8-KFinancial EventsOther EventsExhibits & Filings

NEWMONT Corp /DE/ 8-K Report, Exit or Disposal Costs (Jul 6, 2007)

Filed July 6, 2007For Securities:NEMNEMCL

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.

Frequently Asked Questions

The impairment charge of $1,665 million is a non-cash expense resulting from the decision to discontinue Newmont's Merchant Banking Segment. The carrying value of the goodwill associated with this segment was deemed impaired under accounting rules because the segment is being wound down.

Newmont will dispose of its royalty portfolio and a portion of its existing equity investments within the next year. Additionally, the company will no longer make new investments in equity securities that do not directly support its core mining business.

Newmont paid $578 million to settle these contracts, which were designed to cap the selling price of gold. This settlement will result in a pre-tax loss of approximately $531 million for the second quarter of 2007. The payment was funded through borrowings under the company's credit facility.

By settling these contracts, Newmont has eliminated all its price-capped forward sales and hedging contracts. This means that going forward, the revenue generated from future gold sales will directly reflect the prevailing market prices of gold, providing greater upside potential.