10-KPeriod: FY2006

NEWMONT Corp /DE/ Annual Report, Year Ended Dec 31, 2006

Filed February 26, 2007For Securities:NEMNEMCL

Summary

Newmont Mining Corporation's 2006 10-K filing highlights its primary role as a global gold producer with significant operations across the United States, Australia, Peru, Indonesia, and Ghana. The company also engages in copper production, mainly through its Indonesian operations. A substantial portion of Newmont's revenue, approximately 87% in 2006, is derived from gold sales, with its operations geographically diversified, though the United States and Peru represent the largest segments for both revenues and long-lived assets. The filing also details the company's Merchant Banking segment, which manages a royalty portfolio, equity investments, and downstream refining businesses, and its Exploration segment, crucial for identifying new mineral reserves. Investors should note the company's general philosophy of avoiding gold hedging to provide direct leverage to gold price movements, though some derivative contracts are used for specific risk management. The report provides historical gold and copper price data, with gold prices experiencing a significant increase in 2006, reaching an average of $604 per ounce. Proven and probable gold reserves stood at 93.9 million equity ounces as of December 31, 2006. The filing also addresses environmental matters, including accrued reclamation costs and liabilities associated with former mining activities, with potential for significant fluctuations in ultimate costs.

Key Highlights

  • 1Newmont's primary business is gold production, accounting for 87% of net revenues in 2006, with significant operations in the US, Peru, Australia, and Indonesia.
  • 2The company also produces copper, primarily from its Batu Hijau operation in Indonesia, which contributed 13% of net revenues in 2006.
  • 3Gold prices saw a substantial increase in 2006, averaging $604 per ounce, up significantly from previous years.
  • 4As of December 31, 2006, Newmont reported 93.9 million equity ounces of proven and probable gold reserves.
  • 5The Merchant Banking segment contributes to revenue through royalties, dividends, and equity investments, with its equity portfolio valued at approximately $1,354 million.
  • 6Exploration expenses were $170 million in 2006, with the company focused on adding to its mineral reserves through both Greenfield and near-mine exploration.
  • 7The company accrues significant amounts for environmental reclamation costs, with $520 million recorded for current properties and $85 million for former operations as of December 31, 2006.

Frequently Asked Questions

Newmont's primary revenue source is gold production. In 2006, gold sales accounted for approximately 87% of the company's net revenues.

The filing indicates a significant increase in gold prices. The average afternoon fixing price on the London Bullion Market in 2006 was $604 per ounce, a considerable rise from previous years, reaching $725 at its high and $525 at its low.

As of December 31, 2006, Newmont reported proven and probable gold reserves of 93.9 million equity ounces.

Newmont generally avoids gold hedging to provide shareholders with leverage to gold price changes, aiming to sell its gold production at prevailing market prices. However, the company does use derivative contracts for specific risk management purposes related to commodities, interest rates, and foreign currencies, and to protect the selling price for certain anticipated gold and copper production.

Newmont has accrued $520 million for reclamation costs related to currently developed and producing properties and $85 million for environmental obligations associated with former mining activities as of December 31, 2006. The company notes that the ultimate liability for these former operations could be as much as 89% greater or 27% lower than the amount accrued.