01—Abstract
Summary
Summary of the 10-K/A filed June 8, 2009. Cited figures are marked; the original filing is the authoritative source.
Newmont Mining's FY2008 financials, as presented in this 10-K/A (Amendment No. 1, signed June 8, 2009), show a company that returned to solid profitability after a loss-heavy 2007.
Revenue rose 12% to $6.20 billiona, driven by gold sales of $5.45 billion, and net income swung to $853 million ($1.87 diluted EPS) from a $1.89 billion loss in 2007, which had included a $1.12 billion goodwill write-down and a $531 million loss on settling price-capped forward sales. Operating cash flow was $1.29 billion, but capital spending of $1.88 billion, largely on the Boddington and Akyem projects, left the company reliant on external financing. The balance sheet grew more leveraged.
Total debt including current portion reached roughly $3.54 billionb, up from about $2.94 billion, and cash fell to $435 million from $1.23 billion. Stockholders' equity declined to $7.10 billion from $7.55 billion because of a $1.21 billion hit to other comprehensive income from falling marketable securities values, foreign currency translation and pension losses. Minority interests of $1.37 billion, mainly Yanacocha and Batu Hijau, remain a significant claim on consolidated earnings, absorbing $329 million of income in 2008.
Investors should weigh the strong 2008 earnings and the $1.7 billionc of pro-forma liquidity that management expected from the February 2009 equity and convertible note offerings and the pending Boddington buyout against the rising debt load, the Batu Hijau divestiture arbitration with Indonesia, the Midnite CERCLA liability, and sensitivity to gold price moves. Note that this summary reflects only the financial statements and notes supplied; the MD&A and risk factors were not included.
02—Key points
Key Highlights
- Revenue rose 12% to $6,199 million in 2008, with gold sales of $5,447 million and copper sales of $752 million, up from $5,526 million in 2007.
- Net income was $853 million ($1.87 diluted EPS), a sharp reversal from a net loss of $1,886 million in 2007 that included a $1,122 million goodwill write-down.
- Cash and cash equivalents fell to $435 million from $1,231 million, while operating cash flow of $1,292 million was consumed by $2,157 million of investing activity, mainly capital expenditures.
- Long-term debt rose to $3,373 million from $2,683 million, with the corporate revolver drawn to $757 million; pro-forma debt rises further after the February 2009 convertible notes issuance.
- Stockholders' equity fell to $7,102 million from $7,548 million due to a $1,210 million other comprehensive loss from securities impairments, currency translation and pension liabilities.
- Minority interests in consolidated subsidiaries (Yanacocha, Batu Hijau) absorbed $329 million of 2008 income and carry $1,370 million on the balance sheet.
- Subsequent events include a $750 million cash acquisition of AngloGold Ashanti's 33.33% Boddington interest, a $1,233 million common stock offering, and a $504 million convertible notes offering in February 2009.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2008filed June 8, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| R&D Expenses | $166.00M$62.00M | +167.7% |
| Operating Expenses | $4.82B$5.84B | −17.4% |
| Operating Income | $816.00M-$988.00M | +182.6% |
| Interest Expense | $135.00M$118.00M | +14.4% |
| Net Income | $831.00M-$1.90B | +143.9% |
| EPS (Basic) | $1.83— | — |
| EPS (Diluted) | $1.83— | — |
| Shares Outstanding (Basic) | 454.00M— | — |
| Shares Outstanding (Diluted) | 455.00M— | — |
05—Questions
Frequently Asked Questions
Why did Newmont swing from a large net loss in 2007 to a profit in 2008?
The 2007 loss was driven by non-cash and one-time charges: a $1,122 million write-down of Exploration Segment goodwill, a $531 million pre-tax loss on settling price-capped forward sales contracts, and a $923 million loss from discontinued operations tied to the Merchant Banking exit. None of these repeated in 2008. Net income of $853 million in 2008 reflected higher gold prices and sales, along with $123 million of other income, including $110 million from Canadian Oil Sands Trust.
How leveraged is Newmont after 2008, and what changed in early 2009?
Total debt including current portion was about $3.54 billion at year-end 2008, up from roughly $2.94 billion, and cash dropped to $435 million. In February 2009, Newmont raised about $1.23 billion through a common stock offering and about $504 million through 3% convertible notes due 2012. Management's pro-forma capitalization table shows total long-term debt of about $3.69 billion and cash and short-term investments of about $2.18 billion after these transactions.
What risks are highlighted in the legal and environmental disclosures?
The most notable items are the Midnite Mine CERCLA case, where Newmont was found jointly and severally liable for past and future response costs and is appealing; the Batu Hijau arbitration with the Indonesian government over share divestiture and the Contract of Work, with a ruling expected in the first half of 2009; and the Buyat Bay criminal appeal in Indonesia. Reclamation and remediation liabilities total about $780 million, and management estimates the environmental accrual could be up to 126% higher or 7% lower than the amount recorded.
Are Newmont's reported earnings fully attributable to common shareholders?
No. Minority interests in consolidated subsidiaries took $329 million of 2008 income, mainly from Yanacocha ($232 million) and Batu Hijau ($98 million). Newmont owns 51.35% of Yanacocha and 45% of Batu Hijau economically, so a large share of those mines' profits goes to partners. Investors should look at attributable income after minority interests when comparing per-share results across periods.
What does the Boddington acquisition mean for Newmont's future?
Under a January 2009 agreement, Newmont plans to buy AngloGold Ashanti's 33.33% interest in Boddington for $750 million in cash at closing, plus $240 million payable in cash or stock in December 2009, and a royalty capped at $100 million. Upon closing, Newmont would own 100% of the project, which had about $1.3 billion of construction-in-progress in Australia/New Zealand at year-end 2008, so the deal would concentrate both future production and capital spending in Australia.
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