Summary
Newmont Mining Corporation (NEM) has announced a significant strategic shift by discontinuing its Merchant Banking Segment. This decision involves disposing of its royalty portfolio and a portion of its existing equity investments within the next twelve months, and ceasing further investments in equity securities not supporting its core mining operations. Consequently, the company anticipates recognizing a substantial non-cash impairment charge of $1,665 million in its second quarter 2007 financial statements due to the impairment of goodwill associated with this segment. While this is a large non-cash charge, Newmont does not expect significant additional cash expenditures beyond normal asset sale costs. The company also took steps to close out its obligation under price-capped forward gold sales contracts, resulting in a pre-tax loss of approximately $531 million for the second quarter of 2007, funded by borrowings under its credit facility. This action effectively removes all of Newmont's exposure to price-capped gold hedging contracts, allowing future revenue to reflect market gold prices.
Key Highlights
- 1Discontinuation of the Merchant Banking Segment, including the sale of royalty and equity investments.
- 2Anticipated non-cash goodwill impairment charge of $1,665 million for the second quarter of 2007.
- 3No significant additional cash expenditures expected from the Merchant Banking Segment exit, other than asset sale costs.
- 4Settlement of price-capped forward gold sales contracts for $578 million.
- 5Recognition of a pre-tax loss of approximately $531 million on the settlement of gold forward contracts.
- 6Elimination of all price-capped gold forward sales and hedging contracts.
- 7Future gold sales revenue will reflect current market prices due to the removal of hedging contracts.