10-QPeriod: Q2 FY2004

NEWMONT Corp /DE/ Quarterly Report for Q2 Ended Jun 30, 2004

Filed August 2, 2004For Securities:NEMNEMCL

Summary

Newmont Mining Corporation reported strong financial performance for the second quarter and first half of 2004, driven by higher gold and copper prices. Revenues increased significantly due to higher realized prices and the consolidation of Batu Hijau, which began in January 2004. The company saw substantial growth in its base metals segment, largely attributable to Batu Hijau. Despite increased costs associated with higher production levels and the Batu Hijau consolidation, Newmont maintained healthy margins. The company also provided positive outlooks for future production from key development projects like Ahafo and Leeville. Financially, Newmont strengthened its balance sheet, increasing cash and cash equivalents and managing its debt effectively. The company remains focused on exploration and development to replace depleted reserves and enhance long-term value for shareholders.

Key Highlights

  • 1Consolidated revenues increased significantly in Q2 and H1 2004, driven by higher gold and copper prices and the consolidation of Batu Hijau.
  • 2Base metals revenue saw a substantial increase due to the consolidation of Batu Hijau and higher copper prices.
  • 3Total cash costs per ounce of gold increased in Q2 and H1 2004, influenced by higher production, processing of lower-grade material, and currency fluctuations.
  • 4Cash and cash equivalents increased, and the company managed its debt levels effectively, with long-term debt increasing primarily due to the consolidation of Batu Hijau project debt.
  • 5Significant capital expenditures were made in H1 2004, primarily for property, plant, and mine development, with expectations of further investment in key projects like Ahafo and Leeville.
  • 6Exploration, research, and development expenditures increased in H1 2004, reflecting a strategy to replace depleted reserves and invest in future growth.
  • 7The company recorded a $38.5 million impairment on its investment in Kinross Gold Corporation due to an other-than-temporary decline in value.

Frequently Asked Questions

Newmont's revenue saw a substantial increase driven by higher average realized gold prices, which rose from $353 per ounce in Q2 2003 to $395 per ounce in Q2 2004. Additionally, the consolidation of Batu Hijau, an Indonesian mining operation, which began in January 2004, significantly contributed to the revenue growth, especially in the base metals segment due to higher copper prices and sales volumes.

The consolidation of Batu Hijau, effective January 1, 2004, as per FIN 46R, resulted in a significant increase in revenues, costs, depreciation, depletion, and amortization. This consolidation also led to a higher long-term debt balance due to the inclusion of Batu Hijau's non-recourse project debt. The company recorded a cumulative effect of a change in accounting principle, net of tax, of $47.1 million related to this consolidation.

Newmont has a positive outlook for future production, driven by its development projects. The Ahafo project in Ghana is expected to generate average steady-state annual gold sales of approximately 500,000 ounces commencing in 2006. In Nevada, the Leeville underground project is progressing towards operations by the end of 2005, with expected average annual gold production of approximately 500,000 ounces, and the Phoenix development project, anticipated to begin operations in 2006, is expected to produce between 400,000 and 450,000 ounces of gold annually.

Yes, Newmont recognized a $38.5 million impairment on its investment in Kinross Gold Corporation during the second quarter of 2004 due to an other-than-temporary decline in value. Additionally, the company recorded a $16.3 million write-down of long-lived assets related to the Ovacik mine in Turkey due to ongoing operational and legal challenges.