,700 equity ounces at costs applicable to sales of $691 per ounce during the fourth quarter of 2007. The costs applicable to sales improvements were primarily driven by increased by-product sales and realized prices. Efforts to improve operating performance at Phoenix continue, with the new crusher approximately 74% complete and expected to be in operation around mid-year. Additionally, the new mine plan remains on schedule to be finalized around mid-2008.
Yanacocha – Equity gold sales at Yanacocha in Peru were in line with expectations, with 277,000 ounces sold at costs applicable to sales of $311 per ounce, primarily driven by inventory reductions and lower than expected labor and contract service costs. A higher proportion of Yanacocha production has shifted to the second half of 2008 as a result of lower ore placement in late 2007 and the lag between placement and recovery on the leach pads. As expected, production from the new gold mill should begin to contribute limited equity sales in the second quarter as the mill ramps up to commercial production.
Australia/New Zealand – Equity gold sales were strong during the first quarter with 286,000 ounces sold at costs applicable to sales of $545 per ounce, primarily due to higher grades at Jundee and Waihi. Jundee realized improved ore grades and recoveries due to a higher blend of underground ore, while Waihi had higher than expected throughput from a greater proportion of high grade Favona underground ore. For the year, Australia/New Zealand costs applicable to sales are expected to change by approximately $5 to $6 per ounce for every 0.01 change in the Australian dollar exchange rate.
Batu Hijau – Equity gold sales at Batu Hijau in Indonesia were in line with expectations, with 54,000 equity ounces of gold and 47 million equity pounds of copper sold at costs applicable to sales of $308 per ounce and $1.43 per pound, respectively, as the Company benefited from the sale of 18,000 equity gold ounces and 13 million equity copper pounds of inventory from the fourth quarter of 2007. The average realized copper price for the quarter was $4.10 per pound, including the impact of the provisional sales mark-to-market adjustment of $0.78 per pound due to higher copper prices.
Batu Hijau experienced extremely heavy rainfall during the first quarter of 2008, causing minor damage to pit infrastructure, as well as adding significant amounts of unexpected water to the pit, potentially limiting the Company’s ability to access high grade ore later in the year, as planned. Expectations for 2008 production are contingent on the extent of dry season access during the third and fourth quarters, which could offset portions of the expected wet season production shortfall. As a result, the Company now expects gold and copper sales to be between 100,000 and 130,000 equity ounces of gold and between 125 and 150 million equity pounds of copper at costs applicable to sales of $340 to $380 per ounce and $1.50 to $1.75 per pound, respectively, compared to original guidance of between 150,000 and 165,000 equity ounces of gold and between 155 and 165 million equity pounds of copper at costs applicable to sales of $285 to $325 per ounce and $1.30 to $1.40 per pound, respectively. Potential production shortfalls due to restricted access in 2008 are expected to be recovered in 2009.
Ahafo – Equity gold sales at Ahafo in Ghana were 105,000 ounces at costs applicable to sales of $464 per ounce. First quarter production was lower than expected due to unplanned mill downtime, unexpected power interruptions and lower than expected grades. Gold sales and costs applicable to sales are expected to remain in line with plans for the year.
Regional operating variances from the year ago quarter, as disclosed in the Company’s previous earnings releases, are outlined in the Results of Consolidated Operations section of the Company’s Form 10-Q located at http://www.newmont.com/.
Major Capital Projects
Consolidated capital expenditures were $454 million during the first quarter as the Company continued to execute on its major capital projects. The Company expects the Yanacocha gold mill and the Nevada power plant to achieve commercial production during the second quarter. Russell Ball, Senior Vice President and Chief Financial Officer, stated, “We are pleased with the safe and successful delivery of these projects on schedule and within current forecasts, especially in light of the inflationary and challenging construction environments in which they were executed. We look forward to the production and reduced operating costs that these projects will deliver in the second half of the year and beyond.” The Company’s 2008 consolidated capital expenditures are expected to be in line with previous guidance of between $1.8 and $2.0 billion.
Nevada Power Plant – Construction of the 200 megawatt coal-fired power plant was approximately 87% complete at the end of the quarter. Commissioning remained on track during the first quarter of 2008, with commercial production expected in the second quarter. Capital costs are in line with previous expectations of between $620 and $640 million. As disclosed previously, the lower cost of self-generated electricity, when compared with projected future market prices in the region, is expected to reduce Nevada’s costs applicable to sales by $60 million per year, or approximately $25 per ounce.
Yanacocha Gold Mill – Construction of the gold mill in Peru was approximately 99% complete at the end of the first quarter. Start up of the gold mill occurred in late March and is on schedule to achieve commercial production in the second quarter of 2008. Capital costs for the project are expected to be at or below the Company’s previous outlook of between $250 and $270 million.
Boddington – Development of the Boddington project in Australia was approximately 69% complete at the end of the first quarter, with start-up expected in late 2008 or early 2009. The Company continues to expect its share of total capital costs to be between $1.4 and $1.6 billion. At March 31, 2008, the Company had hedged approximately 39% of the remaining forecasted Australian dollar denominated capital costs at an average exchange rate of 0.87.
A detailed explanation of regional capital expenditures during the first quarter is outlined in the Liquidity and Capital Resources section of the Company’s Form 10-Q located at http://www.newmont.com/.
Advanced Projects and Exploration
Hope Bay in Canada(1) – With the completion of the Miramar acquisition on March 17, 2008, the Company remains focused on exploration and project development planning, with the objective of creating the Company’s newest core AAA-rated gold mining district, and adding higher grade ore to the Company’s reserves. Efforts during the first quarter were focused on planning for infrastructure improvements and preparation for the 2008 drilling season.
Conga in Peru – Conga continued in Stage 3 of the Capital Effectiveness Program during the first quarter, with a development decision expected in 2008. The Conga project is expected to benefit from synergies between existing Yanacocha infrastructure and shared administrative and other operational services.
Exploration – During the first quarter, the Company spent $39 million on exploration, primarily focused on near-mine non-reserve mineralization conversion, strategic greenfields initiatives and continued drilling on prospective brownfields and greenfields opportunities. The 2008 exploration program is focused on establishing a basis for future reserve replacement from near-term growth opportunities and advancing the longer term, non-reserve mineralization pipeline, particularly at Boddington, Hope Bay and Nassau in Suriname. Additionally, the Company continues to explore targets in conjunction with its joint venture partnerships, which includes the drilling program at La Herradura in Mexico.
(1) Preliminary purchase price information related to the acquisition of Miramar Mining Corporation is provided in Note 13 of the Company’s consolidated financial statements in the Form 10-Q located at http://www.newmont.com/. STATEMENTS OF CONSOLIDATED INCOME Three Months Ended March 31, 2008 2007 (unaudited, in millions, except per share) Revenues Sales- gold, net $1,511 $1,011 Sales- copper, net 432 213 1,943 1,224 Costs and expenses Costs applicable to sales – gold (1) 641 630 Costs applicable to sales – copper (1) 150 123 Amortization 182 179 Accretion 8 7 Exploration 39 39 Advanced projects, research and development 30 16 General and administrative 29 33 Write-down of investments 22 – Other expense, net 63 50 1,164 1,077 Other income (expense) Other income, net 37 17 Interest expense, net (20) (24) 17 (7) Income from continuing operations before income tax, minority interest and equity loss of affiliates 796 140 Income tax expense (235) (44) Minority interest in income of consolidated subsidiaries (192) (56) Equity loss of affiliates (5) – Income from continuing operations 364 40 Income from discontinued operations 6 28 Net income $370 $68 Income per common share Basic: Income from continuing operations $0.81 $0.09 Income from discontinued operations 0.01 0.06 Net income $0.82 $0.15 Diluted: Income from continuing operations $0.80 $0.09 Income from discontinued operations 0.01 0.06 Net income $0.81 $0.15 Basic weighted-average common shares outstanding 453 451 Diluted weighted-average common shares outstanding 457 452 Cash dividends declared per common share $0.10 $0.10 (1) Exclusive of Amortization and Accretion. The Company’s financial statements can be found on the website at http://www.newmont.com/. CONSOLIDATED BALANCE SHEETS At March 31, At December 31, 2008 2007 (unaudited, in millions) ASSETS Cash and cash equivalents $1,014 $1,231 Marketable securities and other short-term investments 59 61 Trade receivables 319 177 Accounts receivable 132 168 Inventories 423 463 Stockpiles and ore on leach pads 366 373 Deferred income tax assets 108 112 Other current assets 125 87 Current assets 2,546 2,672 Property, plant and mine development, net 9,744 9,140 Investments 1,522 1,527 Long-term stockpiles and ore on leach pads 831 788 Deferred income tax assets 937 1,027 Other long-term assets 243 234 Goodwill 186 186 Assets of operations held for sale 5 24 Total assets $16,014 $15,598 LIABILITIES Current portion of long-term debt $261 $255 Accounts payable 304 339 Employee-related benefits 152 153 Income and mining taxes 56 88 Other current liabilities 645 665 Current liabilities 1,418 1,500 Long-term debt 2,886 2,683 Reclamation and remediation liabilities 620 623 Deferred income tax liabilities 1,084 1,025 Employee-related benefits 206 226 Other long-term liabilities 153 150 Liabilities of operations held for sale 262 394 Total liabilities 6,629 6,601 Minority interests in subsidiaries 1,503 1,449 STOCKHOLDERS’ EQUITY Common stock 698 696 Additional paid-in capital 6,677 6,696 Accumulated other comprehensive income 937 957 Retained deficit (430) (801) Total stockholders’ equity 7,882 7,548 Total liabilities and stockholders’ equity $16,014 $15,598 The Company’s financial statements can be found on the website at http://www.newmont.com/. STATEMENTS OF CONSOLIDATED CASH FLOW Three Months Ended March 31, 2008 2007 (unaudited, in millions) Operating activities: Net income $370 $68 Adjustments to reconcile net income to net cash from continuing operations: Amortization 182 179 Income from discontinued operations (6) (28) Accretion of accumulated reclamation obligations 10 9 Deferred income taxes (48) 56 Write-down of investments 22 – Stock based compensation and other benefits 11 13 Minority interest expense 192 56 Gain on asset sales, net (4) (2) Other operating adjustments and write-downs 19 10 Net change in operating assets and liabilities (154) (335) Net cash provided from continuing operations 594 26 Net cash (used in) provided from discontinued operations (100) 32 Net cash provided from operations 494 58 Investing activities: Additions to property, plant and mine development (454) (360) Investments in marketable debt and equity securities (3) (153) Proceeds from sale of marketable debt and equity securities – 124 Acquisitions (318) – Other 8 1 Net cash used in investing activities of continuing operations (767) (388) Net cash used in investing activities of discontinued operations (3) (2) Net cash used in investing activities (770) (390) Financing activities: Proceeds from debt, net 572 – Repayment of debt (376) (21) Dividends paid to common stockholders (45) (45) Dividends paid to minority interests (98) (1) Proceeds from stock issuance 17 9 Change in restricted cash and other 1 8 Net cash provided from (used in) financing activities 71 (50) Effect of exchange rate changes on cash (12) 2 Net change in cash and cash equivalents (217) (380) Cash and cash equivalents at beginning of period 1,231 1,166 Cash and cash equivalents at end of period $1,014 $786 The Company’s financial statements can be found on the website at http://www.newmont.com/. Detailed explanation of the Company’s cash flow statement is outlined in the Liquidity and Capital Resource section of the Form 10-Q located at http://www.newmont.com/. SALES STATISTICS Three Months Ended March 31, 2008 2007 Gold Consolidated ounces sold (thousands) Nevada (1) 526 560 Yanacocha (1) 540 455 Australia/New Zealand Tanami 95 113 Jundee 91 62 Kalgoorlie 69 95 Waihi 31 14 286 284 Batu Hijau (2) 120 84 Ahafo 105 125 Other Kori Kollo 20 24 La Herradura 24 22 Golden Giant – 3 44 49 1,621 1,557 Equity ounces sold (thousands) Nevada (1) 526 560 Yanacocha (1) 277 234 Australia/New Zealand Tanami 95 113 Jundee 91 62 Kalgoorlie 69 95 Waihi 31 14 286 284 Batu Hijau (2) 54 45 Ahafo 105 125 Other Kori Kollo 18 21 La Herradura 24 22 Golden Giant – 3 42 46 1,290 1,294 Discontinued Operations Pajingo – 48 1,290 1,342 Copper Batu Hijau pounds sold (millions) (2) Consolidated 105 91 Equity 47 48 (1) Includes incremental start-up ounces of 1 in 2008. (2) Economic interest decreased to 45% from 52.875% on May 25, 2007. This information and other detailed production statistics can be found in the Regional Operating Statistics section of the Company’s website at http://www.newmont.com/. CAS AND CONSOLIDATED CAPITAL EXPENDITURES STATISTICS Three Months Ended March 31, 2008 2007 Gold Costs Applicable to Sales ($/ounce)(1) Nevada $409 $484 Yanacocha 311 280 Australia/New Zealand Tanami 524 426 Jundee 420 563 Kalgoorlie 778 596 Waihi 455 595 545 521 Batu Hijau 308 317 Ahafo 464 325 Other Operations Kori Kollo 447 333 La Herradura 324 323 Golden Giant – 193 379 319 Average $396 $404 Copper Costs Applicable to Sales ($/pound)(1) Batu Hijau $1.43 $1.34 2008 2007 Capital Expenditures ($ million) Nevada $92 $158 Yanacocha 39 56 Australia/New Zealand 237 96 Batu Hijau 29 7 Africa 33 37 Hope Bay 9 – Other Operations 13 3 Corporate and Other 2 3 Total $454 $360 (1) Excludes amortization and accretion. Beginning in 2008, regional administrative, community development, marketing, and accretion costs have been classified outside of costs applicable to sales. Amounts for 2007 have been reclassified to conform to the 2008 presentation. This information and other detailed production statistics can be found in the Regional Operating Statistics section of the Company’s website at http://www.newmont.com/. Supplemental Information Classification Reporting Changes
Certain amounts for the three months ended March 31, 2007 have been reclassified to conform to the 2008 presentation. The most significant reclassifications were to the income statement results from the historical presentation to Income from discontinued operations in the Consolidated Statements of Income. The Consolidated Statements of Cash Flows have also been reclassified for discontinued operations.
The Company reclassified marketing costs from Costs applicable to sales to General and administrative. Additionally, the Company reclassified the World Gold Council dues from General and administrative to Other expense, net and Accretion from Costs applicable to sales to a separate Accretion line item. Other expense, net also includes community development and regional administration expenses that were reclassified from Costs applicable to sales as these costs relate to the Company’s social responsibility, external and government relations, and regional office costs, which are not a cost of mine production. These changes were reflected in the Consolidated Statements of Income for all periods presented.
Reconciliation of Adjusted Net Income to GAAP Net Income
Management of the Company uses the non-GAAP financial measure Adjusted Net income to evaluate the Company’s operating performance, and for planning and forecasting future business operations. Management believes the use of Adjusted Net income allows investors and analysts to compare the results of the continuing operations of the Company and its controlled subsidiaries relating to the production and sale of minerals to similar operating results of other mining companies, by excluding exceptional or unusual items, income or loss from discontinued operations and the permanent impairment of assets, including marketable securities and goodwill. Management’s determination of the components of Adjusted Net income are evaluated periodically and based, in part, on a review of non-GAAP financial measures used by mining industry analysts.
Adjusted Net income is not, and should not be used as, an alternative to GAAP Net income as reflected in the consolidated financial statements of the Company. It is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute to performance measures calculated in accordance with GAAP. The table below sets forth a reconciliation of Adjusted Net income to GAAP Net income, which is the most directly comparable GAAP financial measure.
Description ($ million expect per Per Per share, after-tax) Q1 2008 Share Q1 2007 Share Adjusted Net income $386 $0.85 $40 $0.09 Write-down of marketable securities (22) (0.04) – – GAAP Income from continuing operations $364 $0.81 $40 $0.09 Income from discontinued operations 6 0.01 28 0.06 GAAP Net income $370 $0.82 $68 $0.15 2008 Annual Guidance Description Apr 2008 Feb 2008 Equity gold sales (million ounces) 5,100 – 5,400 5,100 – 5,400 Costs applicable to sales ($/ounce) $425 – $450 $425 – $450 Equity copper sales (million pounds) 125 – 150 155 – 165 Costs applicable to sales ($/pound) $1.50 – $1.75 $1.30 – $1.40 Consolidated capital expenditures ($ billion) $1,800 – $2,000 $1,800 – $2,000 Amortization ($ million) $725 – $775 $725 – $775 Exploration ($ million) $220 – $230 $220 – $230 Advanced projects, research and development ($ million) $160 – $190 $120 – $180 General and administrative expenses ($ million) $140 – $150 $140 – $150 Interest expense, net ($ million) $60 – $80 $110 – $120 Effective tax rate 28% – 32% 30% – 34%
The Company’s first quarter earnings conference call and web cast presentation will be held on April 24, 2008 beginning at 10:00 a.m. Eastern Time (8:00 a.m. Mountain Time). To participate:
Dial-In Number: 210-839-8502 Leader: John Seaberg Password: Newmont Replay Number: 203-369-3000
The conference call will also be simultaneously carried on our web site at http://www.newmont.com/ under Investor Information/Earnings Release and will be archived there for a limited time.
Cautionary Statement:
This news release contains “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 that are intended to be covered by the safe harbor created by such sections. Such forward-looking statements include, without limitation, (i) estimates of future mineral production and sales; (ii) estimates of future costs applicable to sales, other expenses and taxes for specific operations and on a consolidated basis; (iii) estimates of future capital expenditures, construction, production or closure activities; and (iv) statements regarding potential cost savings, productivity, operating performance, cost structure and competitive position. Where the Company expresses or implies 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, 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 such forward-looking statements. Such risks include, but are not limited to, gold and other metals price volatility, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, political and operational risks in the countries in which we operate, and governmental regulation and judicial outcomes. For a more detailed discussion of such risks and other factors, see the Company’s 2007 Annual Report on Form 10-K, filed on February 21, 2008, with the Securities and Exchange Commission, as well as the Company’s other SEC filings. The Company does not undertake any obligation to release publicly revisions to any “forward-looking statement,” to reflect events or circumstances after the date of this news release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
Newmont Mining Corporation
CONTACT: Investors, John Seaberg, +1-303-837-5743,john.seaberg@newmont.com, Media, Omar Jabara, +1-303-837-5114,omar.jabara@newmont.com, both of Newmont Mining Corporation
Web site: http://www.newmont.com/