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Newmont Mining Corp/DE · 10-K · For 12/31/07

Filed On 2/21/08, 2:14pm ET   ·   Accession Number 1193125-8-35169   ·   SEC File 1-31240

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  As Of                Filer                Filing    For/On/As Docs:Size              Issuer               Agent

 2/21/08  Newmont Mining Corp/DE            10-K       12/31/07   15:3.7M                                   RR Donnelley/FA

Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   2.87M 
 3: EX-10.17    Senior Executive Compensation Program Dated         HTML     44K 
                          February 19, 2008                                      
 4: EX-10.25    Employment Agreement Effective January 1, 2007      HTML     34K 
 5: EX-10.26    Consulting Agreement Effective May 1, 2007          HTML     26K 
 2: EX-10.3     Amendment One to the Pension Equalization Plan of   HTML     14K 
                          Newmont                                                
 6: EX-10.34    Summary of Non-Employee Director Compensation and   HTML     14K 
                          Benefits                                               
 7: EX-10.35    Summary of Executive Compensation                   HTML     22K 
 8: EX-12.1     Statement Re Computation of Ratio of Earnings to    HTML     29K 
                          Fixed Charges                                          
 9: EX-21       Subsidiaries of Newmont Mining Corporation          HTML    110K 
10: EX-23.1     Consent of Pricewaterhousecoopers LLP               HTML      9K 
11: EX-24       Power of Attorney                                   HTML     18K 
12: EX-31.1     Certification Pursuant to Rule 13A-14 or 15D-14 of  HTML     13K 
                          the Securities Exchange Act                            
13: EX-31.2     Certification Pursuant to Rule 13A-14 or 15D-14 of  HTML     13K 
                          the Securities Exchange Act                            
14: EX-32.1     Statement Required by 18 U.S.C. Section 1350        HTML     10K 
15: EX-32.2     Statement Required by 18 U.S.C. Section 1350        HTML     10K 


10-K   —   Annual Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Table of Contents
"Part I
"Business
"Introduction
"Segment Information, Export Sales, etc
"Products
"Hedging Activities
"Exploration
"Licenses and Concessions
"Condition of Physical Assets and Insurance
"Environmental Matters
"Employees
"Forward-Looking Statements
"Available Information
"Risk Factors
"Risks Related to the Mining Industry Generally
"Risks Related to Newmont
"Properties
"Gold and Copper Processing Methods
"Production Properties
"Operating Statistics
"Proven and Probable Equity Reserves
"Legal Proceedings
"Submission of Matters to A Vote of Security Holders
"Executive Officers of the Registrant
"Part Ii
"Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
"Selected Financial Data
"Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations
"Overview
"Accounting Developments
"Critical Accounting Policies
"Consolidated Financial Results
"Results of Consolidated Operations
"Recently Issued Accounting Pronouncements and Developments
"Liquidity and Capital Resources
"Environmental
"Quantitative and Qualitative Disclosures About Market Risk
"Metal Price
"Foreign Currency
"Hedging
"Fixed and Variable Rate Debt
"Financial Statements and Supplementary Data
"Report of Independent Registered Public Accounting Firm
"Statements of Consolidated Income
"Consolidated Balance Sheets
"Statements of Consolidated Changes in Stockholders' Equity
"Statements of Consolidated Comprehensive Income
"Statements of Consolidated Cash Flows
"Notes to Consolidated Financial Statements
"Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
"Controls and Procedures
"Other Information
"Part Iii
"Directors and Executive Officers of the Registrant
"Executive Compensation
"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
"Certain Relationships and Related Transactions
"Principal Accountant Fees and Services
"Part Iv
"Exhibits and Financial Statement Schedules
"Signatures
"Exhibit Index

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  Form 10-K  
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-K

 

 

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2007

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                  to                 

Commission File Number 001-31240

 

 

Newmont Mining Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   84-1611629

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

1700 Lincoln Street

Denver, Colorado

  80203
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code (303) 863-7414

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Each Exchange on Which Registered

Common Stock, $1.60 par value

  New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one): Large accelerated filer  x  Accelerated filer  ¨  Non-accelerated filer  ¨  Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of June 29, 2007, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was $17,524,404,968 based on the closing sale price as reported on the New York Stock Exchange. There were 435,838,958 shares of common stock outstanding (and 17,449,759 exchangeable shares exchangeable into Newmont Mining Corporation common stock on a one-for-one basis) on February 14, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s definitive Proxy Statement submitted to the Registrant’s stockholders in connection with our 2008 Annual Stockholders Meeting to be held on April 23, 2008, are incorporated by reference into Part III of this report.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

          Page
   PART I   

ITEM 1.

  

BUSINESS

   1
  

Introduction

   1
  

Segment Information, Export Sales, etc.

   2
  

Products

   2
  

Hedging Activities

   4
  

Exploration

   4
  

Licenses and Concessions

   5
  

Condition of Physical Assets and Insurance

   6
  

Environmental Matters

   6
  

Employees

   7
  

Forward-Looking Statements

   7
  

Available Information

   8

ITEM 1A.

  

RISK FACTORS

   9
  

Risks Related to the Mining Industry Generally

   9
  

Risks Related to Newmont

   11

ITEM 2.

  

PROPERTIES

   17
  

Gold and Copper Processing Methods

   17
  

Production Properties

   18
  

Operating Statistics

   24
  

Proven and Probable Equity Reserves

   26

ITEM 3.

  

LEGAL PROCEEDINGS

   33

ITEM 4.

  

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   33

ITEM 4A.

  

EXECUTIVE OFFICERS OF THE REGISTRANT

   33
   PART II   

ITEM 5.

   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES    35

ITEM 6.

  

SELECTED FINANCIAL DATA

   36

ITEM 7.

   MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS    37
  

Overview

   37
  

Accounting Developments

   40
  

Critical Accounting Policies

   42
  

Consolidated Financial Results

   47
  

Results of Consolidated Operations

   55
  

Recently Issued Accounting Pronouncements and Developments

   65
  

Liquidity and Capital Resources

   66
  

Environmental

   73
  

Forward-Looking Statements

   74

ITEM 7A.

  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   75
  

Metal Price

   75
  

Foreign Currency

   75
  

Hedging

   75
  

Fixed and Variable Rate Debt

   78
  

Pension and Other Benefit Plans

  

 

i


Table of Contents
          Page

ITEM 8.

  

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   79

ITEM 9.

   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE    159

ITEM 9A.

  

CONTROLS AND PROCEDURES

   159

ITEM 9B.

  

OTHER INFORMATION

   159
   PART III   

ITEM 10.

  

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   160

ITEM 11.

  

EXECUTIVE COMPENSATION

   160

ITEM 12.

   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS    160

ITEM 13.

  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   161

ITEM 14.

  

PRINCIPAL ACCOUNTANT FEES AND SERVICES

   161
   PART IV   

ITEM 15.

  

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 

   162

SIGNATURES

   S-1

EXHIBIT INDEX

   E-1

 

ii


Table of Contents

This document (including information incorporated herein by reference) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involve a degree of risk and uncertainty due to various factors affecting Newmont Mining Corporation and our affiliates and subsidiaries. For a discussion of some of these factors, see the discussion in Item 1A, Risk Factors, of this report.

PART I

ITEM 1. BUSINESS (dollars in millions except per share, per ounce and per pound amounts)

Introduction

Newmont Mining Corporation is primarily a gold producer with significant assets or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, Bolivia, New Zealand and Mexico. As of December 31, 2007, Newmont had proven and probable gold reserves of 86.5 million equity ounces and an aggregate land position of approximately 42,680 square miles (110,550 square kilometers). Newmont is also engaged in the production of copper, principally through its Batu Hijau operation in Indonesia. Newmont Mining Corporation’s original predecessor corporation was incorporated in 1921 under the laws of Delaware.

Newmont’s corporate headquarters are in Denver, Colorado, USA. In this report, “Newmont,” the “Company,” “our” and “we” refer to Newmont Mining Corporation and/or our affiliates and subsidiaries. All dollars are in millions, except per share, per ounce, and per pound amounts.

Newmont’s revenues and long-lived assets are geographically distributed as follows:

 

     Revenues     Long-Lived Assets  
     2007     2006     2005     2007     2006     2005  

United States

   29 %   29 %   23 %   39 %   54 %   55 %

Peru

   20 %   32 %   35 %   11 %   10 %   10 %

Australia/New Zealand

   15 %   15 %   15 %   12 %   8 %   7 %

Indonesia

   28 %   19 %   23 %   15 %   15 %   17 %

Ghana

   6 %   3 %       8 %   8 %   6 %

Other(1)

   2 %   2 %   4 %   15 %   5 %   5 %

 

(1)

Other includes Canada, Mexico and Bolivia.

During June 2007, Newmont’s Board of Directors approved a plan to cease Merchant Banking activities. Merchant Banking previously provided advisory services to assist in managing the Company’s portfolio of operating and property interests. Merchant Banking was also engaged in developing value optimization strategies for operating and non-operating assets, business development activities, merger and acquisition analysis and negotiations, monetizing inactive exploration properties, capitalizing on proprietary technology and know-how and acting as an internal resource for other corporate groups to improve and maximize business outcomes. As a result of the Board’s approval of management’s plan to cease Merchant Banking activities, the Company recorded a $1,665 non-cash charge to impair the goodwill associated with the Merchant Banking Segment in the second quarter of 2007.

On October 9, 2007, the Company announced the proposed acquisition of Miramar Mining Corporation (“Miramar”) and offered to acquire all of the outstanding common shares of Miramar for C$6.25 in cash. As of December 31, 2007, approximately 155 million common shares of Miramar had been validly deposited to Newmont’s offer. Newmont accepted and paid for such shares, representing approximately 70% of the common shares of Miramar which, in addition to the 18 million shares previously owned by the Company, brought the Company’s interest in Miramar to approximately 78%. Miramar is a Canadian gold company that controls the

 

1


Table of Contents

Hope Bay project, a large undeveloped gold project in Nunavut, Canada. The Hope Bay project is consistent with the Company’s strategic focus on exploration and project development and was acquired with the intention of adding higher grade ore reserves and developing a new core gold mining district in a AAA-rated country.

In January 2008, Newmont acquired approximately 40 million additional common shares of Miramar at a price of C$6.25 per common share, bringing its interest in Miramar to 96%. This successfully completed the offer to acquire all of the outstanding common shares of Miramar. Newmont has mailed a notice of compulsory acquisition pursuant to the Business Corporations Act (British Columbia) to acquire all the remaining common shares of Miramar that were not acquired pursuant to the offer. As a result of the acquisition, Newmont owns the Hope Bay gold mining project in the Nunavut Territory of Canada.

On December 20, 2007, Newmont sold its portfolio of royalty assets and certain other non-core investments to the new Franco-Nevada Corporation in a cash transaction for $1,187, resulting in a $905 pre-tax gain.

For additional information, see Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations.

Segment Information, Export Sales, etc.

We have operating segments of Nevada, Yanacocha in Peru, Australia/New Zealand, Batu Hijau in Indonesia, Africa and Other Operations comprised of smaller operations in Bolivia, Mexico and Canada. We also have an Exploration Segment. See Note 30 to the Consolidated Financial Statements for information relating to our business segments, our domestic and export sales, and our non-dependence on a limited number of customers.

Products

Gold

General. We had consolidated sales of 6.2 million ounces of gold (5.3 million equity ounces) in 2007, 7.2 million ounces of gold (5.9 million equity ounces) in 2006 and 8.2 million ounces (6.5 million equity ounces) in 2005. For 2007, 2006 and 2005, 78%, 86% and 84%, respectively, of our net revenues were attributable to gold sales. Of our 2007 gold sales, approximately 38% came from Nevada, 25% from Yanacocha, 19% from Australia/New Zealand, 8% from Batu Hijau and 7% from Africa. References in this report to “equity ounces” or “equity pounds” mean that portion of gold or copper produced, sold or included in proven and probable reserves that is attributable to our ownership or economic interest.

Most of our revenue comes from the sale of refined gold in the international market. The end product at our gold operations, however, is generally doré bars. Doré is an alloy consisting mostly of gold but also containing silver, copper and other metals. Doré is sent to refiners to produce bullion that meets the required market standard of 99.95% pure gold. Under the terms of our refining agreements, the doré bars are refined for a fee, and our share of the refined gold and the separately-recovered silver are credited to our account or delivered to buyers. Gold sold from Batu Hijau, and a portion of the gold from Phoenix in Nevada, is contained in a concentrate.

Gold Uses. Gold has two main categories of use: fabrication and investment. Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. Gold investors buy gold bullion, official coins and jewelry.

Gold Supply. The supply of gold consists of a combination of current production from mining and the draw-down of existing stocks of gold held by governments, financial institutions, industrial organizations and private individuals. In recent years, current mine production has accounted for 60% to 70% of the annual supply of gold.

 

2


Table of Contents

Gold Price. The following table presents the annual high, low and average afternoon fixing prices for gold over the past ten years, expressed in U.S. dollars per ounce, on the London Bullion Market.

 

Year

   High    Low    Average

1998

   $ 313    $ 273    $ 294

1999

   $ 326    $ 253    $ 279

2000

   $ 313    $ 264    $ 279

2001

   $ 293    $ 256    $ 271

2002

   $ 349    $ 278    $ 310

2003

   $ 416    $ 320    $ 363

2004

   $ 454    $ 375    $ 410

2005

   $ 536    $ 411    $ 444

2006

   $ 725    $ 525    $ 604

2007

   $ 841    $ 608    $ 695

2008 (through February 14, 2008)

   $ 925    $ 847    $ 895

 

Source: Kitco, Reuters and the London Bullion Market Association

On February 14, 2008, the afternoon fixing price for gold on the London Bullion Market was $906 per ounce and the spot market price of gold on the New York Commodity Exchange was $907 per ounce.

We generally sell our gold at the prevailing market price during the month in which the gold is delivered to the customer. We recognize revenue from a sale when the price is determinable, the gold has been delivered, the title has been transferred to the customer and collection of the sales price is reasonably assured.

Copper

General. We had consolidated sales of 428 million pounds of copper (204 million equity pounds) in 2007, 435 million pounds of copper (230 million equity pounds) in 2006 and 573 million pounds (303 million equity pounds) in 2005. For 2007, 2006 and 2005, 22%, 14% and 16%, respectively, of our net revenues were attributable to copper. As of December 31, 2007, we had a 45% ownership interest in the Batu Hijau operation in Indonesia, which began production in 1999. Production at Batu Hijau is in the form of a copper/gold concentrate that is sold to smelters for further treatment and refining.

Copper Uses. Refined copper is incorporated into wire and cable products for use in the construction, electric utility, communications and transportation industries. Copper is also used in industrial equipment and machinery, consumer products and a variety of other electrical and electronic applications, and is also used to make brass. Copper substitutes include aluminum, plastics, stainless steel and fiber optics. Refined, or cathode, copper is also an internationally traded commodity.

 

3


Table of Contents

Copper Supply. The supply of copper consists of a combination of current production from mining and recycled scrap material. Copper supply has not kept pace with increasing demand in recent years, resulting in price increases reflected in the chart below.

Copper Price. The price of copper is quoted on the London Metal Exchange in terms of dollars per metric ton of high grade copper. The following table presents the dollar per pound equivalent of the annual high, low and average prices of high grade copper on the London Metal Exchange over the past ten years.

 

Year

   High    Low    Average

1998

   $ 0.85    $ 0.65    $ 0.75

1999

   $ 0.84    $ 0.61    $ 0.71

2000

   $ 0.91    $ 0.73    $ 0.82

2001

   $ 0.83    $ 0.60    $ 0.72

2002

   $ 0.77    $ 0.64    $ 0.71

2003

   $ 1.05    $ 0.70    $ 0.81

2004

   $ 1.49    $ 1.06    $ 1.30

2005

   $ 2.11    $ 1.39    $ 1.67

2006

   $ 3.99    $ 2.06    $ 3.05

2007

   $ 3.77    $ 2.37    $ 3.24

2008 (through February 14, 2008)

   $ 3.55    $ 3.02    $ 3.27

 

Source: London Metal Exchange

On February 14, 2008, the closing price of high grade copper was $3.53 per pound on the London Metal Exchange. Our ability to sell copper at market prices is limited in some cases by hedging activities, more particularly described in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, and Note 14 to the Consolidated Financial Statements.

Hedging Activities

We generally avoid gold hedging. Our philosophy is to provide shareholders with leverage to changes in the gold price by selling our gold production at market prices. We have, however, historically entered into derivative contracts to protect the selling price for certain anticipated gold and copper production and to manage risks associated with commodities, interest rates and foreign currencies.

For additional information, see Hedging in Item 7A, Quantitative and Qualitative Disclosures about Market Risk, and Note 14 to the Consolidated Financial Statements.

Exploration

Our exploration group is responsible for all activities, regardless of location, associated with our efforts to discover new mineralized material and, if successful, advance such mineralized material into proven and probable reserves. We conduct exploration in areas surrounding our existing mines for the purpose of locating additional deposits and determining mine geology, and in other prospective gold regions globally. Near-mine exploration can result in the discovery of new gold mineralization, which will receive the economic benefit of existing operating, processing, and administrative infrastructures. Greenfields exploration is where a discovery of new gold mineralization would likely require the investment of new capital to build a separate, stand-alone operation away from any of our existing infrastructure. Our exploration group employs state-of-the-art technology, including airborne geophysical data acquisition systems, satellite location devices and field-portable imaging systems, as well as geochemical and geological prospecting methods, to identify prospective targets. We expensed $177 in 2007, $166 in 2006 and $143 in 2005 on Exploration.

 

4


Table of Contents

As of December 31, 2007, we had proven and probable gold reserves of 86.5 million equity ounces. We added 0.8 million net equity ounces to proven and probable reserves, with 8.2 million equity ounces of depletion and divestitures during 2007. A reconciliation of the changes in proven and probable reserves during the past three years is as follows:

 

        2007         2006         2005    
     (millions of equity ounces)  

Opening balance

   93.9     93.2     92.4  

Greenfield additions(1)

   1.6     1.7     5.5  

Near-mine additions

   (0.8 )   4.2     3.9  
                  

Total additions(2)

   0.8     5.9     9.4  

Acquisitions

       3.7      

Depletion

   (7.3 )   (7.4 )   (8.3 )

Other divestments(3)

   (0.9 )   (1.5 )   (0.3 )
                  

Closing balance

   86.5     93.9     93.2  
                  

 

(1)

Additions attributable to the Exploration Segment.

(2)

The impact of the change in gold price assumption on reserve additions was 0.7, 3.1 and 2.6 million equity ounces in 2007, 2006 and 2005, respectively.

(3)

In December 2007, the Pajingo operation was sold. In May 2007, Newmont’s economic interest in Batu Hijau was reduced from 52.875% to 45%. In August 2006, the government of Uzbekistan appropriated the Company’s 50% interest in the Zarafshan-Newmont Joint Venture.

In Nevada, reserves decreased by depletion of 3.7 million equity ounces, resulting in total proven and probable reserves of 29.4 million equity ounces as of December 31, 2007.

In Peru, reserves decreased to 14.2 million equity ounces, after additions of 0.3 million equity ounces and depletion of 1.2 million equity ounces.

In Australia/New Zealand, reserves increased to 19.4 million equity ounces after depletion of 1.5 million equity ounces, the sale of the Pajingo assets during 2007, and 2.3 million equity ounces of reserve additions, primarily from Boddington and Jundee.

At Batu Hijau, we depleted 0.3 billion equity pounds of copper and 0.3 million equity ounces of gold, and added 0.4 billion equity pounds of copper and 0.3 million equity ounces of gold due to increased metal prices. Additions were partially offset by higher costs and revised geotechnical assumptions. On May 25, 2007, the minority owner of Batu Hijau fully repaid a loan from a Newmont subsidiary. As a result of the loan repayment, our economic interest was reduced from 52.875% to 45%. We reported proven and probable reserves of 4.1 billion equity pounds of copper and 4.2 million equity ounces of gold as of December 31, 2007.

At Ahafo in Ghana, proven and probable reserves decreased by 2.4 million equity ounces as a result of increased cost impacts and by 0.5 million equity ounces due to depletion. As of December 31, 2007, we reported reserves of 9.7 million equity ounces at Ahafo and 7.7 million equity ounces at Akyem.

For additional information, see Item 2, Properties, Proven and Probable Reserves.

Licenses and Concessions

Other than operating licenses for our mining and processing facilities, there are no third party patents, licenses or franchises material to our business. In many countries, however, we conduct our mining and exploration activities pursuant to concessions granted by, or under contract with, the host government. These countries include, among others, Australia, Bolivia, Canada, Ghana, Indonesia, Peru, New Zealand and Mexico.

 

5


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The concessions and contracts are subject to the political risks associated with foreign operations. See Item 1A, Risk Factors, Risks Related to Newmont Operations, below. For a more detailed description of our Indonesian Contract of Work, see Item 2, Properties, below.

Condition of Physical Assets and Insurance

Our business is capital intensive, requiring ongoing capital investment for the replacement, modernization or expansion of equipment and facilities. For more information, see Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, Liquidity and Capital Resources, below.

We maintain insurance policies against property loss and business interruption and insure against risks that are typical in the operation of our business, in amounts that we believe to be reasonable. Such insurance, however, contains exclusions and limitations on coverage, particularly with respect to environmental liability and political risk. There can be no assurance that claims would be paid under such insurance policies in connection with a particular event. See Item 1A, Risk Factors, Risks Related to Newmont Operations, below.

Environmental Matters

Our United States mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment, including the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Endangered Species Act; the Federal Land Policy and Management Act; the National Environmental Policy Act; the Resource Conservation and Recovery Act; and related state laws. These laws and regulations are continually changing and are generally becoming more restrictive. Our activities outside the United States are also subject to governmental regulations for the protection of the environment.

We conduct our operations so as to protect public health and the environment and believe our operations are in compliance with applicable laws and regulations in all material respects. Each operating mine has a reclamation plan in place that meets all applicable legal and regulatory requirements. We have made, and expect to make in the future, expenditures to comply with such laws and regulations. We have made estimates of the amount of such expenditures, but cannot precisely predict the amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. As of December 31, 2007, $569 was accrued for reclamation costs relating to currently developed and producing properties.

We are also involved in several matters concerning environmental obligations associated with former, primarily historic, mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites. We believe that the related environmental obligations associated with these sites are similar in nature with respect to the development of remediation plans, their risk profile and the activities required to meet general environmental standards. Based upon our best estimate of our liability for these matters, $125 was accrued as of December 31, 2007 for such obligations associated with properties previously owned or operated by us or our subsidiaries. These amounts are included in Other current liabilities and Reclamation and remediation liabilities. Depending upon the ultimate resolution of these matters, we believe that it is reasonably possible that the liability for these matters could be as much as 61% greater or 18% lower than the amount accrued as of December 31, 2007. The amounts accrued for these matters are reviewed periodically based upon facts and circumstances available at the time. Changes in estimates are charged to costs and expenses in the period when estimates are revised.

For a discussion of the most significant reclamation and remediation activities, see Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, and Notes 24 and 32 to the Consolidated Financial Statements, below.

 

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Table of Contents

Employees

There were approximately 15,000 people employed by Newmont as of December 31, 2007.

Forward-Looking Statements

Certain statements contained in this report (including information incorporated by reference) are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provided for under these sections. Our forward-looking statements include, without limitation:

 

   

Statements regarding future earnings;

 

   

Estimates of future mineral production and sales, for specific operations and on a consolidated or equity basis;

 

   

Estimates of future costs applicable to sales, other expenses and taxes for specific operations and on a consolidated basis;

 

   

Estimates of future cash flows;

 

   

Estimates of future capital expenditures and other cash needs, for specific operations and on a consolidated basis, and expectations as to the funding thereof;

 

   

Estimates regarding timing of future capital expenditures, construction, production or closure activities;

 

   

Statements as to the projected development of certain ore deposits, including estimates of development and other capital costs and financing plans for these deposits;

 

   

Estimates of reserves and statements regarding future exploration results and reserve replacement and the sensitivity of reserves to metal price changes;

 

   

Statements regarding the availability and costs related to future borrowing, debt repayment and financing;

 

   

Statements regarding modifications to hedge and derivative positions;

 

   

Statements regarding future transactions;

 

   

Statements regarding the impacts of changes in the legal and regulatory environment in which we operate; and

 

   

Estimates of future costs and other liabilities for certain environmental matters.

Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by those forward-looking statements. Such risks include, but are not limited to: the price of gold, copper and other commodities; currency fluctuations; geological and metallurgical assumptions; operating performance of equipment, processes and facilities; labor relations; timing of receipt of necessary governmental permits or approvals; domestic and foreign laws or regulations, particularly relating to the environment and mining; domestic and international economic and political conditions; the ability of Newmont to obtain or maintain necessary financing; and other risks and hazards associated with mining operations. More detailed information regarding these factors is included in Item 1, Business, Item 1A, Risk Factors, and elsewhere throughout this report. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements.

All subsequent written and oral forward-looking statements attributable to Newmont or to persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Newmont disclaims any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

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Available Information

Newmont maintains an internet web site at www.newmont.com. Newmont makes available, free of charge, through the Investor Information section of the web site, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 filings and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. Newmont’s Corporate Governance Guidelines, the charters of key committees of its Board of Directors and its Code of Business Ethics and Conduct are also available on the web site. Any of the foregoing information is available in print to any stockholder who requests it by contacting Newmont’s Investor Relations Department.

The Company filed with the New York Stock Exchange (“NYSE”) on May 24, 2007, the annual certification by its Chief Executive Officer, certifying that, as of the date of the certification, he was not aware of any violation by the Company of the NYSE’s corporate governance listing standards, as required by Section 303A.12(a) of the NYSE Listed Company Manual. The Company has filed the required certifications under Section 302 of the Sarbanes-Oxley Act of 2002 regarding the quality of its public disclosures as Exhibits 31.1 and 31.2 to this report.

 

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ITEM 1A. RISK FACTORS (dollars in millions except per share, per ounce and per pound amounts)

Every investor or potential investor in Newmont should carefully consider the following risks, which have been separated into two groups:

 

   

Risks related to the mining industry generally; and

 

   

Risks related to Newmont.

Risks Related to the Mining Industry Generally

A Substantial or Extended Decline in Gold or Copper Prices Would Have a Material Adverse Effect on Newmont

Our business is dependent on the realized price of gold and copper, which are affected by numerous factors beyond our control. Factors tending to put downward pressure on prices include:

 

   

Sales or leasing of gold by governments and central banks;

 

   

U.S. dollar strength;

 

   

Recession or reduced economic activity;

 

   

Speculative selling;

 

   

Decreased industrial, jewelry or investment demand;

 

   

Increased supply from production, disinvestment and scrap;

 

   

Sales by producers in forward and other hedging transactions; and

 

   

Devaluing local currencies (relative to gold and copper priced in U.S. dollars) leading to lower production costs and higher production in certain regions.

Any drop in the realized price of gold or copper adversely impacts our revenues, net income and cash flows, particularly in light of our philosophy of generally avoiding gold hedging. We have recorded asset write-downs in the past and may experience additional impairments as a result of low gold or copper prices in the future.

In addition, sustained low gold or copper prices can:

 

   

Reduce revenues further through production declines due to cessation of the mining of deposits, or portions of deposits, that have become uneconomic at the then-prevailing gold or copper price;

 

   

Reduce or eliminate the profit that we currently expect from ore stockpiles;

 

   

Halt or delay the development of new projects;

 

   

Reduce funds available for exploration; and

 

   

Reduce existing reserves by removing ores from reserves that can no longer be economically processed at prevailing prices.

Also see the discussion in Item 1, Business, Gold or Copper Price.

Gold and Copper Producers Must Continually Replace Reserves Depleted By Production

Gold and copper producers must continually replace reserves depleted by production. Depleted reserves must be replaced by expanding known ore bodies or by locating new deposits in order to maintain production levels over the long term. Exploration is highly speculative in nature, involves many risks and frequently is unproductive. Our new or ongoing exploration programs may not result in new mineral producing operations. Once mineralization is discovered, it will likely take many years from the initial phases of exploration until production, during which time the economic feasibility of production may change.

 

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Estimates of Proven and Probable Reserves Are Uncertain

Estimates of proven and probable reserves are subject to considerable uncertainty. Such estimates are, to a large extent, based on the price of gold and interpretations of geologic data obtained from drill holes and other exploration techniques. Producers use feasibility studies to derive estimates of capital and operating costs based upon anticipated tonnage and grades of ore to be mined and processed, the predicted configuration of the ore body, expected recovery rates of metals from the ore, the costs of comparable facilities, the costs of operating and processing equipment and other factors. Actual operating costs and economic returns on projects may differ significantly from original estimates. Further, it may take many years from the initial phase of exploration before production and, during that time, the economic feasibility of exploiting a discovery may change.

Increased Costs Could Affect Profitability

Costs at any particular mining location frequently are subject to variation due to a number of factors, such as changing ore grade, changing metallurgy and revisions to mine plans in response to the physical shape and location of the ore body. In addition, costs are affected by the price of commodities, such as fuel, electricity and labor. Commodity costs are at times subject to volatile price movements, including increases that could make production at certain operations less profitable. Reported costs may also be affected by changes in accounting standards. A material increase in costs at any significant location could have a significant effect on our profitability and cash flow.

We anticipate significant capital expenditures over the next several years in connection with the development of new projects and sustaining existing operations. Costs associated with capital expenditures have escalated on an industry-wide basis over the last several years, as a result of major factors beyond our control, including the prices of oil, steel and other commodities and labor. Increased costs for capital expenditures may have an adverse effect on the profitability of existing mining operations and returns anticipated from new mining projects.

Shortages of Critical Parts, Equipment and Skilled Labor May Adversely Affect Our Operations and Development Projects

The industry has been impacted by increased demand for critical resources such as input commodities, drilling equipment, tires and skilled labor. These shortages have caused unanticipated cost increases and delays in delivery times, thereby impacting operating costs, capital expenditures and production schedules.

Mining Accidents or Other Adverse Events or Conditions at a Mining Location Could Reduce Our Production Levels

At any of our operations, production may fall below historic or estimated levels as a result of mining accidents such as a pit wall failure in an open pit mine, or cave-ins or flooding at underground mines. In addition, production may be unexpectedly reduced at a location if, during the course of mining, unfavorable ground conditions or seismic activity, extreme or prolonged storm events, or prolonged adverse climate changes are encountered; ore grades are lower than expected; the physical or metallurgical characteristics of the ore are less amenable to mining or treatment than expected; or our equipment, processes or facilities fail to operate properly or as expected. Our Midas operations in Nevada were suspended by order of the Mine Safety and Health Administration (“MSHA”) after a fatal accident in June 2007. On October 11, 2007, MSHA lifted the restrictive order that had required Midas to halt mining activities. As a result, mining activities have resumed. MSHA’s investigation of the accident is continuing.

Mining Companies Are Subject to Extensive Environmental Laws and Regulations

Our exploration, mining and processing operations are regulated in all countries in which we operate under various federal, state, provincial and local laws relating to the protection of the environment, which generally

 

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include air and water quality, hazardous waste management and reclamation. Delays in obtaining, or failure to obtain, government permits and approvals may adversely impact our operations. The regulatory environment in which we operate could change in ways that would substantially increase costs to achieve compliance, or otherwise could have a material adverse effect on our operations or financial position. For a more detailed discussion of potential environmental liabilities, see the discussion in Environmental Matters, Note 32 to the Consolidated Financial Statements.

Risks Related to Newmont

Our Operations Outside North America and Australia/New Zealand Are Subject to Risks of Doing Business Abroad

Exploration, development and production activities outside of North America and Australia/New Zealand are potentially subject to political and economic risks, including:

 

   

Cancellation or renegotiation of contracts;

 

   

Disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the Foreign Corrupt Practices Act;

 

   

Changes in foreign laws or regulations;

 

   

Royalty and tax increases or claims by governmental entities, including retroactive claims;

 

   

Expropriation or nationalization of property;

 

   

Currency fluctuations (particularly in countries with high inflation);

 

   

Foreign exchange controls;

 

   

Restrictions on the ability of local operating companies to sell gold offshore for U.S. dollars, or on the ability of such companies to hold U.S. dollars or other foreign currencies in offshore bank accounts;

 

   

Import and export regulations, including restrictions on the export of gold;

 

   

Restrictions on the ability to pay dividends offshore;

 

   

Risk of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism;

 

   

Risk of loss due to disease and other potential endemic health issues; and

 

   

Other risks arising out of foreign sovereignty over the areas in which our operations are conducted, including risks inherent in contracts with government owned entities.

Consequently, our exploration, development and production activities outside of North America and Australia/New Zealand may be substantially affected by factors beyond our control, some of which could materially adversely affect our financial position or results of operations. Furthermore, if a dispute arises from such activities, we may be subject to the exclusive jurisdiction of courts outside North America or Australia/New Zealand, which could adversely affect the outcome of a dispute.

We have substantial investments in Indonesia, a nation that since 1997 has undergone financial crises and devaluation of its currency, outbreaks of political and religious violence, changes in national leadership, and the secession of East Timor, one of its former provinces. These factors heighten the risk of abrupt changes in the national policy toward foreign investors, which in turn could result in unilateral modification of concessions or contracts, increased taxation, denial of permits or permit renewals or expropriation of assets. Subsequent to the commencement of operations, the government purported to designate the land surrounding Batu Hijau as a protection forest, which could make operating permits more difficult to obtain. The Company has been in discussions to renew its forest use permit (called a pinjam pakai) for over two years. This permit is a key

 

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requirement to continue to efficiently operate the Batu Hijau mine. The permit renewal has not been received and in the event it is not received by May 2008, it could have an adverse impact on operating and financial results.

Recent violence committed by radical elements in Indonesia and other countries, and the presence of U.S. forces in Iraq and Afghanistan, may increase the risk that operations owned by U.S. companies will be the target of violence. If any of our operations were so targeted it could have an adverse effect on our business.

During the last several years, Yanacocha, in which we own a 51.35% interest, has been the target of numerous local political protests, including ones that blocked the road between the Yanacocha mine complex and the City of Cajamarca in Peru. In 2004, local opposition to the Cerro Quilish project became so pronounced that Yanacocha decided to relinquish its drilling permit for Cerro Quilish and the deposit was reclassified from proven and probable reserves to non-reserve mineralization. In 2006 a road blockade was carried out by members of the Combayo community. This blockade resulted in a brief cessation of mining activities. We cannot predict whether similar or more significant incidents will occur in the future, and the recurrence of significant community opposition or protests could adversely affect Yanacocha’s assets and operations. In 2007 no material roadblocks or protests occurred involving Yanacocha.

Presidential, congressional and regional elections took place in Peru in 2006, with the new national government taking office in July 2006. In December 2006, Yanacocha, along with other mining companies in Peru, entered into an agreement with the central government to contribute 3.75% of net profits to fund social development projects. Although the current government has generally taken positions promoting private investment, we cannot predict future government positions on foreign investment, mining concessions, land tenure, environmental regulation or taxation. A change in government positions on these issues could adversely affect Yanacocha’s assets and operations.

Our Interest in the Batu Hijau Operation in Indonesia May Be Reduced Under the Contract of Work

Under the Contract of Work, beginning in 2005 and continuing through 2010, a portion of the shares of P.T. Newmont Nusa Tenggara, the subsidiary that owns Batu Hijau (“PTNNT”) must be offered for sale, first, to the Indonesian government or, second, to Indonesian nationals, equal to the difference between the following percentages and the percentage of shares already owned by the Indonesian government or Indonesian nationals (if such number is positive): 23% by March 31 2006; 30% by March 31, 2007; 37% by March 31, 2008, 44% by March 31, 2009; and 51% by March 31, 2010. The price at which such interest must be offered for sale to the Indonesian parties is the highest of the then-current replacement cost, the price at which shares would be accepted for listing on the Jakarta Stock Exchange, or the fair market value of such interest as a going concern, as agreed with the Indonesian government. Pursuant to this provision, it is possible that the ownership interest of the Newmont/Sumitomo partnership in PTNNT, owner of Batu Hijau, could be reduced to 49%.

P.T. Pukuafa Indah (“PTPI”), an unrelated Indonesian company, has owned and continues to own a 20% interest in PTNNT, and therefore the Newmont/Sumitomo partnership was required to offer a 3% interest for sale in 2006 and an additional 7% interest in 2007. A further 7% interest will be offered for sale in March 2008. In accordance with the Contract of Work, an offer to sell a 3% interest was made to the government of Indonesia in 2006 and an offer for an additional 7% interest was made in 2007. While the central government declined to participate in the offer, local governments in the area in which the Batu Hijau mine is located have expressed interest in acquiring shares, as have various Indonesian nationals. In January 2008, the Newmont/Sumitomo partnership agreed to sell, under a carried interest arrangement, 2% of PTNNT’s shares to Kabupaten Sumbawa, one of the local governments, subject to satisfaction of closing conditions. On February 11, 2008, PTNNT received notification from the Department of Energy and Mineral Resources (DEMR) alleging that PTNNT is in breach of its divestiture requirements under the Contract of Work and threatening to issue a notice to terminate the Contract of Work if PTNNT does not agree to divest the 2006 and 2007 shares, in accordance with the direction of the DEMR, by February 22, 2008. Newmont and Sumitomo believe there is no basis under the

 

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Contract of Work for this notification and no grounds for terminating the Contract of Work, and are currently evaluating possible responses to the February 11, 2008 default notice, including filing for international arbitration as provided for under the Contract of Work. Newmont and Sumitomo are in discussions with officials of the Government of Indonesia to attempt to clarify or resolve this issue.

Our Success May Depend on Our Social and Environmental Performance

Our ability to operate successfully in communities around the world will likely depend on our ability to develop, operate and close mines in a manner that is consistent with the health and safety of our employees, the protection of the environment, and the creation of long-term economic and social opportunities in the communities in which we operate. We have implemented a management system designed to promote continuous improvement in health and safety, environmental performance and community relations. However, our ability to operate could be adversely impacted by accidents or events detrimental (or perceived to be detrimental) to the health and safety of our employees, the environment or the communities in which we operate.

Remediation Costs for Environmental Liabilities May Exceed the Provisions We Have Made

We have conducted extensive remediation work at two inactive sites in the United States. At one of these sites, remediation requirements have not been finally determined, and, therefore, the final cost cannot be determined. At a third site in the United States, an inactive uranium mine and mill formerly operated by a subsidiary of Newmont, remediation work at the mill is ongoing, but remediation at the mine is subject to dispute and has not yet commenced. The environmental standards that may ultimately be imposed at this site remain uncertain and there is a risk that the costs of remediation may exceed the provision that has been made for such remediation by a material amount. For a more detailed discussion of potential environmental liabilities, see the discussion in Environmental Matters, Note 32 to the Consolidated Financial Statements.

Whenever a previously unrecognized remediation liability becomes known, or a previously estimated reclamation cost is increased, the amount of that liability and additional cost will be recorded at that time and could materially reduce net income in that period.

Currency Fluctuations May Affect Costs

Currency fluctuations may affect the costs that we incur at our operations. Gold is sold throughout the world based principally on the U.S. dollar price, but a portion of our operating expenses are incurred in local currencies. The appreciation of non-U.S. dollar currencies against the U.S. dollar increases the costs of gold production in U.S. dollar terms at mines located outside the United States.

The foreign currency that primarily impacts our results of operations is the Australian dollar. We estimate that every $0.01 increase in U.S. dollar / Australian dollar exchange rate increases the U.S. dollar Costs applicable to sales by approximately $4 or $5 for each ounce of gold produced in Australia. During 2007, the Australian dollar appreciated by approximately $0.09 per U.S. dollar, or approximately 10.8%. In mid-2007, we implemented derivative programs to hedge up to 75% of our future forecasted Australian dollar denominated operating and capital expenditures to reduce the variability in our Australian dollar denominated expenditures. As of December 31, 2007, we have hedged 23%, 18% and 11% of our forecasted Australian denominated operating costs in 2008, 2009 and 2010, respectively. We have also hedged 32% of our forecasted Australian denominated capital expenditures for 2008. Our Australian dollar derivative programs will limit the benefit to the Company of future decreases if any, in the US dollar/Australian dollar exchange rates. For additional information, see Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, Results of Consolidated Operations, Foreign Currency Exchange Rates, below. For a more detailed description of how currency exchange rates may affect costs, see discussion in Foreign Currency in Item 7A, Quantitative and Qualitative Discussions About Market Risk.

 

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Future Funding Requirements May Affect Our Business

The construction of the Boddington project in Australia, the 200 megawatt coal-fired power plant in Nevada, and the gold mill at Yanacocha in Peru, as well as potential future investments in the Akyem project in Ghana, the Conga project in Peru and the Hope Bay project in Nunavat, Canada, will require significant funds for capital expenditures. At current gold and copper prices, our operating cash flow is insufficient to meet all of these expenditures. As a result, new sources of capital will be needed to meet the funding requirements of these investments, fund our ongoing business activities and pay dividends. Our ability to raise and service significant new sources of capital will be a function of macroeconomic conditions, future gold and copper prices and our operational performance, among other factors; in order to retain our investment grade rating, it may be necessary to issue additional equity or other securities, defer projects or sell assets. In the event of lower gold and copper prices, unanticipated operating or financial challenges, or new funding limitations, our ability to pursue new business opportunities, invest in existing and new projects, fund our ongoing business activities and pay dividends could be significantly constrained.

Costs Estimates and Timing of New Projects Are Uncertain

The capital expenditures and time required to develop new mines or other projects are considerable and changes in costs or construction schedules can affect project economics. There are a number of factors that can affect costs and construction schedules, including, among others:

 

   

Availability of labor, power, transportation, commodities and infrastructure;

 

   

Increases in input commodity prices and labor costs;

 

   

Fluctuations in currency exchange rates;

 

   

Availability and terms of financing;

 

   

Difficulty of estimating construction costs over a period of years;

 

   

Delays in obtaining environmental or other government permits; and

 

   

Potential delays related to social and community issues.

Our Operations May Be Adversely Affected By Power Shortages

We have experienced power shortages in Ghana resulting from a nationwide drought and insufficient hydroelectric or other generating capacity. Power shortages have caused curtailment of production at our Ahafo operations. As a result of the mining industry’s initiative to construct and install a 80 mega-watt power plant during 2007, the Ghanaian government has agreed, if required to curtail power consumption as a result of power shortages, to distribute power proportionately between participating mines and other industrial and commercial users. Alternative sources of power will result in higher than anticipated costs, which will affect operating costs. Continued power shortages and increased costs may adversely affect our results of operations and financial condition.

Occurrence of Events for Which We Are Not Insured May Affect Our Cash Flow and Overall Profitability

We maintain insurance policies that mitigate against certain risks related to our operations. This insurance is maintained in amounts that we believe are reasonable depending upon the circumstances surrounding each identified risk. However, we may elect not to have insurance for certain risks because of the high premiums associated with insuring those risks or for various other reasons; in other cases, insurance may not be available for certain risks. Some concern always exists with respect to investments in parts of the world where civil unrest, war, nationalist movements, political violence or economic crises are possible. These countries may also pose heightened risks of expropriation of assets, business interruption, increased taxation or unilateral modification of concessions and contracts. We do not maintain insurance policies against political risk. Occurrence of events for which we are not insured may affect our cash flow and overall profitability.

 

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Our Business Depends on Good Relations with Our Employees

Due to union activities or other employee actions, we could experience labor disputes, work stoppages or other disruptions in production that could adversely affect us. As of December 31, 2007, unions represented approximately 45% of our worldwide work force. Currently, there are labor agreements in effect for all of these workers. We may be unable to resolve any future disputes without disruption to operations.

Title to Some of Our Properties May Be Defective or Challenged

Although we have conducted title reviews of our properties, title review does not necessarily preclude third parties from challenging our title. While we believe that we have satisfactory title to our properties, some risk exists that some titles may be defective or subject to challenge. In addition, certain of our Australian properties could be subject to native title or traditional landowner claims, but such claims would not deprive us of the properties. For information regarding native title or traditional landowner claims, see the discussion under the Australia/New Zealand section of Item 2, Properties, below.

We Compete With Other Mining Companies

We compete with other mining companies to attract and retain key executives, skilled labor and other employees with technical skills and experience in the mining industry. We also compete with other mining companies for rights to mine properties containing gold and other minerals. We may be unable to continue to attract and retain skilled and experienced employees, or to acquire additional rights to mine properties.

Certain Factors Outside of Our Control May Affect Our Ability to Support the Carrying Value of Goodwill

As of December 31, 2007, the carrying value of goodwill was approximately $186 or 1% of our total assets. Goodwill has been assigned to various mine site reporting units in the Australia/New Zealand Segment. This goodwill primarily arose in connection with our February 2002 acquisition of Normandy and represents the excess of the aggregate purchase price over the fair value of the identifiable net assets acquired. We evaluate, on at least an annual basis, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. This evaluation involves a comparison of the estimated fair value of our reporting units to their carrying values. If the carrying amount of goodwill for any reporting unit exceeds its estimated fair value, a non-cash impairment charge could result. For a more detailed description of the estimates and assumptions involved in assessing the recoverability of the carrying value of goodwill, see Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, Critical Accounting Policies, below.

Our Ability to Recognize the Benefits of Deferred Tax Assets is Dependent on Future Cash Flows and Taxable Income

We recognize the expected future tax benefit from deferred tax assets when the tax benefit is considered to be more likely than not of being realized. Otherwise, a valuation allowance is applied against deferred tax assets. Assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, our ability to realize the deferred tax assets could be impacted. Additionally, future changes in tax laws could limit our ability to obtain the future tax benefits represented by our deferred tax assets. As of December 31, 2007, the Company’s current and long-term deferred tax assets were $112 and $1,036, respectively.

 

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Returns for Investments in Pension Plans Are Uncertain

We maintain pension plans for employees, which provide for specified payments after retirement for certain employees. The ability of the pension plans to provide the specified benefits depends on our funding of the plans and returns on investments made by the plans. Returns, if any, on investments are subject to fluctuations based on investment choices and market conditions. A sustained period of low returns or losses on investments could require us to fund the pension plans to a greater extent than anticipated.

 

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ITEM 2. PROPERTIES (dollars in millions except per share, per ounce and per pound amounts)

Gold and Copper Processing Methods

Gold is extracted from naturally-oxidized ores by either heap leaching or milling, depending on the amount of gold contained in the ore, the amenability of the ore to treatment and related capital and operating costs. Higher grade oxide ores are generally processed through mills, where the ore is ground into a fine powder and mixed with water in slurry, which then passes through a carbon-in-leach circuit. Lower grade oxide ores are generally processed using heap leaching. Heap leaching consists of stacking crushed or run-of-mine ore on impermeable pads, where a weak cyanide solution is applied to the surface of the heap to dissolve the gold. In both cases, the gold-bearing solution is then collected and pumped to process facilities to remove the gold by collection on carbon or by zinc precipitation.

Gold contained in ores that are not naturally oxidized can be directly milled if the gold is amenable to cyanidization, generally known as free milling sulfide ores. Ores that are not amenable to cyanidization, known as refractory ores, require more costly and complex processing techniques than oxide or free milling ore. Higher-grade refractory ores are processed through either roasters or autoclaves. Roasters heat finely ground ore to a high temperature, burn off the carbon and oxidize the sulfide minerals that prevent efficient leaching. Autoclaves use heat, oxygen and pressure to oxidize sulfide ores.

Some sulfide ores may be processed through a flotation plant or by bio-milling. In flotation, ore is finely ground, turned into slurry, then placed in a tank known as a flotation cell. Chemicals are added to the slurry causing the gold-containing sulfides to float attached to air bubbles to the top of the tank. The sulfides are removed from the cell and converted into a concentrate that can then be processed in an autoclave or roaster to recover the gold. Bio-milling incorporates patented technology that involves inoculation of suitable crushed ore on a leach pad with naturally occurring bacteria strains, which oxidize the sulfides over a period of time. The ore is then processed through an oxide mill.

At Batu Hijau, ore containing copper and gold is crushed to a coarse size at the mine and then transported from the mine via conveyor to a concentrator, where it is finely ground and then treated by successive stages of flotation, resulting in a concentrate containing approximately 30% copper. The concentrate is dewatered and stored for loading onto ships for transport to smelters.

 

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LOGO

Production Properties

Set forth below is a description of Newmont’s significant production properties. Operating statistics for each operation are presented in a table in the next section of Item 2.

Nevada

We have been mining gold in Nevada since 1965. Nevada operations include Carlin, located west of the city of Elko on the geologic feature known as the Carlin Trend, the Twin Creeks mine, located approximately 15 miles north of Golconda, the Lone Tree Complex near the town of Valmy, and the Midas mine near the town of the same name. We also participate in the Turquoise Ridge joint venture with a subsidiary of Barrick Gold Corp. (“Barrick”), which utilizes mill capacity at Twin Creeks. The Phoenix mine, located 10 miles south of Battle Mountain, commenced commercial production in the fourth quarter of 2006. The Leeville underground mine, located on the Carlin Trend northwest of the Carlin East underground mine, also commenced commercial production in the fourth quarter of 2006.

Gold sales from Nevada totaled approximately 2.3 million ounces for 2007 with ore mined from nine open pit and five underground mines. At year-end 2007, we reported 29.4 million equity ounces of gold reserves in Nevada, with 84% in open pit mines and 16% in underground mines. Refractory ores require more complex, higher cost processing methods. Refractory ore treatment facilities generated 75% of Nevada’s gold production in 2007, compared with 72% in 2006, and 69% in 2005. With respect to remaining reserves, we estimate that 79% are refractory ores and 21% are oxide ores.

The Nevada operations produce gold from a variety of ore types requiring different processing techniques depending on economic and metallurgical characteristics. To ensure the best use of processing capacity, we use a linear programming model to guide the flow of both mining sequence selection and routing of ore streams to various plants. Higher-grade oxide ores are processed by conventional milling and cyanide leaching at Carlin (Mill 5), Twin Creeks (Juniper) and Lone Tree. Lower-grade material with suitable cyanide solubility is treated

 

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on heap leach pads at Carlin, Twin Creeks and Lone Tree. Higher-grade refractory ores are processed through either a roaster at Carlin (Mill 6) or autoclaves at Twin Creeks (Sage) and Lone Tree. Lower-grade refractory ores are processed by a flotation plant at Lone Tree or either bio-oxidation/flotation or direct flotation at Mill 5. Ore from the Midas mine is processed by conventional milling and Merrill-Crowe zinc precipitation. Activated carbon from the various leaching circuits is treated to produce gold ore at Carlin and Twin Creeks. Zinc precipitate at Midas is refined on-site. All milling at Lone Tree was completed in 2007.

We own, or control through long-term mining leases and unpatented mining claims, all of the minerals and surface area within the boundaries of the present Nevada mining operations (except for the Turquoise Ridge joint venture described below). The long-term leases extend for at least the anticipated mine life of those deposits. With respect to a significant portion of the Gold Quarry mine at Carlin, we own a 10% undivided interest in the mineral rights and lease the remaining 90%, on which we pay a royalty equivalent to 18% of the mineral production. We wholly-own or control the remainder of the Gold Quarry mineral rights, in some cases subject to additional royalties. With respect to certain smaller deposits in Western Nevada, we are obligated to pay royalties on production to third parties that vary from 2% to 5% of production.

We have a 25% interest in a joint venture with Barrick to operate the Turquoise Ridge and Getchell mines. Newmont has an agreement to provide up to 2,000 tons per day of milling capacity at Twin Creeks to the joint venture. Barrick is the operator of the joint venture. Gold sales of 62,844 in 2007, 58,300 ounces in 2006 and 52,300 ounces in 2005 were attributable to Newmont, based on our 25% ownership interest.

We have ore sale agreements with Barrick and Yukon-Nevada Gold Corp. (“Yukon-Nevada”) to process some of the Company’s ore. We recognized attributable gold sales, net of treatment charges, of 58,624 ounces in 2007, 99,500 ounces in 2006 and 104,600 ounces in 2005 pursuant to these agreements.

We have sales and refining agreements with Gerald Metals, Peñoles, Yukon-Nevada, Johnson Matthey, Just Refiners and Glencore to process intermediate gold bearing product.

Yanacocha, Peru

The properties of Minera Yanacocha S.R.L. (“Yanacocha”) are located approximately 375 miles (604 kilometers) north of Lima and 30 miles (48 kilometers) north of the city of Cajamarca, in Peru. Yanacocha began production in 1993. We hold a 51.35% interest in Yanacocha with the remaining interests held by Compañia de Minas Buenaventura, S.A.A. (43.65%) and the International Finance Corporation (5%).

Yanacocha has mining rights with respect to a large land position. Yanacocha’s mining rights consist of concessions granted by the Peruvian government to Yanacocha and a related entity. These mining concessions provide for both the right to explore and exploit. However, Yanacocha must first obtain the respective exploration and exploitation permits, which are generally granted in due course. Yanacocha may retain mining concessions indefinitely by paying annual fees and, during exploitation, complying with production obligations or paying assessed fines. Mining concessions are freely assignable or transferable.

Yanacocha currently has three active open pit mines, Cerro Yanacocha, La Quinua and Chaquicocha. In addition, reclamation and/or backfilling activities at Carachugo, San José and Maqui Maqui are currently underway. In addition, Yanacocha has four leach pads and three processing facilities. Yanacocha’s gold sales for 2007 totaled 1.6 million ounces (0.8 million equity ounces). At year-end 2007, we reported 14.2 million equity ounces of gold reserves at Yanacocha.

The Yanacocha operations contain the Conga deposit, for which a feasibility study was completed in 2004. We continue to evaluate the optimum development plan for Conga.

Yanacocha, along with other mining companies in Peru, agreed with the central government in 2006 to contribute 3.75% of its net profits to fund social development projects for a period of up to five years, contingent upon metal prices remaining high.

 

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Australia/New Zealand

In Australia, mineral exploration and mining titles are granted by the individual states or territories. Mineral titles may also be subject to native title legislation or, in the Northern Territory, to Aboriginal freehold title legislation that entitles indigenous persons to compensation calculated by reference to the gross value of production. In 1992, the High Court of Australia held that Aboriginal people who have maintained a continuing connection with their land according to their traditions and customs may hold certain rights in respect of the land, such rights commonly referred to as native title. Since the High Court’s decision, Australia has passed legislation providing for the protection of native title and established procedures for Aboriginal people to claim these rights. The fact that native title is claimed with respect to an area, however, does not necessarily mean that native title exists, and disputes may be resolved by the courts.

Generally, under native title legislation, all mining titles granted before January 1, 1994 are valid. Titles granted between January 1, 1994 and December 23, 1996, however, may be subject to invalidation if they were not obtained in compliance with applicable legislative procedures, though subsequent legislation has validated some of these titles. After December 23, 1996, mining titles over areas where native title is claimed to exist became subject to legislative processes that generally give native title claimants the “right to negotiate” with the title applicant for compensation and other conditions. Native title holders do not have a veto over the granting of mining titles, but if agreement cannot be reached, the matter can be referred to the National Native Title Tribunal for decision.

We do not expect that native title claims will have a material adverse effect on any of our operations in Australia. The High Court of Australia determined in an August 2002 decision, which refined and narrowed the scope of native title, that native title does not subsist in minerals in Western Australia and that the rights granted under a mining title would, to the extent inconsistent with asserted native title rights, operate to extinguish those native title rights. Generally, native title is only an issue for Newmont with respect to obtaining new mineral titles or moving from one form of title to another, for example, from an exploration title to a mining title. In these cases, the requirements for negotiation and the possibility of paying compensation may result in delay and increased costs for mining in the affected areas. Similarly, the process of conducting Aboriginal heritage surveys to identify and locate areas or sites of Aboriginal cultural significance can result in additional costs and delay in gaining access to land for exploration and mining-related activities.

In Australia, various ad valorem royalties are paid to state and territorial governments, typically based on a percentage of gross revenues and earnings.

Tanami. The Tanami operations (100% owned) include The Granites treatment plant and associated mining operations, which are located in the Northern Territory approximately 342 miles (550 kilometers) northwest of Alice Springs, adjacent to the Tanami highway, and the Dead Bullock Soak mining operations, approximately 25 miles (40 kilometers) west of The Granites. The Tanami operations have been wholly-owned since April 2003, when Newmont acquired the minority interests.

The operations are predominantly focused on the Callie underground mine at Dead Bullock Soak, with mill feed supplemented by production stockpiles from the Dead Bullock Soak open pit. Ore from all of these operations is processed through The Granites plant. During 2007, the Tanami operations sold 439,000 ounces of gold. At year-end 2007, we reported 1.7 million equity ounces of gold reserves at Tanami.

Kalgoorlie. The Kalgoorlie operations comprise the Fimiston open pit (commonly referred to as the Super Pit) and Mt. Charlotte underground mine at Kalgoorlie-Boulder, 373 miles (600 kilometers) east of Perth. The mines are managed by Kalgoorlie Consolidated Gold Mines Pty Ltd for the joint venture owners, Newmont and Barrick, each of which holds a 50% interest. The Super Pit is one of Australia’s largest gold mines in terms of gold production and annual mining volume. During 2007, the Kalgoorlie operations sold 323,400 equity ounces of gold. At year-end 2007, we reported 4.6 million equity ounces of gold reserves at Kalgoorlie.

 

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Jundee. The Jundee operation (100% owned) is situated approximately 435 miles (700 kilometers) northeast of Perth in Western Australia. During 2007 mining was conducted from both the underground and open pit deposits with the open pit operation ceasing production in November 2007. The milling operation was consolidated during the year with the relocation of the Nimary ball mill to the Jundee plant site. Jundee sold 298,200 ounces of gold in 2007. At year-end 2007, we reported 1.5 million equity ounces of gold reserves at Jundee.

Waihi. The Waihi operations (100% owned) are located within the town of Waihi, located approximately 68 miles (110 kilometers) southeast of Auckland, New Zealand and consist of the Favona underground deposit and the Martha open pit. The Waihi operation sold 92,900 ounces of gold during 2007. At year-end 2007, we reported 0.5 million equity ounces of gold reserves at Waihi. The Martha mine does not currently pay royalties. At Favona, Newmont pays a royalty of 1% of gross revenues from gold and silver sales, or 5% of accounting profit, whichever is greater.

Boddington. Boddington is a development project located 81 miles (130 kilometers) southeast of Perth in Western Australia. Boddington is owned by Newmont (66.67%) and AngloGold Ashanti Limited (33.33%). Development of the Boddington project was approximately 62% complete as of December 31, 2007, with mill start-up expected in late 2008 or early 2009. At year-end 2007, we reported 11.1 million equity ounces of gold reserves at Boddington.

Batu Hijau, Indonesia

Batu Hijau is located on the island of Sumbawa, approximately 950 miles (1,529 kilometers) east of Jakarta. Batu Hijau is a large porphyry copper/gold deposit which Newmont discovered in 1990. Development and construction activities began in 1997 and start-up occurred in late 1999. In 2007, copper sales were 427.5 million pounds (204.2 million equity pounds), while gold sales were 494,300 ounces (233,300 equity ounces). At year-end 2007, we reported 4.1 billion equity pounds of copper reserves and 4.2 million equity ounces of gold reserves at Batu Hijau.

We operate Batu Hijau, a producer of copper/gold concentrates, and have a 45% ownership interest therein, held through a partnership with an affiliate of Sumitomo Corporation. We have a 56.25% interest in the partnership and the Sumitomo affiliate holds the remaining 43.75%. The partnership, in turn, owns 80% of P.T. Newmont Nusa Tenggara (“PTNNT”), the subsidiary that owns Batu Hijau. The remaining 20% interest in PTNNT is owned by P.T. Pukuafu Indah (“PTPI”), an unrelated Indonesian company. Because PTPI’s interest was a carried interest, and because PTPI had been advanced a loan by the partnership, we reported a 52.875% economic interest in Batu Hijau, which reflected our actual economic interest in the mine until such time as the loan was fully repaid (including accrued interest). On May 25, 2007, PTPI fully repaid the loan (including accrued interest) and as a result, our economic interest was reduced from 52.875% to 45% and we recorded a net charge of $25 (after-tax) against Minority interest expense in the second quarter of 2007.

In Indonesia, rights are granted to foreign investors to explore for and to develop mineral resources within defined areas through Contracts of Work entered into with the Indonesian government. In 1986, PTNNT entered into a Contract of Work with the Indonesian government covering Batu Hijau, under which PTNNT was granted the exclusive right to explore in the contract area, construct any required facilities, extract and process the mineralized materials, and sell and export the minerals produced, subject to certain requirements including Indonesian government approvals and payment of royalties to the government. Under the Contract of Work, PTNNT has the right to continue operating the project for 30 years from operational start-up, or longer if approved by the Indonesian government.

Under the Contract of Work, beginning in 2005 and continuing through 2010, a portion of PTNNT’s shares must be offered for sale, first, to the Indonesian government or, second, to Indonesian nationals, equal to the difference between the following percentages and the percentage of shares already owned by the Indonesian

 

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government or Indonesian nationals (if such number is positive): 23% by March 31, 2006; 30% by March 31, 2007; 37% by March 31, 2008, 44% by March 31, 2009; and 51% by March 31, 2010. The price at which such interest must be offered for sale to the Indonesian parties is the highest of the then-current replacement cost, the price at which shares would be accepted for listing on the Jakarta Stock Exchange, or the fair market value of such interest as a going concern, as agreed with the Indonesian government. Pursuant to this provision, it is possible that the ownership interest of the Newmont/Sumitomo partnership in PTNNT, owner of Batu Hijau, could be reduced to 49%.

PTPI has owned and continues to own a 20% interest in PTNNT, and therefore the Newmont/Sumitomo partnership was required to offer a 3% interest for sale in 2006 and an additional 7% interest in 2007. A further 7% interest will be offered for sale in March 2008. In accordance with the Contract of Work, an offer to sell a 3% interest was made to the government of Indonesia in 2006 and an offer for an additional 7% interest was made in 2007. While the central government declined to participate in the offer, local governments in the area in which the Batu Hijau mine is located have expressed interest in acquiring shares, as have various Indonesian nationals. In January 2008, the Newmont/Sumitomo partnership agreed to sell, under a carried interest arrangement, 2% of PTNNT’s shares to Kabupaten Sumbawa, one of the local governments, subject to satisfaction of closing conditions. On February 11, 2008, PTNNT received notification from the Department of Energy and Mineral Resources (DEMR) alleging that PTNNT is in breach of its divestiture requirements under the Contract of Work and threatening to issue a notice to terminate the Contract of Work if PTNNT does not agree to divest the 2006 and 2007 shares, in accordance with the direction of the DEMR, by February 22, 2008. Newmont and Sumitomo believe there is no basis under the Contract of Work for this notification and no grounds for terminating the Contract of Work, and are currently evaluating possible responses to the February 11, 2008 default notice, including filing for international arbitration as provided for under the Contract of Work. Newmont and Sumitomo are in discussions with officials of the Government of Indonesia to attempt to clarify or resolve this issue.

The Company has been in discussions to renew its forest use permit (called a pinjam pakai) for over two years. This permit is a key requirement to continue to efficiently operate the Batu Hijau mine. The permit renewal has not been received and in the event it is not received by May 2008, it could have an adverse impact on operating and financial results.

Ghana

The Ahafo operation (100% owned) is located in the Brong-Ahafo Region of Ghana, approximately 180 miles (290 kilometers) northwest of Accra. Ahafo poured its first gold on July 18, 2006 and commenced commercial production in August 2006. Ahafo sold 445,600 ounces of gold in 2007.

We currently operate two open pits at Ahafo with reserves contained in 17 pits. The process plant consists of a conventional mill and carbon-in-leach circuit. Ahafo reserves as of December 31, 2007, were 9.7 million equity ounces.

In December 2003, Ghana’s Parliament unanimously ratified an Investment Agreement between Newmont and the Government of Ghana. The Agreement establishes a fixed fiscal and legal regime, including fixed royalty and tax rates, for the life of any Newmont project in Ghana. Under the Agreement, we will pay corporate income tax at the Ghana statutory tax rate (presently 25%) not to exceed 32.5% and fixed gross royalties on gold production of 3.0% (3.6% for any production from forest reserve areas). The Government of Ghana is also entitled to receive 10% of a project’s net cash flow after we have recouped our investment and may acquire up to 20% of a project’s equity at fair market value on or after the 15th anniversary of such project’s commencement of production. The Investment Agreement also contains commitments with respect to job training for local Ghanaians, community development, purchasing of local goods and services and environmental protection.

 

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We have one development project in Ghana, currently the subject of further optimization studies. The Akyem project (100% owned) is approximately 80 miles (125 kilometers) northwest of Accra. In 2007, the Company continued optimization and engineering on alternative plans for the proposed operation. The Company also initiated environmental and social baseline data collection in preparation for submitting permit documents in 2008.

Other Operations

Bolivia. The Kori Kollo open pit mine is on a high plain in northwestern Bolivia near Oruro, on government mining concessions issued to a Bolivian corporation, Empresa Minera Inti Raymi S.A. (“Inti Raymi”), in which we have an 88% interest. The remaining 12% is owned by Mrs. Beatriz Rocabado. Inti Raymi owns and operates the mine. The mill was closed in October 2003 and production continued from residual leaching. In 2005, additional material from the stockpiles and Lla Llagua pit were placed on the existing leach pad and ore from the Kori Chaca pit was processed on a new leach pad. In 2007, Inti Raymi sold 76,300 equity ounces of gold. At year-end 2007, we reported 0.4 million equity ounces of gold reserves at Inti Raymi.

Mexico. We have a 44% interest in La Herradura, which is located in Mexico’s Sonora desert. La Herradura is operated by Industriales Peñoles (which owns the remaining 56% interest) and comprises an open pit operation with run-of-mine heap leach processing. La Herradura sold 85,700 equity ounces of gold in 2007. At year-end 2007, we reported 1.6 million equity ounces of gold reserves at La Herradura.

Canada. During 2007, our Canadian operations included one underground mine. Golden Giant (100% owned) is located approximately 25 miles (40 kilometers) east of Marathon in Ontario, Canada, and began production in 1985. Mining operations at Golden Giant were completed in December 2005 with remnant sales continuing through the second quarter of 2007. In 2007, Golden Giant sold 12,000 ounces of gold.

Other Property

Hope Bay. With the successful acquisition of Miramar in December 2007, we now control the Hope Bay project, a large undeveloped gold project in the Nunavut Territory of Canada. Hope Bay is consistent with the Company’s strategic focus on exploration and project development and was acquired with the intention of adding higher grade ore reserves and developing a new core gold mining district in a AAA-rated country.

 

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Operating Statistics

The following tables detail operating statistics related to gold production, sales and production costs.

 

     Nevada     Yanacocha, Peru  

Year Ended December 31,

   2007     2006     2005     2007     2006     2005  

Tons mined (000 dry short tons):

            

Open pit

     214,127       191,438       193,565       208,871       217,501       218,933  

Underground

     1,942       1,651       1,727                    

Tons milled/processed (000 dry short tons):

            

Mill

     25,526       17,882       15,570                    

Leach

     14,042       22,138       21,660       98,319       118,511       146,645  

Average ore grade (oz/ton):

            

Mill

     0.098       0.127       0.157                    

Leach

     0.035       0.026       0.024       0.019       0.026       0.028  

Average mill recovery rate

     81.2 %     81.1 %     86.0 %                  

Ounces produced (000):

            

Mill

     2,004       2,059       2,061                    

Leach

     332       364       351       1,565       2,612       3,333  

Incremental start-up

     6       100       22                    
                                                
     2,342       2,523       2,434       1,565       2,612       3,333  
                                                

Ounces sold (000)

     2,341       2,534       2,444       1,565       2,572       3,327  
                                                

Production costs per ounce:

            

Direct mining and production costs

   $ 449     $ 404     $ 346     $ 337     $ 190     $ 142  

Deferred stripping

                 (20 )                  

By-product credits

     (26 )     (15 )     (7 )     (22 )     (16 )     (10 )

Royalties and production taxes

     14       9       8       13       14       11  

Reclamation/accretion expense

     2       3       2       6       3       2  

Other

     5       2       4       11       2       2  
                                                

Costs applicable to sales

     444       403       333       345       193       147  

Depreciation, depletion and amortization

     94       74       51       103       67       62  
                                                

Total production costs

   $ 538     $ 477     $ 384     $ 448     $ 260     $ 209  
                                                

 

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     Australia/New Zealand     Batu Hijau, Indonesia  

Year Ended December 31,

   2007     2006     2005     2007     2006     2005  

Tons mined (000 dry short tons):

            

Open pit

     56,259       54,221       60,691       244,907       293,159       225,838  

Underground

     3,547       3,658       3,394                    

Tons milled (000 dry short tons)

     11,932       13,070       15,233       46,782       47,026       50,210  

Average ore grade (oz/ton)

     0.102       0.102       0.102       0.014       0.012       0.018  

Average mill recovery rate

     91.3 %     90.9 %     91.1 %     81.9 %     79.5 %     80.7 %

Ounces produced (000)

     1,117       1,216       1,402       548       448       732  
                                                

Ounces sold (000)

     1,153       1,176       1,409       494       435       720  
                                                

Production costs per ounce:

            

Direct mining and production costs

   $ 462     $ 364     $ 314     $ 233     $ 203     $ 145  

Deferred stripping

                 (5 )                 1  

By-product credits

     (5 )     (10 )     (9 )     (8 )     (9 )     (5 )

Royalties and production taxes

     29       28       13       15       13       9  

Reclamation/accretion expense

     5       5       3       3       2       2  

Other

     5       2       3                    
                                                

Costs applicable to sales

     496       389       319       243       209       152  

Depreciation, depletion and amortization

     94       78       66       50       46       47  
                                                

Total production costs

   $ 590     $ 467     $ 385     $ 293     $ 255     $ 199  
                                                
     Ahafo, Ghana                          

Year Ended December 31,

   2007     2006                          

Tons mined (000 dry short tons):

            

Open pit

     44,235       19,999          

Underground

                    

Tons milled (000 dry short tons)

     8,090       3,515          

Average ore grade: (oz/ton)

     0.060       0.065          

Average mill recovery rate

     92.0 %     88.3 %        

Ounces produced (000):

     456       202          
                        

Ounces sold (000)

     446       202          
                        

Production costs per ounce:

            

Direct mining and production costs

   $ 373     $ 277          

By-product credits and other

     (1 )     (1 )        

Royalties and production taxes

     21       18          

Reclamation/accretion expense

     1       1          

Other

     2       2          
                        

Costs applicable to sales

     396       297          

Depreciation, depletion and amortization

     96       94          
                        

Total production costs

   $ 492     $ 391          
                        

 

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     Other Operations     Total Gold  

Year Ended December 31,

   2007     2006     2005     2007     2006     2005  

Ounces produced (000):

            

Mill

     12       59       162       4,137       3,979       4,357  

Leach

     175       208       177       2,072       3,184       3,861  

Incremental start-up

                       6       105       22  
                                                
     187       267       339       6,215       7,268       8,240  
                                                

Ounces sold (000)

     185       267       337       6,184       7,186       8,237  
                                                

Production costs per ounce:

            

Direct mining and production costs

   $ 334     $ 214     $ 230     $ 397     $ 301     $ 238  

Deferred stripping

                 (8 )                 (7 )

By-product credits

     (18 )     (11 )     (3 )     (18 )     (13 )     (8 )

Royalties and production taxes

     (1 )           6       17       10       7  

Reclamation/accretion expense

     10       9       6       4       3       2  

Other

     7       10       2       6       2       3  
                                                

Costs applicable to sales

     332       222       233       406       303       235  

Depreciation, depletion and amortization

     91       69       58       93       71       58  
                                                

Total production costs

   $ 423     $ 291     $ 291     $ 499     $ 374     $ 293  
                                                

The following table details operating statistics related to Batu Hijau copper production, sales and production costs.

 

     Batu Hijau, Indonesia  

Year Ended December 31,

   2007     2006     2005  

Tons milled (000 dry short tons)

     46,782       47,026       50,210  

Average copper grade

     0.60 %     0.55 %     0.69 %

Average copper recovery rate

     86.1 %     87.3 %     86.7 %

Copper pounds produced (millions)

     484       454       596  

Copper pounds sold (millions)

     428       435       573  

Production costs per pound:

      

Costs applicable to sales

   $ 1.10     $ 0.71     $ 0.53  

Depreciation, depletion and amortization

     0.22       0.15       0.15  
                        

Total production costs

   $ 1.32     $ 0.86     $ 0.68  
                        

Proven and Probable Equity Reserves

We had proven and probable equity gold reserves of 86.5 million contained ounces as of December 31, 2007.

Reserves were calculated at a $575, A$750 or NZ$850 per ounce gold price assumption. Our 2007 reserves would decline by approximately 6%, or 5.6 million ounces, if calculated at a $550 per ounce gold price. An increase in the gold price to $600 per ounce would increase reserves by approximately 4%, or 4.0 million ounces, all other assumptions remaining constant.

As of December 31, 2007, our equity gold reserves in Nevada were 29.4 million ounces. Outside of Nevada, year-end equity gold reserves were 57.1 million ounces, including 19.4 million ounces in Australia/New Zealand, 17.4 million ounces in Ghana, 14.2 million ounces in Peru, 4.2 million ounces in Indonesia and 2.0 million ounces at Other Operations.

 

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Our equity copper reserves as of December 31, 2007 were 7.6 billion contained pounds. Reserves were calculated at a price of $1.75 or A$2.00 per pound assumption.

Under our current mining plans, all of our reserves are located on fee property or mining claims or will be depleted during the terms of existing mining licenses or concessions, or where applicable, any assured renewal or extension periods for the licenses or concessions.

Proven and probable equity reserves are based on extensive drilling, sampling, mine modeling and metallurgical testing from which we determined economic feasibility. The price sensitivity of reserves depends upon several factors including grade, metallurgical recovery, operating cost, waste-to-ore ratio and ore type. Metallurgical recovery rates vary depending on the metallurgical properties of each deposit and the production process used. The reserve tables below list the average metallurgical recovery rate for each deposit, which takes into account the several different processing methods that we use. The cut-off grade, or lowest grade of mineralized material considered economic to process, varies with material type, metallurgical recoveries and operating costs.

The proven and probable equity reserve figures presented herein are estimates based on information available at the time of calculation. No assurance can be given that the indicated levels of recovery of gold and copper will be realized. Ounces of gold or pounds of copper in the proven and probable reserves are calculated without regard to any losses during metallurgical treatment. Reserve estimates may require revision based on actual production experience. Market price fluctuations of gold and copper, as well as increased production costs or reduced metallurgical recovery rates, could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves.

We publish reserves annually, and we will recalculate reserves as of December 31, 2008, taking into account metal prices, divestments and depletion as well as any acquisitions and additions to reserves during 2008.

 

27


Table of Contents

The following tables detail gold proven and probable equity reserves(1) reflecting only those reserves owned by Newmont as of December 31, 2007 and 2006:

 

Deposits/Districts

  Newmont
Share
    December 31, 2007   Metallurgical
Recovery(3)
 
    Proven Reserves   Probable Reserves   Proven and Probable
Reserves
 
    Tonnage(2)
(000)
  Grade
(oz/ton)
  Ounces(3)
(000)
  Tonnage(2)
(000)
  Grade
(oz/ton)
  Ounces(3)
(000)
  Tonnage(2)
(000)
  Grade
(oz/ton)
  Ounces(3)
(000)
 

Nevada(4)

                     

Carlin Open Pit(5)

  100 %   17,700   0.065   1,140   195,800   0.043   8,380   213,500   0.045   9,520   71 %

Carlin Underground

  100 %   1,500   0.318   490   5,700   0.407   2,330   7,200   0.388   2,820   94 %

Midas(6)

  100 %   600   0.539   340   400   0.428   190   1,000   0.493   530   95 %

Phoenix

  100 %         278,100   0.027   7,600   278,100   0.027   7,600   75 %

Turquoise Ridge(7)

  25 %   2,100   0.477   990   700   0.402   290   2,800   0.458   1,280   92 %

Twin Creeks

  100 %   4,200   0.072   300   47,900   0.079   3,780   52,100   0.078   4,080   80 %

Nevada In-Process(8)

  100 %   40,200   0.026   1,060         40,200   0.026   1,060   66 %

Nevada Stockpiles(9)

  100 %   30,900   0.079   2,440   1,500   0.030   40   32,400   0.077   2,480   77 %
                                 
    97,200   0.070   6,760   530,100   0.043   22,610   627,300   0.047   29,370   77 %
                                 

Yanacocha, Peru

                     

Conga(10)

  51.35 %         317,200   0.019   6,080   317,200   0.019   6,080   79 %

Yanacocha In-Process(8)(11)

  51.35 %   20,700   0.027   560         20,700   0.027   560   76 %

Yanacocha Open Pits(11)

  51.35 %   26,400   0.023   600   229,200   0.030   6,940   255,600   0.029   7,540   69 %
                                 
    47,100   0.025   1,160   546,400   0.024   13,020   593,500   0.024   14,180   74 %
                                 

Australia/New Zealand

                     

Boddington, Western Australia(12)

  66.67 %   124,900   0.026   3,240   352,000   0.022   7,850   476,900   0.023   11,090   82 %

Jundee, Western Australia(13)

  100 %   3,000   0.148   450   3,700   0.283   1,040   6,700   0.222   1,490   91 %

Kalgoorlie Open Pits and Underground

  50 %   32,500   0.061   1,980   33,600   0.065   2,190   66,100   0.063   4,170   86 %

Kalgoorlie Stockpiles(9)

  50 %   13,500   0.031   420         13,500   0.031   420   79 %
                                 

Total Kalgoorlie, Western Australia(14)

  50 %   46,000   0.052   2,400   33,600   0.065   2,190   79,600   0.058   4,590   85 %

Tanami Underground and Open Pits

  100 %   6,200   0.144   890   5,200   0.138   710   11,400   0.141   1,600   95 %

Tanami Stockpiles(9)

  100 %   400   0.081   30   1,500   0.036   60   1,900   0.045   90   95 %
                                 

Total Tanami, Northern Territory(15)

  100 %   6,600   0.140   920   6,700   0.115   770   13,300   0.127   1,690   95 %

Waihi, New Zealand(16)

  100 %         3,800   0.131   500   3,800   0.131   500   89 %
                                 
    180,500   0.039   7,010   399,800   0.031   12,350   580,300   0.033   19,360   85 %
                                 

Batu Hijau, Indonesia

                     

Open Pit(17)

  45 %   132,700   0.013   1,780   246,200   0.008   2,050   378,900   0.010   3,830   77 %

Stockpiles(9) (17)

  45 %         114,300   0.004   410   114,300   0.004   410   64 %
                                 
    132,700   0.013   1,780   360,500   0.007   2,460   493,200   0.009   4,240   76 %
                                 

Ghana

                     

Ahafo(18)

  100 %         124,000   0.078   9,720   124,000   0.078   9,720   87 %

Akyem(19)

  100 %         147,200   0.052   7,660   147,200   0.052   7,660   89 %
                                 
          271,200   0.064   17,380   271,200   0.064   17,380   88 %
                                 

Other Operations

                     

Kori Kollo, Bolivia(20)

  88 %   7,800   0.018   140   17,400   0.016   280   25,200   0.017   420   59 %

La Herradura, Mexico(21)

  44 %   32,600   0.023   760   35,100   0.023   820   67,700   0.023   1,580   66 %
                                 
    40,400   0.022   900   52,500   0.021   1,100   92,900   0.022   2,000   65 %
                                 

Total Gold

    497,900   0.035   17,610   2,160,500   0.032   68,920   2,658,400   0.033   86,530   80 %
                                 

 

28


Table of Contents

Deposits/Districts

  Newmont
Share
    December 31, 2006   Metallurgical
Recovery(3)
 
    Proven Reserves   Probable Reserves   Proven and Probable
Reserves
 
    Tonnage(2)
(000)
  Grade
(oz/ton)
  Ounces(3)
(000)
  Tonnage(2)
(000)
  Grade
(oz/ton)
  Ounces(3)
(000)
  Tonnage(2)
(000)
  Grade
(oz/ton)
  Ounces(3)
(000)
 

Nevada

                     

Carlin Open Pit

  100 %   25,900   0.069   1,780   245,700   0.040   9,750   271,600   0.042   11,530   74 %

Carlin Underground

  100 %   1,700   0.44   750   5,700   0.44   2,510   7,400   0.44   3,260   94 %

Midas

  100 %   600   0.58   350   600   0.35   200   1,200   0.47   550   95 %

Phoenix

  100 %         295,200   0.027   8,080   295,200   0.027   8,080   75 %

Turquoise Ridge

  25 %   1,200   0.54   640   900   0.54   510   2,100   0.54   1,150   90 %

Twin Creeks

  100 %   15,500   0.084   1,300   49,300   0.075   3,680   64,800   0.077   4,980   81 %

Nevada In-Process(8)

  100 %   45,600   0.024   1,120         45,600   0.024   1,120   66 %

Nevada Stockpiles(9)

  100 %   29,100   0.080   2,330   2,500   0.045   110   31,600   0.077   2,440   76 %
                                 
    119,600   0.069   8,270   599,900   0.041   24,840   719,500   0.046   33,110   78 %
                                 

Yanacocha, Peru

                     

Conga

  51.35 %         317,200   0.019   6,080   317,200   0.019   6,080   79 %

Yanacocha In-Process(8)

  51.35 %   24,000   0.028   670         24,000   0.028   670   71 %

Yanacocha Open Pits

  51.35 %   28,500   0.020   560   249,300   0.031   7,750   277,800   0.030   8,310   68 %
                                 
    52,500   0.023   1,230   566,500   0.024   13,830   619,000   0.024   15,060   73 %
                                 

Australia/New Zealand

                     

Boddington, Western Australia

  66.67 %   100,800   0.027   2,760   276,900   0.023   6,330   377,700   0.024   9,090   82 %

Jundee, Western Australia

  100 %   2,500   0.086   220   4,400   0.29   1,260   6,900   0.21   1,480   93 %

Kalgoorlie Open Pits and Underground

  50 %   34,500   0.061   2,120   40,100   0.064   2,550   74,600   0.063   4,670   86 %

Kalgoorlie Stockpiles(9)

  50 %   13,100   0.032   420         13,100   0.032   420   79 %
                                 

Total Kalgoorlie, Western Australia

  50 %   47,600   0.053   2,540   40,100   0.064   2,550   87,700   0.058   5,090   85 %

Pajingo, Queensland(22)

  100 %   600   0.31   170   700   0.17   130   1,300   0.23   300   96 %

Tanami Underground and Open Pits

  100 %   5,100   0.16   800   7,100   0.15   1,060   12,200   0.15   1,860   95 %

Tanami Stockpiles(9)

  100 %   400   0.084   40   2,600   0.032   80   3,000   0.039   120   95 %
                                 

Total Tanami, Northern Territory

  100 %   5,500   0.15   840   9,700   0.12   1,140   15,200   0.13   1,980   95 %

Waihi, New Zealand

  100 %         4,100   0.14   560   4,100   0.14   560   90 %
                                 
    157,000   0.042   6,530   335,900   0.036   11,970   492,900   0.038   18,500   86 %
                                 

Batu Hijau, Indonesia

                     

Open Pit

  52.875 %   106,100   0.015   1,540   266,100   0.011   2,960   372,200   0.012   4,500   80 %

Stockpiles(9)

  52.875 %         145,800   0.004   540   145,800   0.004   540   67 %
                                 
    106,100   0.015   1,540   411,900   0.009   3,500   518,000   0.010   5,040   79 %
                                 

Ghana

                     

Ahafo

  100 %         163,800   0.078   12,620   163,800   0.078   12,620   87 %

Akyem

  100 %         147,200   0.052   7,660   147,200   0.052   7,660   89 %
                                 
          311,000   0.065   20,280   311,000   0.065   20,280   88 %
                                 

Other Operations

                     

Kori Kollo, Bolivia

  88 %   20,300   0.004   80   21,500   0.018   390   41,800   0.011   470   61 %

La Herradura, Mexico

  44 %   27,000   0.020   540   37,500   0.023   850   64,500   0.022   1,390   66 %
                                 
    47,300   0.013   620   59,000   0.021   1,240   106,300   0.017   1,860   65 %
                                 

Total Gold

    482,500   0.038   18,190   2,284,200   0.033   75,660   2,766,700   0.034   93,850   81 %
                                 

 

29


Table of Contents

 

(1)

The term “reserve” means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination.

The term “economically,” as used in the definition of reserve, means that profitable extraction or production has been established or analytically demonstrated in a full feasibility study to be viable and justifiable under reasonable investment and market assumptions.

The term “legally,” as used in the definition of reserve, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, Newmont must have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with Newmont’s current mine plans.

The term “proven reserves” means reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (b) grade and/or quality are computed from the results of detailed sampling; and (c) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that size, shape, depth and mineral content of reserves are well established.

The term “probable reserves” means reserves for which quantity and grade are computed from information similar to that used for proven reserves, but the sites for sampling are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

Proven and probable equity reserves were calculated using different cut-off grades. The term “cut-off grade” means the lowest grade of mineralized material that can be included in the reserves in a given deposit. Cut-off grades vary between deposits depending upon prevailing economic conditions, mineability of the deposit, by-products, amenability of the ore to gold or copper extraction, and type of milling or leaching facilities available.

2007 reserves were calculated at a $575, A$750 or NZ$850 per ounce gold price unless otherwise noted.

2006 reserves were calculated at a $500, A$675 or NZ$750 per ounce gold price unless otherwise noted.

(2)

Tonnages include allowances for losses resulting from mining methods. Tonnages are rounded to the nearest 100,000.

(3)

Ounces or pounds are estimates of metal contained in ore tonnages and do not include allowances for processing losses. Metallurgical recovery rates represent the estimated amount of metal to be recovered through metallurgical extraction processes. Ounces are rounded to the nearest 10,000.

(4)

Cut-off grades utilized in Nevada 2007 reserves were as follows: oxide leach material not less than 0.006 ounce per ton; oxide mill material not less than 0.040 ounce per ton; refractory leach material not less than 0.025 ounce per ton; and refractory mill material not less than 0.047 ounce per ton.

(5)

Includes undeveloped reserves at Castle Reef, North Lantern and Emigrant deposits for combined total undeveloped reserves of 1.5 million ounces.

(6)

Also contains reserves of 7.5 million ounces of silver with a metallurgical recovery of 88%.

(7)

Reserve estimates provided by Barrick, the operator of the Turquoise Ridge Joint Venture.

(8)

In-process material is the material on leach pads at the end of the year from which gold remains to be recovered. In-process material reserves are reported separately where tonnage or contained ounces are greater than 5% of the total site-reported reserves and contained ounces are greater than 100,000.

(9)

Stockpiles are comprised primarily of material that has been set aside to allow processing of higher grade material in the mills. Stockpiles increase or decrease depending on current mine plans. Stockpile reserves are reported separately where tonnage or contained ounces are greater than 5% of the total site-reported reserves and contained ounces are greater than 100,000.

(10)

Deposit is currently undeveloped. Gold cut-off grade is not applicable due to reliance on copper credits.

(11)

Reserves include the currently undeveloped deposit at Corimayo, which contains reserves of 2.5 million equity ounces. Cut-off grades utilized in 2007 reserves were as follows: oxide leach material not less than 0.004 ounce per ton; and oxide mill material not less than 0.030 ounce per ton.

(12)

Deposit is currently being developed. Mill startup is expected in late 2008 or early 2009. Gold cut-off grade is not applicable due to reliance on copper credits.

(13)

Cut-off grade utilized in 2007 reserves not less than 0.020 ounce per ton.

(14)

Cut-off grade utilized in 2007 reserves not less than 0.026 ounce per ton.

(15)

Cut-off grade utilized in 2007 reserves not less than 0.031 ounce per ton.

(16)

Cut-off grade utilized in 2007 reserves not less than 0.023 ounce per ton.

(17)

Percentage reflects Newmont’s economic interest at December 31, 2007. On May 25, 2007, the minority owner of the Batu Hijau mine fully repaid a loan from a Newmont subsidiary. As a result of the loan repayment, Newmont’s economic interest was reduced from 52.875% to 45%. Gold cut-off grade is not applicable due to reliance on copper credits.

(18)

Includes undeveloped reserves at Awonsu, Amoma, Yamfo South, Yamfo Central, Techire West, Subenso South, Subenso North, Yamfo Northeast and Susuan totaling 5.3 million ounces. Cut-off grade utilized in 2007 reserves not less than 0.029 ounce per ton.

(19)

Deposit is undeveloped. Cut-off grade utilized in 2007 reserves not less than 0.012 ounce per ton.

(20)

Cut-off grade utilized in 2007 reserves not less than 0.007 ounce per ton.

(21)

Cut-off grade utilized in 2007 reserves not less than 0.009 ounce per ton.

(22)

Pajingo assets were sold in 2007.

 

30


Table of Contents

The following tables detail copper proven and probable equity reserves(1) reflecting only those reserves owned by Newmont as of December 31, 2007 and 2006:

 

Deposits/Districts

  Newmont
Share
    December 31, 2007   Metallurgical
Recovery(3)
 
    Proven Reserves   Probable Reserves   Proven and Probable Reserves  
    Tonnage(2)
(000)
  Grade
(Cu %)
    Pounds(3)
(millions)
  Tonnage(2)
(000)
  Grade
(Cu %)
    Pounds(3)
(millions)
  Tonnage(2)
(000)
  Grade
(Cu %)
    Pounds(3)
(millions)
 

Batu Hijau Open Pit(4)

  45 %   132,700   0.50 %   1,330   246,200   0.40 %   1,970   378,900   0.43 %   3,300   79 %

Batu Hijau Stockpiles(4)(5) 

  45 %           114,300   0.36 %   820   114,300   0.36 %   820   64 %
                                 

Total Batu Hijau, Indonesia(4)

  45 %   132,700   0.50 %   1,330   360,500   0.39 %   2,790   493,200   0.42 %   4,120   76 %

Boddington, Western Australia(6)

  66.67 %   124,900   0.11 %   280   351,600   0.11 %   750   476,500   0.11 %   1,030   83 %

Conga, Peru(7) 

  51.35 %           317,200   0.26 %   1,660   317,200   0.26 %   1,660   85 %

Phoenix, Nevada

  100 %           279,600   0.13 %   740   279,600   0.13 %   740   66 %
                                 

Total Copper

    257,600   0.31 %   1,610   1,308,900   0.23 %   5,940   1,566,500   0.24 %   7,550   78 %
                                 

Deposits/Districts

  Newmont
Share
    December 31, 2006   Metallurgical
Recovery(3)
 
    Proven Reserves   Probable Reserves   Proven and Probable Reserves  
    Tonnage(2)
(000)
  Grade
(Cu %)
    Pounds(3)
(millions)
  Tonnage(2)
(000)
  Grade
(Cu %)
    Pounds(3)
(millions)
  Tonnage(2)
(000)
  Grade
(Cu %)
    Pounds(3)
(millions)
 

Batu Hijau Open Pit

  52.875 %   106,100   0.53 %   1,120   266,100   0.47 %   2,530   372,200   0.49 %   3,650   85 %

Batu Hijau Stockpiles(5) 

  52.875 %           145,800   0.37 %   1,070   145,800   0.37 %   1,070   72 %
                                 

Total Batu Hijau, Indonesia

  52.875 %   106,100   0.53 %   1,120   411,900   0.44 %   3,600   518,000   0.46 %   4,720   82 %

Boddington, Western Australia(6)

  66.67 %   100,800   0.11 %   230   276,600   0.11 %   610   377,400   0.11 %   840   83 %

Conga, Peru(7) 

  51.35 %           317,200   0.26 %   1,660   317,200   0.26 %   1,660   85 %

Phoenix, Nevada

  100 %           296,600   0.13 %   770   296,600   0.13 %   770   65 %
                                 

Total Copper

    206,900   0.33 %   1,350   1,302,300   0.25 %   6,640   1,509,200   0.26 %   7,990   81 %
                                 

 

(1)

See footnote (1) to the Gold Proven and Probable Equity Reserves tables above. Copper reserves for 2007 were calculated at a $1.75 or A$2.00 per pound copper price. Copper reserves for 2006 were calculated at a $1.25 or A$1.70 per pound copper price.

(2)

See footnote (2) to the Gold Proven and Probable Equity Reserves tables above. Tonnages are rounded to nearest 100,000.

(3)

See footnote (3) to the Gold Proven and Probable Equity Reserves tables above. Pounds are rounded to the nearest 10 million.

(4)

Percentage reflects Newmont’s economic interest at December 31, 2007. On May 25, 2007, the minority owner of the Batu Hijau mine fully repaid a loan from a Newmont subsidiary. As a result of the loan repayment, Newmont’s economic interest was reduced from 52.875% to 45%. Copper cut-off grade is not applicable due to reliance on gold credits.

(5)

Stockpiles are comprised primarily of material that has been set aside to allow processing of higher grade material in the mills. Stockpiles increase or decrease depending on current mine plans. Stockpiles are reported separately where tonnage or contained metal are greater than 5% of the total site reported reserves.

(6)

Deposit is currently being developed. Mill startup is expected in late 2008 or early 2009. Copper cut-off grade is not applicable due to reliance on gold credits.

(7)

Deposit is undeveloped. Copper cut-off grade is not applicable due to reliance on gold credits.

 

31


Table of Contents

The following table reconciles year-end 2007 and 2006 gold proven and probable equity reserves:

 

     Equity
Contained Ounces
 
     (in millions)  

December 31, 2006

   93.9  

Depletion(1)

   (7.3 )

Divestments/Other(2)

   (0.9 )

Revisions and Additions, net(3)

   0.8  
      

December 31, 2007

   86.5  
      

 

(1)

Reserves mined and processed in 2007.

(2)

Includes the reduction in Newmont’s economic interest in Batu Hijau from 52.875% to 45% and the sale of Pajingo.

(3)

Revisions and additions are due to reserve conversions, optimizations, model updates, metal price changes and updated unit costs and recoveries.

 

32


Table of Contents

ITEM 3. LEGAL PROCEEDINGS

For a discussion of legal proceedings, see Note 32 to the Consolidated Financial Statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended December 31, 2007.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

Newmont’s executive officers as of February 20, 2008 were:

 

Name

   Age     

Office

Richard T. O’Brien

   53      President and Chief Executive Officer

Britt D. Banks

   46      Executive Vice President, Legal and External Affairs

Russell Ball

   39      Senior Vice President and Chief Financial Officer

Steve Enders

   53      Senior Vice President, Exploration

Randy Engel

   41      Senior Vice President, Strategy and Corporate Development

Guy Lansdown

   47      Senior Vice President, Project Development and Technical Services

David Gutierrez

   53      Vice President, Tax and Accounting

Brian A. Hill

   48      Vice President, Asia Pacific Operations

Brant Hinze

   52      Vice President, North American Operations

Jeffrey R. Huspeni

   52      Vice President, African Operations

Roger Johnson

   50      Vice President and Chief Accounting Officer

Thomas P. Mahoney

   52      Vice President and Treasurer

Gordon R. Nixon

   54      Vice President, Technical Services

Carlos Santa Cruz

   52      Vice President, South American Operations

There are no family relationships by blood, marriage or adoption among any of the above executive officers of Newmont. All executive officers are elected annually by the Board of Directors of Newmont to serve for one year or until his respective successor is elected and qualified. There is no arrangement or understanding between any of the above executive officers and any other person pursuant to which he was selected as an executive officer.

Mr. O’Brien was elected President and Chief Executive Officer as of July 1, 2007, having served as President and Chief Financial Officer from April 2007 to July 2007, Executive Vice President and Chief Financial Officer from September 2006 to April 2007 and Senior Vice President and Chief Financial Officer during 2005 and 2006. Mr. O’Brien was Executive Vice President and Chief Financial Officer of AGL Resources from 2001 to 2005.

Mr. Banks was elected Executive Vice President Legal and Public Affairs, in 2006. He previously served as Senior Vice President and General Counsel from 2005 to 2006; Vice President and General Counsel from 2001 to 2005; and Secretary from 2001 to 2004.

Mr. Ball was elected Senior Vice President and Chief Financial Officer in July 2007. Mr. Ball served as Vice President and Controller from 2004 to July 2007. Previously, he served as Group Executive, Investor Relations, from 2002 to 2004.

Mr. Enders was elected Senior Vice President, Worldwide Exploration in 2006. Mr. Enders served as Vice President, Worldwide Exploration from 2003 to 2006. Mr. Enders was President of Phelps Dodge Exploration Corporation before joining Newmont.

 

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Mr. Engel was elected Senior Vice President, Strategy and Corporate Development in July 2007. Mr. Engel served as Vice President, Strategic Planning and Investor relations from 2006 to July 2007; Group Executive, Investor Relations from 2004 to 2006; and Assistant Treasurer from 2001 to 2004.

Mr. Lansdown was elected Senior Vice President, Project Development and Operations Services in July 2007. Mr. Lansdown served as Vice President, Project Engineering from 2006 to July 2007; Project Executive, Boddington, from 2005 to 2006; and Operations Manager, Yanacocha from 2003 to 2005.

Mr. Gutierrez was named Vice President, Tax and Accounting in July 2007, having served as Vice President, Tax, from 2005 to July 2007. Prior to joining Newmont, he was a partner with KPMG LLP from 2002 to 2005, serving as the Denver office Tax Managing Partner from 2003 to 2005.

Mr. Hill was named Vice President, Asia Pacific Operation in January 2008. Mr. Hill previously served as Managing Director and Chief Executive Officer of Norilsk Nickel Australia Pty Ltd in 2007; Managing Director and Chief Executive Officer of Equatorial Mining Ltd from 2004 to 2006; and Managing Director of Falconbridge (Australia) Pty Ltd from 2000 to 2004.

Mr. Hinze was elected Vice President, North American Operations in 2005. He previously served as General Manager of the Minera Yanacocha operations in Peru from 2003 to 2005 and managed the Minahasa project in Indonesia from 2001 to 2002.

Mr. Huspeni was elected Vice President, African Operations in January 2008. Mr. Huspeni previously served as Vice President, Exploration Business Development from 2005 to 2008 and Vice President, Mineral District Exploration, from 2002 to 2005.

Mr. Johnson was elected Vice President and Chief Accounting Officer in February 2008. Mr. Johnson previously served as Controller and Chief Accounting Officer from July 2007 to February 2008; Assistant Controller from 2004 to July 2007; Operations Controller and Regional Controller, Australia from 2003 to 2004. Before joining Newmont, Mr. Johnson served as Senior Vice President, Finance and Administration at Pasminco Zinc, Inc.

Mr. Mahoney was elected Vice President and Treasurer of Newmont in 2002. He served as Treasurer of Newmont from 2001 to 2002. Previously, he served as Assistant Treasurer from 1997 to 2001.

Mr. Nixon was elected Vice President, Technical Services in January 2008. Mr. Nixon previously served as Vice President, African Operations in 2007; Regional Group Executive, Africa and Eurasia, from 2006 to 2007; and Managing Director, Central Asia and Europe, from 2002 to 2006.

Mr. Santa Cruz was named Vice President, South American Operations in 2001. He served as General Manager of Minera Yanacocha S.R.L. from 1997 to 2001.

 

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

Newmont’s common stock is listed and principally traded on the New York Stock Exchange (under the symbol “NEM”) and is also listed in the form of CHESS Depositary Interests (“CDIs”) (under the symbol “NEM”) on the Australian Stock Exchange (“ASX”). In Australia, Newmont is referred to as “Newmont Mining Corporation ARBN 099 065 997 organized in Delaware with limited liability.” Since July 1, 2002, Newmont CDIs have traded on the ASX as a Foreign Exempt Listing granted by the ASX, which provides an ancillary trading facility to Newmont’s primary listing on NYSE. Newmont Mining Corporation of Canada Limited’s exchangeable shares (“Exchangeable Shares”) are listed on the Toronto Stock Exchange (under the symbol “NMC”). The following table sets forth, for the periods indicated, the closing high and low sales prices per share of Newmont’s common stock as reported on the New York Stock Exchange Composite Tape.

 

     2007    2006
     High    Low    High    Low

First quarter

   $ 47.71    $ 41.42    $ 61.95    $ 47.79

Second quarter

   $ 45.00    $ 38.53    $ 58.43    $ 47.72

Third quarter

   $ 48.26    $ 39.44    $ 55.52    $ 42.75

Fourth quarter

   $ 54.50    $ 44.75    $ 47.57    $ 40.83

On February 14, 2008, there were outstanding 435,838,958 shares of Newmont’s common stock (including shares represented by CDIs), which were held by approximately 15,410 stockholders of record. A dividend of $0.10 per share of common stock outstanding was declared in each quarter of 2007 and 2006, for a total of $0.40 during each year.

On February 14, 2008, there were outstanding 17,449,759 Exchangeable Shares, which were held by 46 holders of record. The Exchangeable Shares are exchangeable at the option of the holders into Newmont common stock. Holders of Exchangeable Shares are therefore entitled to receive dividends equivalent to those that Newmont declares on its common stock.

The determination of the amount of future dividends will be made by Newmont’s Board of Directors from time to time and will depend on Newmont’s future earnings, capital requirements, financial condition and other relevant factors.

Issuer purchase of equity securities:

 

Period

   (a)
Total
Number
of Shares
Purchased
    (b)
Average
Price Paid
Per Share
   (c)
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
   (d)
Maximum Number
(or Approximate
Dollar Value) of
Shares that may
yet be Purchased
under the Plans or
Programs

October 1, 2007 through October 31, 2007

   870 (1)    $ 47.20       N/A

November 1, 2007 through November 30, 2007

       $       N/A

December 1, 2007 through December 31, 2007

   984 (1)   $ 49.27       N/A

 

(1)

Represents shares delivered to the Company from restricted stock held by a Company employee upon vesting for purposes of covering the recipient’s tax withholding obligation.

 

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ITEM 6. SELECTED FINANCIAL DATA (dollars in millions, except per share)

 

     Years Ended December 31,  
     2007     2006    2005    2004(1)     2003  

Revenues

   $ 5,526     $ 4,882    $ 4,265    $ 4,222     $ 2,792  

(Loss) income from continuing operations

   $ (963 )   $ 563    $ 278    $ 416     $ 388  

Net (loss) income applicable to common shares(2)(3)

   $ (1,886 )   $ 791    $ 322    $ 443     $ 476  

Basic (loss) income per common share:

            

From continuing operations

   $ (2.13 )   $ 1.25    $ 0.62    $ 0.94     $ 0.95  

Discontinued operations

     (2.04 )     0.51      0.10      0.17       0.29  

Cumulative effect of a change in accounting principle

                     (0.11 )     (0.08 )
                                      

Net (loss) income per common share, basic

   $ (4.17 )   $ 1.76    $ 0.72    $ 1.00     $ 1.16  
                                      

Diluted (loss) income per common share:

            

From continuing operations

   $ (2.13 )   $ 1.25    $ 0.62    $ 0.93     $ 0.94  

Discontinued operations

     (2.04 )     0.51      0.10      0.17       0.29  

Cumulative effect of a change in accounting principle

                     (0.11 )     (0.08 )
                                      

Net (loss) income per common share, diluted

   $ (4.17 )   $ 1.76    $ 0.72    $ 0.99     $ 1.15  
                                      

Dividends declared per common share

   $ 0.40     $ 0.40    $ 0.40    $ 0.30     $ 0.17  
     At December 31,  
     2007     2006    2005    2004(1)     2003  

Total assets

   $ 15,598     $ 15,601    $ 13,992    $ 12,776     $ 10,698  

Long-term debt, including current portion

   $ 2,938     $ 1,911    $ 1,918    $ 1,590     $ 1,065  

Stockholders’ equity

   $ 7,548     $ 9,337    $ 8,376    $ 7,938     $ 7,385  

 

(1)

Effective January 1, 2004, the Company consolidated Batu Hijau.

(2)

Net income includes the cumulative effect of a change in accounting principle related to a net expense for the consolidation of Batu Hijau of $47 ($0.11 per share, basic) net of tax and minority interest in 2004; and a net expense for reclamation and remediation of $35 ($0.08 per share, basic), net of tax, in 2003.

(3)

Net (loss) income includes income (loss) from discontinued operations for Merchant Banking, Pajingo, Zarafshan, Holloway and Golden Grove of ($923) ($2.04 per share, basic), $228 ($0.51 per share, basic), $44 ($0.10 per share, basic), $74 ($0.17 per share, basic) and $123 ($0.29 per share, basic) net of tax in 2007, 2006, 2005, 2004 and 2003, respectively.

 

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in millions, except per share, per ounce and per pound amounts)

The following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”). References to “A$” refer to Australian currency, “CDN$” to Canadian currency, “NZD$” to New Zealand currency, “IDR” to Indonesian currency and “$” to United States currency.

This discussion addresses matters we consider important for an understanding of our financial condition and results of operations as of and for the three years ended December 31, 2007, as well as our future results. It consists of the following subsections:

 

   

“Overview,” which provides a brief summary of our consolidated results and financial position and the primary factors affecting those results, as well as a summary of our expectations for 2008;

 

   

“Accounting Developments,” which provides a discussion of recent changes to our accounting policies that have affected our consolidated results and financial position;

 

   

“Critical Accounting Policies,” which provides an analysis of the accounting policies we consider critical because of their effect on the reported amounts of assets, liabilities, income and/or expenses in our consolidated financial statements and/or because they require difficult, subjective or complex judgments by our management;

 

   

“Consolidated Financial Results,” which includes a discussion of our consolidated financial results for the last three years;

 

   

“Results of Consolidated Operations,” which sets forth an analysis of the operating results for the last three years;

 

   

“Recent Accounting Pronouncements and Developments,” which summarizes recently published authoritative accounting guidance, how it might apply to us and how it might affect our future results; and

 

   

“Liquidity and Capital Resources,” which contains a discussion of our cash flows and liquidity, investing activities and financing activities, contractual obligations and off-balance sheet arrangements.

This item should be read in conjunction with our consolidated financial statements and the notes thereto included in this annual report.

Overview

Newmont is one of the world’s largest gold producers and is the only gold company included in the S&P 500 Index, Fortune 500 and in the Dow Jones Sustainability Index-World. We are also engaged in the exploration for and acquisition of gold properties. We have significant assets or operations in the United States, Australia, Peru, Indonesia, Canada, Bolivia, New Zealand, Ghana and Mexico.

We face key risks associated with our business. One of the most significant risks is fluctuation in the prices of gold and copper, which are affected by numerous factors beyond our control. Other challenges we face include capital and production cost increases and social and environmental issues. Operating costs at our mines are subject to variation due to a number of factors, such as changing ore grades, metallurgy, revisions to mine plans and changes in accounting principles. At foreign locations, such costs are also influenced by currency fluctuations that may affect our U.S. dollar operating costs. In addition, we must continually replace reserves depleted through production by expanding known ore bodies, by acquisition or by locating new deposits in order to maintain production levels over the long term.

 

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Summary of Consolidated Financial and Operating Performance

The table below highlights key financial and operating results:

 

     Years Ended December 31,
     2007     2006    2005

Revenues

   $ 5,526     $ 4,882    $ 4,265

(Loss) income from continuing operations

   $ (963 )   $ 563    $ 278

Net (loss) income

   $ (1,886 )   $ 791    $ 322

Net (loss) income per common share, basic:

       

(Loss) income from continuing operations

   $ (2.13 )   $ 1.25    $ 0.62

Net (loss) income

   $ (4.17 )   $ 1.76    $ 0.72

Consolidated gold ounces sold (thousands)(1)

     6,184       7,186      8,237

Consolidated copper pounds sold (millions)

     428       435      573

Average price received, net(2)

       

Gold (per ounce)

   $ 697     $ 594    $ 437

Copper (per pound)

   $ 2.86     $ 1.54    $ 1.17

Costs applicable to sales(3)

       

Gold (per ounce)

   $ 406     $ 303    $ 235

Copper (per pound)

   $ 1.10     $ 0.71    $ 0.53

 

(1)

Includes incremental start-up ounces of 6, 100 and 22 in 2007, 2006 and 2005, respectively.

(2)

After treatment and refining charges and excluding settlement of price-capped forward sales contracts.

(3)

Excludes depreciation, depletion and amortization, loss on settlement of price-capped forward sales contracts and Midas redevelopment.

Consolidated Financial Performance

Gold revenues increased in 2007 from 2006 primarily due to higher gold prices, partially offset by lower gold sales volume. Gold sales decreased to 6.2 million ounces in 2007 from 7.2 million ounces in 2006, primarily due to decreased throughput and lower grade ores processed at Yanacocha and Nevada, partially offset by a full year of operations at Ahafo in 2007. Copper revenues increased in 2007 from 2006 due to an increase in the average realized price as the final deliveries were made under the copper collar contracts in February 2007 (see Results of Consolidated Operations below).

The gold price increases over the last few years were partially offset by higher production costs and fewer gold ounces sold. During the same period, we have seen significant increases in the costs of labor, fuel, power and other bulk consumables.

In addition, our financial and operating results were impacted by the following (pre-tax):

 

   

Gain on the sale of the royalty portfolio ($905) included in (Loss) income from discontinued operations;

 

   

Gain on the Zarafshan settlement ($77) compared to a loss on expropriation ($101 in 2006) included in (Loss) income from discontinued operations;

 

   

Merchant Banking goodwill impairment ($1,665) included in (Loss) income from discontinued operations;

 

   

Exploration goodwill impairment ($1,122); and

 

   

Loss on the settlement of price-capped forward sales contracts ($531).

 

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Acquisition of Miramar

On October 9, 2007, the Company announced the proposed acquisition of Miramar Mining Corporation (“Miramar”) and offered to acquire all of the outstanding common shares of Miramar for C$6.25 in cash. On December 27, 2007, 155 million common shares of Miramar had been validly deposited to Newmont’s offer. Newmont took up, accepted and paid for such shares, representing approximately 70% of the common shares of Miramar which, in addition to the 18 million shares previously owned by the Company, brought the Company’s interest in Miramar to approximately 78%. Miramar is a Canadian company that controls the Hope Bay project, a large undeveloped gold project in Nunavut, Canada. The Hope Bay Project is consistent with the Company’s strategic focus on exploration and project development and was acquired with the intention of adding higher grade ore reserves and developing a new core gold mining district in a AAA-rated country.

In January 2008, Newmont acquired approximately 40 million additional common shares of Miramar at a price of C$6.25 per common share, bringing its interest in Miramar to 96%. This successfully completed the offer to acquire all of the outstanding common shares of Miramar. Newmont has mailed a notice of compulsory acquisition pursuant to the Business Corporations Act (British Columbia) to acquire all the remaining common shares of Miramar that were not acquired pursuant to the offer.

Liquidity

The Company’s financial position was as follows:

 

     December 31,
     2007    2006

Total debt

   $ 2,938    $ 1,911

Total stockholders’ equity

   $ 7,548    $ 9,337

Cash and cash equivalents

   $ 1,231    $ 1,166

Marketable securities

   $ 1,500    $ 1,353

During 2007 our debt and liquidity positions were affected by the following:

 

   

Proceeds from the issuance of debt of $3,008, offset by $2,036 in repayments;

 

   

Convertible note hedge transaction including the purchase of call options for $366, partially offset by issuance of warrants of $248;

 

   

Net cash provided from continuing operations of $525 after settlement of the price-capped forward sales contracts of $578 and settlement of pre-acquisition tax contingency of Normandy of $276;

 

   

Net proceeds from the sale of discontinued operations of $1,197 and net proceeds from the Zarafshan settlement of $77;

 

   

Acquisition of approximately 70% of Miramar for $991 less cash received from the purchase of $38;

 

   

Capital expenditures of $1,670;

 

   

Dividends paid to common shareholders of $181; and

 

   

Dividends paid to minority interests of $270.

Looking Forward

Certain key factors will affect our future financial and operating results. These include, but are not limited to, the following:

 

   

Fluctuations in gold prices and, to a lesser extent, copper prices;

 

   

We expect 2008 consolidated gold sales of approximately 5.9 to 6.4 million ounces, primarily as a result of lower production from Australia and Batu Hijau;

 

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Costs applicable to sales per ounce for 2008 are expected to be approximately $425 to $450 per ounce as the impact of industry-wide cost pressures are expected to be compounded by slightly lower gold production;

 

   

We expect 2008 consolidated copper sales of approximately 345 to 365 million pounds at Costs applicable to sales of approximately $1.30 to $1.40 per pound as mining shifts from the high grade bottom of the pit into a lower grade mine sequence during 2008 and 2009;

 

   

We anticipate capital expenditures of approximately $1,800 to $2,000 in 2008, with approximately 50% in Australia/New Zealand, 25% in Nevada and the remaining 25% invested at other locations. Approximately $900 to $1,000 of the 2008 capital budget is allocated to sustaining investments, with the remaining $900 to $1,000 allocated to project development initiatives, including completion of the Boddington project in Australia, the power plant in Nevada and the Yanacocha gold mill in Peru;

 

   

We expect 2008 exploration expenditures of approximately $220 to $230 and 2008 advanced projects, research and development expenditures of approximately $120 to $180;

 

   

The construction of the Boddington project, the 200 megawatt coal-fired power plant in Nevada and the gold mill at Yanacocha, as well as potential future investments in the Hope Bay project in Canada, the Akyem project in Ghana and the Conga project in Peru will require significant funds for capital expenditures. At current gold and copper prices, new sources of capital will be needed to meet the funding requirements of these investments, fund our ongoing business activities and pay dividends. Our ability to raise and service significant new sources of capital will be a function of macroeconomic conditions, future gold and copper prices and our operational performance, among other factors. In the event of lower gold and copper prices, unanticipated operating or financial challenges, or new funding limitations, our ability to pursue new business opportunities, invest in existing and new projects, fund our ongoing business activities and pay dividends could be significantly constrained; and

 

   

Our full-year 2008 expectations, particularly with respect to sales volumes and costs applicable to sales per ounce or pound, may differ significantly from actual quarter and full year results due to variations in: ore grades and hardness, metal recoveries, waste removed, commodity input prices, foreign currencies and gold and copper sales prices (as impacting royalty and labor costs).

Accounting Developments

Income Taxes

The Company operates in numerous countries around the world and accordingly is subject to, and pays, annual income taxes under the various income tax regimes in the countries in which it operates. Some of these tax regimes are defined by contractual agreements with the local government, and others are defined by the general corporate income tax laws of the country. The Company has historically filed, and continues to file, all required income tax returns and to pay the taxes reasonably determined to be due. The tax rules and regulations in many countries are highly complex and subject to interpretation. From time to time the Company is subject to a review of its historic income tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the Company’s business conducted within the country involved.

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN48”) an interpretation of FASB Statement No. 109, “Accounting for Income Taxes” on January 1, 2007. FIN 48 clarifies the accounting and reporting for uncertainties in the application of the income tax laws to the Company’s operations. The interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The cumulative effects of applying this interpretation have been recorded as a decrease in retained earnings of $108, an increase of $5 in goodwill, an increase of $4 in minority interest, a decrease in net deferred tax assets of $37 (primarily, as a result of utilization of foreign tax credits and net

 

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operating losses as part of the FIN 48 measurement process, offset, in part, by the impact of the interaction of the Alternative Minimum Tax rules) and an increase of $72 in the net liability for unrecognized income tax benefits.

Pensions

As of December 31, 2006, the Company adopted the provisions of FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“FAS 158”). FAS 158 required employers that sponsor one or more defined benefit plans to (i) recognize the funded status of a benefit plan in its statement of financial position, (ii) recognize the gains or losses and prior service costs or credits that arise during the period as a component of other comprehensive income, net of tax, (iii) measure the defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position, and (iv) disclose in the notes to the financial statements additional information about certain effects on net periodic cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. The impact of adopting FAS 158 on the Consolidated Balance Sheets as of December 31, 2006 was as follows:

 

     Before
Application
of FAS 158
   Adjustment     After
Application
of FAS 158

Other long-term assets

   $ 193    $ (15 )   $ 178

Total assets

   $ 15,616    $ (15 )   $ 15,601

Employee pension and other benefits

   $ 229    $ 27     $ 256

Deferred income taxes

   $ 649    $ (14 )   $ 635

Accumulated other comprehensive income

   $ 700    $ (27 )   $ 673

Total stockholders’ equity

   $ 9,364    $ (27 )   $ 9,337

Stock Based Compensation

On January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), “Share-Based Payment” (“FAS 123(R)”). The Company adopted FAS 123(R) using the modified prospective transition method. Under this method, compensation cost recognized in 2006 included: a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of FAS 123, and b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R).

As a result of adopting FAS 123(R), the Company’s Loss from continuing operations and Net loss for 2007 was $11 ($0.02 per share) higher and Income from continuing operations and Net income for 2006 was $19 ($0.04 per share) lower, respectively, than if we had continued to account for share-based compensation under APB 25 as we did prior to January 1, 2006. Prior to the adoption of FAS 123(R), cash retained as a result of tax deductions relating to stock-based compensation was included in operating cash flows, along with other tax cash flows. FAS 123(R) requires tax benefits relating to the deductibility of increases in the equity instruments issued under share-based compensation arrangements that are not included in Costs applicable to sales (“excess tax benefits”) to be presented in the Statement of Cash Flows as financing cash inflows. The benefit realized for tax deductions from option exercises totaled $3 and $6 in 2007 and 2006, respectively.

Deferred Stripping Costs

On January 1, 2006 the Company adopted Emerging Issues Task Force Issue No. 04-06 (“EITF 04-06”), “Accounting for Stripping Costs Incurred during Production in the Mining Industry.” EITF 04-06 addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be included as a component of inventory to be recognized in Costs applicable to

 

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sales in the same period as the revenue from the sale of inventory. As a result, capitalization of post-production stripping costs is appropriate only to the extent product inventory exists at the end of a reporting period. The guidance required the recognition of a cumulative effect adjustment to opening retained earnings in the period of adoption, with no charge to earnings in the period of adoption for prior periods. The cumulative effect adjustment reduced retained earnings by $81 (net of tax and minority interests) and eliminated the $71 net deferred stripping asset from the balance sheet in 2006. Adoption of EITF 04-06 had no impact on the Company’s cash position or net cash from operations.

Critical Accounting Policies

Listed below are the accounting policies that the Company believes are critical to its financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported.

Carrying Value of Goodwill

As of December 31, 2007, the carrying value of goodwill was approximately $186. Goodwill represents the excess of the aggregate purchase price over the fair value of the identifiable net assets. Goodwill was assigned to various mine site reporting units in the Australia/New Zealand Segment. Our approach to allocating goodwill was to identify those reporting units that we believed had contributed to such excess purchase price. We then performed valuations to measure the incremental increases in the fair values of such reporting units that were attributable to the acquisitions, and that were not already captured in the fair values assigned to such units’ identifiable net assets.

We evaluate, on at least an annual basis, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. To accomplish this, we compare the estimated fair values of the reporting units to their carrying amounts. If the carrying value of a reporting unit exceeds its fair value at the time of the evaluation, we would compare the implied fair value of the reporting unit’s goodwill to its carrying amount and any shortfall would be charged to earnings. Assumptions underlying fair value estimates are subject to risks and uncertainties.

Mine Site Goodwill

The assignment of goodwill to mine site reporting units was based on synergies that have been incorporated into our operations and business plans over time. The amount of goodwill assigned to each segment or reporting unit was based on discounted cash flow analyses that assumed risk-adjusted discount rates over the remaining lives of the applicable mining operations. We believe that triggering events with respect to the goodwill assigned to mine site reporting units could include, but are not limited to: (i) a significant decrease in our long-term gold and copper price assumptions; (ii) a decrease in reserves; (iii) a significant reduction in the estimated fair value of mine site exploration potential; and (iv) any event that might otherwise adversely affect mine site production levels or costs. We performed our annual impairment test of mine site goodwill as of December 31, 2007 and determined that the fair value of each mine site reporting unit was in excess of the relevant carrying value as of December 31, 2007. For more information on the discounted cash flows used to value mine site reporting units, see Carrying Value of Long-Lived Assets, below.

Exploration Segment Goodwill

The Exploration Segment is responsible for all activities, whether near-mine or greenfield, associated with the Company’s efforts to discover new mineralized material that could ultimately advance into proven and probable reserves. As discussed in greater detail below, when performing its Exploration Segment goodwill impairment testing, the Company uses historic additions to proven and probable reserves as an indication of the expected future performance of the Exploration Segment.

 

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The Exploration Segment’s valuation model attributes all cash flows expected to be derived from future greenfield exploration discoveries, to the Exploration Segment. The valuation model includes management’s best estimates of future reserve additions from exploration activities and all revenues and costs associated with their discovery, development and production. Historical proven and probable reserve additions, excluding acquisitions, are used as an indicator of the Exploration Segment’s ability to discover additional reserves in the future. Actual reserve additions may vary significantly from year to year due to the time required to advance a deposit from initial discovery to proven and probable reserves and based on the timing of when proven and probable reserves can be reported under the Securities and Exchange Commission Industry Guide 7.

We performed our annual impairment test of the Exploration Segment goodwill during the fourth quarter of 2007. Based on the Exploration Segment’s historic additions to proven and probable reserves and management’s best estimates of future reserve additions from exploration activities and all revenues and costs associated with their discovery, development and production, the Exploration Segment’s estimated fair value was negligible. The decreased value attributable to the Exploration Segment resulted primarily from (i) a significantly lower assumed annual reserve growth rate (from 4% to 3%), (ii) a significant change in the financial markets resulting in a significant increase in the discount rate (from 8% to 10%), and (iii) an increase in finding costs due to a combination of increased spending and reduced exploration success.

Based on the negligible valuation, the Exploration Segment goodwill was impaired and the full $1,122 of goodwill was recorded as a non-cash write-down of goodwill as of December 31, 2007.

Merchant Banking Goodwill

During June 2007, Newmont’s Board of Directors approved a plan to cease Merchant Banking activities. Merchant Banking previously provided advisory services to assist in managing the Company’s portfolio of operating and property interests. Merchant Banking was also engaged in developing value optimization strategies for operating and non-operating assets, business development activities, merger and acquisition analysis and negotiations, monetizing inactive exploration properties, capitalizing on proprietary technology and know-how and acting as an internal resource for other corporate groups to improve and maximize business outcomes. As a result of the Board’s approval of management’s plan to cease Merchant Banking activities, the Company recorded a $1,665 non-cash charge to impair the goodwill associated with the Merchant Banking Segment during the second quarter of 2007.

Depreciation, Depletion and Amortization

Expenditures for new facilities or equipment and expenditures that extend the useful lives of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated future lives of such facilities or equipment. These lives do not exceed the estimated mine life based on proven and probable reserves as the useful lives of these assets are considered to be limited to the life of the relevant mine. During the second quarter of 2007, the Company revised its estimate of haul truck lives prospectively to ten years based on experience. The impact of the change in estimate was a reduction of Depreciation, depletion and amortization which decreased the Company’s Loss from continuing operations and Net loss by $13 ($0.03 per share) in 2007.

Costs incurred to develop new properties are capitalized as incurred, where it has been determined that the property can be economically developed based on the existence of proven and probable reserves. At our surface mines, these costs include costs to further delineate the ore body and remove overburden to initially expose the ore body. At our underground mines, these costs include the cost of building access ways, shaft sinking and access, lateral development, drift development, ramps and infrastructure development. All such costs are amortized using the units-of-production (“UOP”) method over the estimated life of the ore body based on estimated recoverable ounces to be produced from proven and probable reserves.

 

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Major development costs incurred after the commencement of production are amortized using the UOP method based on estimated recoverable ounces to be produced from proven and probable reserves. To the extent that such costs benefit the entire ore body, they are amortized over the estimated recoverable ounces or pounds in proven and probable reserves of the entire ore body. Costs incurred to access specific ore blocks on areas that only provide benefit over the life of that block or area are amortized over the estimated recoverable ounces or pounds in proven and probable reserves of that specific ore block or area.

The calculation of the UOP rate of amortization, and therefore the annual amortization charge to operations, could be materially impacted to the extent that actual production in the future is different from current forecasts of production based on proven and probable reserves. This would generally occur to the extent that there were significant changes in any of the factors or assumptions used in determining reserves. These factors could include: (i) an expansion of proven and probable reserves through exploration activities; (ii) differences between estimated and actual costs of production, due to differences in grade, metal recovery rates and foreign currency exchange rates; and (iii) differences between actual commodity prices and commodity price assumptions used in the estimation of reserves. If reserves decreased significantly, amortization charged to operations would increase; conversely, if reserves increased significantly, amortization charged to operations would decrease. Such changes in reserves could similarly impact the useful lives of assets depreciated on a straight-line basis, where those lives are limited to the life of the mine, which in turn is limited to the life of the proven and probable reserves.

The expected useful lives used in depreciation, depletion and amortization calculations are determined based on applicable facts and circumstances, as described above. Significant judgment is involved in the determination of useful lives, and no assurance can be given that actual useful lives will not differ significantly from the useful lives assumed for the purpose of depreciation, depletion and amortization calculations.

Carrying Value of Stockpiles

Stockpiles represent ore that has been extracted from the mine and is available for further processing. Stockpiles are measured by estimating the number of tons added and removed from the stockpile, the number of contained ounces based on assay data, and the estimated recovery percentage based on the expected processing method. Stockpile tonnages are verified by periodic surveys. Stockpiles are valued based on mining costs incurred up to the point of stockpiling the ore, including applicable depreciation, depletion and amortization relating to mining operations. Costs are added to a stockpile based on current mining costs and removed at the average cost per recoverable ounce of gold or pound of copper in the stockpile. Stockpiles are reduced as material is removed and processed further. The adoption of EITF 04-06 resulted in the allocation of deferred and advanced stripping costs to stockpiles and the value of our stockpiles decreased from $532 as of December 31, 2005 to $515 as of January 1, 2006. As of December 31, 2007 and 2006, our stockpiles had a total carrying value of $732 and $742, respectively.

Costs that are incurred in or benefit from the productive process are accumulated as stockpiles. We record stockpiles at the lower of average cost or net realizable value (“NRV”), and carrying values are evaluated at least quarterly. NRV represents the estimated future sales price of the product based on prevailing and long-term metals prices, less estimated costs to complete production and bring the product to sale. The primary factors that influence the need to record write-downs of stockpiles include short-term and long-term metals prices and costs for production inputs such as labor, fuel and energy, materials and supplies, as well as realized ore grades and actual production levels. If short-term and long-term metals prices decrease, the value of the stockpiles decreases, and it may be necessary to record a write-down of stockpiles to NRV. During 2007, 2006 and 2005, write-downs of stockpiles to NRV totaled $14, $2 and $9, respectively.

Cost allocation to stockpiles and the NRV measurement involves the use of estimates and assumptions unique to each mining operation regarding current and future operating and capital costs, metal recoveries, production levels, commodity prices, proven and probable reserve quantities, engineering data and other factors. A high degree of judgment is involved in determining such assumptions and estimates and no assurance can be given that actual results will not differ significantly from those estimates and assumptions.

 

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Carrying Value of Long-Lived Assets

We review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. An asset impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on estimated quantities of recoverable minerals, expected gold and other commodity prices (considering current and historical prices, price trends and related factors), production levels and costs of production, capital and reclamation costs, all based on life-of-mine plans. The significant assumptions in determining the future discounted cash flows for each mine site reporting unit as of December 31, 2007, apart from production cost and capitalized expenditure assumptions unique to each operation, included a long-term gold price of $700 per ounce, a long-term copper price of $2.25 per pound and an Australian dollar exchange rate of A$1.25 per $1.00.

Existing proven and probable reserves and value beyond proven and probable reserves, including mineralization other than proven and probable reserves and other material that is not part of the measured, indicated or inferred resource base, are included when determining the fair value of mine site reporting units at acquisition and, subsequently, in determining whether the assets are impaired. The term “recoverable minerals” refers to the estimated amount of gold or other commodities that will be obtained after taking into account losses during ore processing and treatment. Estimates of recoverable minerals from such exploration stage mineral interests are risk adjusted based on management’s relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups.

As discussed above under Depreciation, Depletion and Amortization, various factors could impact our ability to achieve our forecasted production schedules from proven and probable reserves. Additionally, production, capital and reclamation costs could differ from the assumptions used in the cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material could ultimately be mined economically. Assets classified as other mine-related exploration potential and greenfields exploration potential have the highest level of risk that the carrying value of the asset can be ultimately realized, due to the still lower level of geological confidence and economic modeling.

Derivative Instruments

With the exception of the Call Spread Transactions (as described below in Note 20), all financial instruments that meet the definition of a derivative are recorded on the balance sheet at fair market value. Changes in the fair market value of derivatives recorded on the balance sheet are recorded in the statements of consolidated (loss) income, except for the effective portion of the change in fair market value of derivatives that are designated as a cash flow hedge and qualify for cash flow hedge accounting. Our portfolio of derivatives includes various complex instruments. Management applies significant judgment in estimating the fair value of instruments that are highly sensitive to assumptions regarding commodity prices, market volatilities, foreign currency exchange rates and interest rates. Variations in these factors could materially affect amounts credited or charged to earnings to reflect the changes in fair market value of derivatives. In addition, certain derivative contracts are accounted for as cash flow hedges, whereby the effective portion of changes in fair market value of these instruments are deferred in Accumulated other comprehensive income and will be recognized in the statements of consolidated operations when the underlying production designated as the hedged item impacts earnings. All derivative contracts qualifying for hedge accounting are designated against the applicable portion of future foreign currency expenditures or future production from proven and probable reserves, where management believes the forecasted transaction is probable of occurring. To the extent that management determines that such future foreign expenditures or production are no longer probable of occurring, gains and losses deferred in

 

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Accumulated other comprehensive income would be reclassified to the statements of consolidated (loss) income immediately.

Reclamation and Remediation Obligations (Asset Retirement Obligations)

Reclamation costs are allocated to expense over the life of the related assets and are periodically adjusted to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation and remediation costs. The asset retirement obligation is based on when the spending for an existing environmental disturbance will occur. We review, on at least an annual basis, the asset retirement obligation at each mine site in accordance with FASB FAS No. 143, “Accounting for Asset Retirement Obligations.”

Future remediation costs for inactive mines are accrued based on management’s best estimate at the end of each period of the costs expected to be incurred. Such cost estimates include, where applicable, ongoing care, water treatment, maintenance and monitoring costs. Changes in estimates at inactive mines are reflected in earnings in the period an estimate is revised.

Accounting for reclamation and remediation obligations requires management to make estimates unique to each mining operation of the future costs we will incur to complete the reclamation and remediation work required to comply with existing laws and regulations. Actual costs incurred in future periods could differ from amounts estimated. Additionally, future changes to environmental laws and regulations could increase the extent of reclamation and remediation work required. Any such increases in future costs could materially impact the amounts charged to earnings for reclamation and remediation.

Income and Mining Taxes

We recognize the expected future tax benefit from deferred tax assets when the tax benefit is considered to be more likely than not of being realized. Assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecasted cash flows and the application of existing tax laws in each jurisdiction. Refer above under Carrying Value of Long-Lived Assets for a discussion of the factors that could cause future cash flows to differ from estimates. To the extent that future cash flows and taxable income differ significantly from estimates, our ability to realize deferred tax assets recorded at the balance sheet date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which we operate could limit our ability to obtain the future tax benefits represented by our deferred tax assets recorded at the reporting date.

The Company’s operation involves dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. As of January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”), an interpretation of FASB Statement No. 109, “Accounting for Income Taxes,” guidance to record these liabilities (refer to Note 8 of the Consolidated Financial Statements for additional information). The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

 

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Consolidated Financial Results

Sales - gold, net for 2007 increased $94 compared to 2006 due to a $103 per ounce increase in the average realized price after treatment and refining charges partially offset by 908,000 fewer ounces sold. Sales—gold, net for 2006 increased $618 compared to 2005 due to a $157 per ounce increase in the average realized price after treatment and refining charges partially offset by 1,129,000 fewer ounces sold. The following analysis summarizes the change in consolidated gold sales revenue:

 

     Years Ended December 31,  
     2007     2006     2005  

Consolidated gold sales:

      

Gross

   $ 4,332     $ 4,241     $ 3,619  

Less: Treatment and refining charges

     (27 )     (30 )     (26 )
                        

Net

   $ 4,305     $ 4,211     $ 3,593  
                        

Consolidated gold ounces sold (thousands)

      

Gross

     6,184       7,186       8,237  

Less: Incremental start-up sales

     (6 )     (100 )     (22 )
                        

Net

     6,178       7,086       8,215  
                        

Average realized gold price per ounce:

      

Before treatment and refining charges

   $ 701     $ 599     $ 441  

After treatment and refining charges

   $ 697     $ 594     $ 437  

The change in consolidated gold sales is due to:

 

     2007 vs. 2006     2006 vs. 2005  

Reduction in consolidated ounces sold

   $ (544 )   $ (506 )

Increase in average realized gold price

     635       1,128  

Decrease (increase) in treatment and refining charges

     3       (4 )
                
   $ 94     $ 618  
                

Sales - copper, net increased in 2007 compared to 2006 due to higher realized prices as the final deliveries were made under the copper collar contracts in February 2007, partially offset by lower production. In 2006, copper sales were unchanged compared to 2005 as lower sales volumes were offset by higher realized prices. In addition, in 2006 a loss of $56 was included in Other income, net for the ineffective portion of copper hedges. For a complete discussion regarding variations in copper volumes, see Results of Consolidated Operations below.

The following analysis reflects the changes in consolidated copper sales:

 

     Years Ended December 31,  
       2007         2006         2005    

Consolidated copper sales:

      

Gross before derivative contracts

   $ 1,409     $ 1,333     $ 953  

Hedging losses

     (1 )     (633 )     (258 )

Provisional pricing mark-to-market

     (34 )     165       138  
                        

Gross after derivative contracts

     1,374       865       833  

Less: Treatment and refining charges

     (153 )     (194 )     (161 )
                        

Net

   $ 1,221     $ 671     $ 672  
                        

Consolidated copper pounds sold (millions)

     428       435       573  

Average realized price per pound:

      

Gross before derivative contracts

   $ 3.30     $ 3.07     $ 1.66  

Hedging losses

     —         (1.46 )     (0.45 )

Provisional pricing mark-to-market

     (0.09 )     0.38       0.24  
                        

Gross after derivative contracts

     3.21       1.99       1.45  

Less: Treatment and refining charges

     (0.35 )     (0.45 )     (0.28 )
                        

Net

   $ 2.86     $ 1.54     $ 1.17  
                        

 

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The change in consolidated copper sales is due to:

 

     2007 vs. 2006     2006 vs. 2005  

Decrease in consolidated pounds sold

   $ (15 )   $ (201 )

Increase in average realized copper price

     524       233  

Decrease (increase) in treatment and refining charges

     41       (33 )
                
   $ 550     $ (1 )
                

The following is a summary of consolidated gold and copper sales, net:

 

     Years Ended December 31,  
     2007    2006     2005  

Gold

       

Nevada, USA

   $ 1,616    $ 1,441     $ 1,053  

Yanacocha, Peru

     1,093      1,543       1,490  

Australia/New Zealand:

       

Tanami, Australia

     305      250       221  

Kalgoorlie, Australia

     224      198       183  

Jundee, Australia

     214      190       154  

Waihi, New Zealand

     66      71       73  
                       
     809      709       631  
                       

Batu Hijau, Indonesia

     351      264       318  

Ahafo, Ghana

     306      124        

Other Operations:

       

Kori Kollo, Bolivia

     60      77       44  

La Herradura, Mexico

     61      48       36  

Golden Giant, Canada

     8      35       73  
                       
     129      160       153  
                       

Corporate

     1      (30 )     (52 )
                       
   $ 4,305    $ 4,211     $ 3,593  
                       

Copper

       

Batu Hijau, Indonesia

   $ 1,221    $ 671     $ 672  
                       

Costs applicable to sales - gold increased in 2007 compared to 2006 due to increased labor and diesel costs, the strengthening of the Australian dollar, a full year of operations at Ahafo in Ghana and Phoenix and Leeville in Nevada and higher waste removal costs at Batu Hijau. The increase in 2006 from 2005 resulted primarily from higher labor and input commodity prices and higher waste removal costs at Yanacocha and Batu Hijau, as well as increased operating costs from the start-up of Phoenix and Leeville in Nevada and Ahafo in Ghana. Costs applicable to sales - copper increased in 2007 from 2006 mainly due to higher waste removal costs at Batu Hijau. We have seen significant increases in the costs of labor, fuel, power and other consumables during these periods for both gold and copper. For a complete discussion regarding variations in operations, see Results of Consolidated Operations below.

Depreciation, depletion and amortization increased in 2007 from 2006 due to a full year of operations at Phoenix and Leeville in Nevada and Ahafo in Ghana. Depreciation, depletion and amortization remained at the same level in 2006 from 2005, as capital spending increases from the start-up of Phoenix and Leeville in Nevada and Ahafo in Ghana and capital expenditures at other operations were offset by lower production at Yanacocha and Batu Hijau. Depreciation, depletion and amortization expense fluctuates as capital expenditures increase or decrease and as production levels increase or decrease due to the use of the units-of production amortization

 

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method. For a complete discussion, see Results of Consolidated Operations, below. We expect Depreciation, depletion and amortization to increase to approximately $725 to $775 in 2008.

The following is a summary of Costs applicable to sales and Depreciation, depletion and amortization by operation:

 

     Costs Applicable to Sales    Depreciation, Depletion
and Amortization
     Years Ended December 31,    Years Ended December 31,
     2007    2006    2005    2007    2006        2005    

Gold

                 

Nevada, USA

   $ 1,036    $ 980    $ 807    $ 220    $ 180    $ 124

Yanacocha, Peru

     540      498      487      160      172      205

Australia/New Zealand:

                 

Tanami, Australia

     187      155      162      37      30      33

Kalgoorlie, Australia

     196      163      144      24      25      17

Jundee, Australia

     143      113      115      26      26      27

Waihi, New Zealand

     47      27      29      22      10      16
                                         
     573      458      450      109      91      93
                                         

Batu Hijau, Indonesia

     120      91      109      25      20      34

Ahafo, Ghana

     177      60           43      19     

Other Operations:

                 

Kori Kollo, Bolivia

     30      27      16      10      9      4

La Herradura, Mexico

     29      19      15      7      8      5

Golden Giant, Canada

     2      13      48           1      11
                                         
     61      59      79      17      18      20
                                         
     2,507      2,146      1,932      574      500      476
                                         

Copper

                 

Batu Hijau, Indonesia

     471      308      303      96      66      87
                                         

Other

                 

Exploration

                    1      3      4

Australia/New Zealand

                    3      3      3

Ahafo, Ghana

                              1

Other Operations

                         1      2

Corporate and Other

                    21      16      16
                                         
                    25      23      26
                                         
   $ 2,978    $ 2,454    $ 2,235    $ 695    $ 589    $ 589
                                         

 

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Deferred stripping. The net deferred stripping amounts included in Costs applicable to sales by operation were as follows for the year ended December 31, 2005:

 

Gold

  

Nevada, USA

   $ (47 )

Australia/New Zealand:

  

Kalgoorlie, Australia

     (9 )

Waihi, New Zealand

     2  
        
     (7 )
        

Other Operations:

  

La Herradura, Mexico

     (3 )
        
   $ (57 )
        

Copper

  

Batu Hijau, Indonesia

   $ 1  
        

See Accounting Developments, above.

The Loss on settlement of price-capped forward sales contracts of $531 in 2007 resulted from the elimination of the entire 1.85 million ounces of forward sales contracts that would have impacted results in 2008 and beyond.

Midas redevelopment of $11 in 2007 resulted from activities undertaken, during suspended operations, to regain entry into the mine in order to resume commercial production following the accident that occurred on June 19, 2007.

Exploration period-to-period increases reflect increased exploration and related activity in response to higher gold prices and increased drilling, labor and consumable costs. Advanced projects, research and development costs represent spending on advanced projects, feasibility studies and drilling at Phoenix, Akyem, Ahafo and Conga. We expect Exploration to be approximately $220 to $230 and Advanced projects, research and development to be approximately $120 to $180 in 2008.

General and administrative expense increased in 2007 from 2006 primarily due to increased professional fees and consulting costs. The increase in 2006 from 2005 was primarily due to $12 of stock option expense. General and administrative expense as a percentage of revenues was 2.6% in 2007, compared to 2.8% in both 2006 and 2005. We expect General and administrative expenses to be approximately $140 to $150 in 2008.

Write-down of goodwill was $1,122, $nil and $41 for 2007, 2006 and 2005, respectively. The 2007 impairment was related to the Exploration segment. In 2007, annual testing for impairment pursuant to FAS No. 142 resulted in a goodwill impairment charge for the Exploration Segment of $1,122. The impairment resulted primarily from (i) a significantly lower assumed annual reserve growth rate (from 4% to 3%), (ii) a significant change in the financial markets resulting in an increase in the discount rate (from 8% to 10%), and (iii) an increase in finding costs due to a combination of increased spending and reduced exploration success. The 2005 impairment was related to the Nevada segment resulting from anticipated increased future operating and capital costs.

Write-down of investments totaled $46 in 2007, primarily related to the impairment of investments in Shore Gold Inc. and Gabriel Resources Ltd.

Write-down of long-lived and other assets totaled $4, $3 and $41 for 2007, 2006 and 2005, respectively. The 2007 write-down was primarily related to tenements in Australia. The 2006 write-down was primarily related to equipment. The 2005 write-down was primarily related to the Martabe exploration project in Indonesia and exploration tenements in Australia.

 

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For a discussion of our policy for assessing the carrying value of goodwill and long-lived assets for impairment, see Critical Accounting Policies, above.

Other expense, net includes the following:

 

     Years Ended December 31,  
         2007            2006            2005      

Reclamation and remediation

   $ 29    $ 47    $ 38  

Pension settlement loss

     17           4  

Buyat Bay settlement and other

     12      22      56  

Western Australia power plant

     11      1      (3 )

World Gold Council dues

     11      13      14  

Peruvian royalty

     10      22       

Choropampa legal costs

     9      5      4  

Reclamation accretion

     8      3       

Australian office relocation

     6      5       

PTNNT divestiture

     3            

Yanacocha leach pad repairs

     1      10       

Peruvian workers participation reserve

          15       

Other

     31      16      13  
                      
   $ 148    $ 159    $ 126  
                      

The 2007 expense includes changes in environmental obligations estimates at former mines, pension settlement losses related to senior management retirements, World Gold Council dues and costs at the Western Australia power plant. The 2006 expense primarily includes changes in environmental obligation estimates at former mines, legal and other costs incurred in regards to pollution allegations at Minahasa and at Yanacocha, the Peruvian royalty, costs associated with leach pad repairs and Peruvian worker’s participation reserves. Beginning in 2006 Yanacocha recorded a charge to Other expense, net related to an agreement with the Peruvian government to provide for a negotiated royalty payment during high metal prices for community improvements. The negotiated royalty is based on 3.75% of Yanacocha’s net income beginning January 1, 2006 for a period of up to five years. The 2005 expense included legal and other costs incurred in regards to pollution allegations at Minahasa, changes in environmental obligation estimates at former mines, costs incurred to stabilize material and repair damage to roads and utility lines for a waste dump slide in Nevada and a pension settlement loss.

Other income, net is summarized as follows:

 

     Years Ended December 31,
         2007             2006             2005    

Interest income

   $ 50     $ 67     $ 59

Canadian Oil Sands Trust income

     47       30       10

Foreign currency exchange gains

     25       5       8

Gain on sale of property, plant and equipment

     9       12       11

Gain (loss) on ineffective portion of derivative investments, net (Note 14)

     4       (60 )     2

Income from development projects, net

     3       19      

Loss (gain) on sale of other assets, net

     (1 )     6       6

Loss on early extinguishment of debt

           (40 )    

Other

     7       14       10
                      
   $ 144     $ 53     $ 106
                      

 

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Interest income decreased in 2007 from 2006 due to lower investment yields. Interest income increased in 2006 from 2005 due to increased funds invested and higher investment yields.

Income from developing projects includes gold and copper sales, net of incremental operating costs incurred, from operations prior to commercial production. Income in 2007 is from the Bob Star project in Nevada and income in 2006 is from the Leeville and Phoenix operations also in Nevada.

Foreign currency exchange gains in 2007 resulted from the strengthening of the Canadian and Australian dollars compared to the U.S. dollar. The Canadian dollar exchange rate increased by approximately 19% from December 31, 2006 while the Australian dollar exchange rate increased by approximately 11%.

On September 27, 2006, we settled our remaining obligations under the prepaid forward gold sales contract and forward gold purchase contract for which we were required to deliver 17,951 ounces of gold in December 2006 and 179,062 ounces of gold in June 2007. This settlement resulted in cash payments of $96, and included a $48 reduction to the current portion of long-term debt and a $40 pre-tax loss on extinguishment of debt.

The loss on ineffective portion of derivative instruments includes a loss of $56 in 2006 for the ineffective portion of the copper collar instruments designated as cash flow hedges. Other losses relate to the ineffective portion of legacy gold puts held in Australia.

Interest expense, net of capitalized interest was $105, $97 and $97 for 2007, 2006 and 2005, respectively. Capitalized interest totaled $50, $57 and $39 in each year, respectively. Interest costs increased in 2007 due to the issuance of the $1,150 convertible senior notes in July 2007 and the $200 bond issuance at Yanacocha in July 2006. These increases were offset by capitalized interest due to construction of Leeville, Phoenix and the power plant in Nevada, the Ahafo project in Ghana and the Boddington project in Australia. Capitalized interest has decreased in 2007 from 2006 due to the completion of the Leeville, Phoenix and Ahafo projects. We expect Interest expense, net of capitalized interest to be approximately $110 to $115 in 2008.

Income tax expense was $200 in 2007, compared to $326 and $270 in 2006 and 2005, respectively. The effective tax rates were (57%), 26%, and 29% in 2007, 2006 and 2005, respectively. Without the $1,122 goodwill impairment charge in 2007 (which is not deductible for tax purposes and for which no related income tax benefit can be claimed), the effective tax rate for 2007 would have been 26%. The factors that most significantly impact our effective tax rate are percentage depletion and resource allowances, the rate differential related to foreign earnings indefinitely invested, valuation allowances related to deferred tax assets, foreign earnings net of foreign tax credits, earnings attributable to minority interests in subsidiaries and affiliated companies, foreign currency translation gains and losses, impacts of the analysis of income taxes payable and U.S. book and tax basis of assets and liabilities, changes in tax laws, goodwill impairment and the impact of certain specific transactions. Most of these factors are sensitive to the average realized price of gold and other metals.

Percentage depletion allowances (tax deductions for depletion that may exceed our tax basis in our mineral reserves) are available to us under the income tax laws of the United States for operations conducted in the United States or through branches and partnerships owned by U.S. subsidiaries included in our consolidated United States income tax return. The deductions are highly sensitive to the price of gold and other minerals produced by the Company. For 2006 and prior years, similar types of deductions were available for mining operations in Canada. The tax benefits from percentage depletion and resource allowances were $70, $77 and $43 in 2007, 2006 and 2005, respectively. The decrease in 2007 compared to 2006 primarily is due to a decrease in production at certain non-US mine sites.

We operate in various countries around the world that have tax laws, tax incentives and tax rates that are significantly different than those of the United States. Many of these differences combine to move our overall effective tax rate higher or lower than the United States statutory rate depending on the mix of income relative to income earned in the United States. The effect of these differences is shown in Note 8 to the Consolidated

 

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Financial Statements as either a foreign rate differential or the effect of foreign earnings, net of credits. Differences in tax rates and other foreign income tax law variations make our ability to fully utilize all of our available foreign income tax credits on a year-by-year basis highly dependent on the price of the gold and copper produced by the Company and the costs of production, since lower prices or higher costs can result in our having insufficient sources of taxable income in the United States to utilize all available foreign tax credits. Such credits have limited carry back and carry forward periods and can only be used to reduce the United States income tax imposed on our foreign earnings included in our annual United States consolidated income tax return. The effects of foreign earnings, net of allowable credits, were an increase of income tax expense of $10, $7 and $13, in 2007, 2006 and 2005, respectively. The effect of different income tax rates in countries where earnings are indefinitely reinvested contributed to an increase in our income tax expense of $7 and $70 in 2007 and 2006, respectively, and decreased tax expense in 2005 by $6.

The tax effect of changes in local country tax laws, as shown in our effective tax reconciliation in Note 8 to the Consolidated Financial Statements, resulted in a net tax benefit of $2, $71 and $24 in 2007, 2006 and 2005, respectively. The net tax benefit in 2007 is primarily related to a decrease in Canadian federal and provincial statutory tax rates and a decrease in New Zealand tax rates. The net tax benefit in 2006 is primarily related to adopting the U.S. dollar as our functional currency for Australian tax reporting purposes and a decrease in the Canadian federal and provincial statutory tax rates. The net tax benefit in 2005 is primarily related to a change in Australian tax law regarding our ability to file consolidated income tax returns.

The need to record valuation allowances related to our deferred tax assets (primarily attributable to net operating losses and tax credits) is principally dependent on the following factors: (i) the extent to which the net operating losses and tax credits can be carried back and yield a tax benefit; (ii) our long-term estimate of future average realized minerals prices; and (iii) the degree to which many of the tax laws and income tax agreements imposed upon us and our subsidiaries around the world tend to create significant tax deductions early in the mining process. These up-front deductions can give rise to net operating losses and tax credit carry forwards in circumstances where future sources of taxable income may not coincide with available carry forward periods even after taking into account all available tax planning strategies. Furthermore, certain liabilities, accrued for financial reporting purposes, may not be deductible for tax purposes until such liabilities are actually funded which could happen after mining operations have ceased, when sufficient sources of taxable income may not be available. Changes to valuation allowances decreased income tax expense by $17 and $3 in 2007 and 2006, respectively, and increased income tax expense by $39 in 2005. The change in 2007 primarily is due to the realization of capital gains in Australia.

We consolidate certain subsidiaries of which we do not own 100% of the outstanding equity. However, for tax purposes, we are only responsible for the income taxes on the portion of the taxable earnings attributable to our ownership interest of each consolidated entity. Such minority interests contributed $4, $15 and $15 in 2007, 2006 and 2005, respectively, as reductions in our income tax expense.

Our tax expense was not affected in 2007 and decreased by $1 and $14 in 2006 and 2005 respectively due to changes in foreign currency exchange rates. In 2005, these amounts primarily relate to the Australian tax effect of realized and unrealized translation gains attributable to United States dollar-denominated assets and liabilities and the gold derivatives positions at Newmont Australia Limited whose functional currency is the United States dollar. Because we intend to indefinitely reinvest earnings from Newmont Australia Limited, no offsetting United States deferred income tax effect can be recorded.

Had the $1,122 write-off of goodwill in 2007, which is non-deductible for tax purposes, been deductible, our tax expense would have decreased by $393.

During 2006 we completed a reconciliation of our U.S. book and tax basis assets and liabilities as well as a detailed analysis of our income taxes payable. This exercise identified differences of $27, which was recognized as a tax benefit in 2006.

 

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Based on the uncertainty and inherent unpredictability of the factors influencing our effective tax rate and the sensitivity of such factors to gold and other metals prices as discussed above, the effective tax rate is expected to be volatile in future periods. The effective tax rate is expected to be between 30% and 34% in 2008.

Minority interest in income of subsidiaries was as follows:

 

     Years Ended December 31,
         2007            2006            2005    

Batu Hijau

   $ 299    $ 103    $ 119

Yanacocha

     108      256      256

Other

     3      4      5
                    
   $ 410    $ 363    $ 380
                    

Minority interest in income of subsidiaries increased in 2007 from 2006 as a result of increased earnings at Batu Hijau and a $25 charge in 2007 related to the repayment of the carried interest loan at Batu Hijau, partially offset by decreased earnings at Yanacocha (see Results of Consolidated Operations, Batu Hijau Operations and Yanacocha Operations). The 2006 decrease from 2005 resulted from lower production and earnings at Batu Hijau (see Results of Consolidated Operations, Batu Hijau Operations).

Equity (loss) income of affiliates was as follows:

 

     Years Ended December 31,  
         2007             2006             2005      

European Gold Refineries

   $ 6     $ 3     $ 6  

AGR Matthey Joint Venture

     1       1       (2 )

Regis Resources NL

     (8 )     (2 )      
                        
   $ (1 )   $ 2     $ 4  
                        

(Loss) income from discontinued operations was as follows:

 

     Years Ended December 31,  
         2007             2006             2005      

Sales - gold, net

   $ 119     $ 157     $ 171  

Sales - base metals, net

                 38  
                        
   $ 119     $ 157     $ 209  
                        

Income (loss) from operations:

      

Royalty portfolio

   $ 123     $ 67     $ 121  

Pajingo

     8       12       1  

Zarafshan

           6       18  

Holloway

                 (27 )

Golden Grove

                 (5 )
                        
     131       85       108  
                        

Gain on sale of operations:

      

Zarafshan

     77              

Pajingo

     8              

Holloway

           13        

Golden Grove

                 6  
                        
     85       13       6  
                        

Gain on sale of royalty assets

     905              

Gain on sale of Alberta oil sands project

           266        

Gain on sale of Martabe

           30        

Loss from impairment

     (1,665 )     (101 )     (42 )
                        

Pre-tax (loss) income

     (544 )     293       72  

Income tax expense

     (379 )     (65 )     (28 )
                        

(Loss) income from discontinued operations

   $ (923 )   $ 228     $ 44  
                        

 

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During June 2007, Newmont’s Board of Directors approved a plan to cease Merchant Banking activities. The Company decided to dispose of its royalty portfolio and a portion of its existing equity investments and will not make further investments in equity securities that do not support its core gold mining business. Newmont and the new Franco-Nevada Corporation (“new Franco-Nevada”) entered into an agreement under which new Franco-Nevada acquired certain mineral interests and oil and gas interests for cash consideration of $1,187. The transaction closed in December 2007 resulting in a $905 pre-tax gain.

In 2006, the Company received net cash proceeds of $271 for the Alberta oil sands project resulting in a $266 pre-tax gain. The Company received $42 net cash proceeds and approximately 43 million Agincourt shares valued at $37 for the Martabe project, resulting in a $30 pre-tax gain in 2006.

During 2007, we recognized a $1,665 non-cash charge to impair goodwill associated with the Merchant Banking segment. In 2006, we recorded a pre-tax impairment loss of $101 as a result of the Uzbekistan government’s expropriation of the Zarafshan operation. In 2005, we recorded a $42 pre-tax write-down of long-lived assets at the Golden Grove copper-zinc operation in Australia.

The Company’s income tax expense attributable to discontinued operations differed from the amounts computed by applying the United States statutory corporate income tax rate primarily due to the goodwill impairment that was nondeductible for tax, the benefit from percentage depletion and a decrease in the valuation allowance related to deferred tax assets.

Other comprehensive income, net of tax in 2007 included a $113 gain in value of marketable securities, $33 related to a pension liability adjustment, and a gain of $138 on the translation of subsidiaries with non-U.S. dollar functional currencies. Other comprehensive income, net of tax in 2006 included a $272 gain in value of marketable securities, $47 for unrealized gains on derivatives designated as cash flow hedges and $17 related to a pension liability adjustment, offset by a loss of $14 on the translation of subsidiaries with non-U.S. dollar functional currencies. Other comprehensive income, net of tax in 2005 included a $282 gain in value of marketable equity securities and a $26 gain on the translation of subsidiaries with non-U.S. dollar functional currencies, offset by losses of $18 related to a minimum pension liability adjustment and $59 for unrealized losses on derivatives designated as cash flow hedges.

Results of Consolidated Operations

 

     Gold Ounces or Copper
Pounds Sold(1)
   Costs Applicable to Sales(2)    Depreciation, Depletion
and Amortization
     2007    2006    2005      2007        2006        2005      2007    2006    2005
Gold    (ounces in thousands)    ($ per ounce)    ($ per ounce)

Nevada

   2,341    2,534    2,444    $ 444    $ 403    $ 333    $ 94    $ 74    $ 51

Yanacocha(3) (51.35% owned)

   1,565    2,572    3,327      345      193      147      103      67      62

Australia/New Zealand

   1,153    1,176    1,409      496      389      319      94      78      66

Batu Hijau(3)(4)

   494    435    720      243      209      152      50      46      47

Ahafo

   446    202         396      297           96      94     

Other(3)

   185    267    337      332      222      233      91      69      58
                                                        

Total/Weighted-Average

   6,184    7,186    8,237    $ 406    $ 303    $ 235    $ 93    $ 71    $ 58
                                                        
Copper    (pounds in millions)    ($ per pound)    ($ per pound)

Batu Hijau(2)(3)

   428    435    573    $ 1.10    $ 0.71    $ 0.53    $ 0.22    $ 0.15    $ 0.15

 

(1)

Includes incremental start-up ounces of 6, 100 and 22 in 2007, 2006 and 2005, respectively.

(2)

Excludes depreciation, depletion and amortization, loss on settlement of price-capped forward sales contracts and Midas redevelopment.

(3)

Consolidated gold ounces or copper pounds sold includes minority interests’ share.

(4)

Economic interest decreased to 45% from 52.875% on May 25, 2007.

 

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Consolidated gold ounces sold decreased in 2007 from 2006 due to:

 

   

lower production at Nevada due to lower ore grades;

 

   

lower production at Yanacocha due to lower ore grade and tons placed on the leach pads; partially offset by

 

   

a full year of operations at Ahafo (Ghana) and Leeville and Phoenix (Nevada); and

 

   

higher ore grades processed at Batu Hijau.

Consolidated gold ounces sold decreased in 2006 from 2005 due to:

 

   

decreased sales at Yanacocha and Batu Hijau due to lower grade ores and lower throughput at Batu Hijau;

 

   

the completion of operations at Lone Tree (Nevada) and Golden Giant (Other); partially offset by

 

   

the start-up of operations at Ahafo (Ghana) and Leeville and Phoenix (Nevada).

Consolidated copper pounds sold decreased in 2007 from 2006 due to an increase in concentrate inventory at year-end due to the timing of shipments. Consolidated copper pounds sold decreased in 2006 from 2005 due to the processing of lower grade ore (0.55% vs. 0.69%) and lower mill throughput due to mine plan changes and harder material.

Costs applicable to sales per consolidated gold ounce sold increased in 2007 compared to 2006 due to increased labor and diesel costs, the strengthening of the Australian dollar which increased Costs applicable to sales by approximately $8 per ounce, a full year of operations at Ahafo in Ghana and Phoenix and Leeville in Nevada and higher waste removal costs at Batu Hijau. Costs applicable to sales per consolidated gold ounce sold increased in 2006 from 2005, primarily due to the decrease in production at Yanacocha and increased operating costs at all sites. Costs applicable to sales per consolidated copper pound increased from year-to-year due to increased operating costs.

We expect 2008 consolidated gold sales of approximately 5.9 to 6.4 million ounces, primarily as a result of lower production from Australia and Batu Hijau. Costs applicable to sales per ounce for 2008 are expected to be approximately $425 to $450 per ounce as the impact of industry-wide cost pressures are expected to be compounded by slightly lower gold grades and production.

We expect 2008 consolidated copper sales of approximately 345 to 365 million pounds at Costs applicable to sales of approximately $1.30 to $1.40 per pound as mining shifts from the high grade bottom of the pit into a lower grade mine sequence during 2008 and 2009.

Nevada Operations

 

     Gold Ounces Sold(1)    Costs Applicable to Sales(2)    Depreciation, Depletion
and Amortization
     2007    2006    2005      2007        2006        2005      2007    2006    2005
     (in thousands)    ($ per ounce)    ($ per ounce)

Year ended December 31,

   2,341    2,534    2,444    $ 444    $ 403    $ 333    $ 94    $ 74    $ 51

 

(1)

Includes incremental start-up ounces of 6, 100, and 22 in 2007, 2006 and 2005, respectively.

(2)

Excludes depreciation, depletion and amortization and loss on settlement of price-capped forward sales contracts and Midas redevelopment.

Gold ounces sold in Nevada decreased due to the milling of lower grade ore, completion of mining at Lone Tree and the temporary suspension of mining operations at Midas, partially offset by a full year of operations at Phoenix and Leeville. Open pit ore mined increased to 42.6 million tons in 2007, up from 38.4 million tons in

 

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2006 and underground ore production increased to 1.9 million tons in 2007 from 1.7 million tons in 2006 due to a full year of operations at Phoenix and Leeville. Ore milled increased to 25.5 million tons from 17.9 million tons in 2006, while mill ore grade decreased 23% with the processing of lower grade ore from Phoenix. Ore placed on leach pads decreased 37% in 2007 compared to 2006 primarily as a result of mine sequencing at Gold Quarry and Twin Creeks and the completion of mining at Lone Tree in 2006. Processing at the Lone Tree mill continued in 2007 with ore hauled from Twin Creeks. Nevada’s Costs applicable to sales per ounce increased in 2007 compared to 2006 as lower production, higher cost production from Phoenix, the suspension of lower cost mining operations at Midas and increased labor, diesel and commodity costs were partially offset by lower surface mining costs. Surface mining costs were lower due to completion of mining at Lone Tree in 2006 and work on capital projects at Carlin, partially offset by a full year of mining at Phoenix. Depreciation, depletion and amortization per ounce increased 27% from 2006 as a result of a full year of Phoenix and Leeville operation.

Gold ounces sold increased in 2006 from 2005, due to the commencement of commercial operations at Phoenix and Leeville in the fourth quarter of 2006 and increased access to open pit ore at the Twin Creeks layback, partially offset by lower production from Lone Tree. The Phoenix and Leeville projects commenced commercial operations in October 2006. Leeville and Phoenix produced 243,700 ounces in 2006, including 100,300 incremental start-up ounces included in Other income, net. Gold production at Lone Tree declined as mining was completed in 2006. Overall, mill ore grade decreased 17% and mill throughput increased 16% as a result of the start-up of the lower grade Phoenix operation. Heap leach production was slightly higher than 2005 due to a 9% increase in average grade of ore placed on the leach pads. Costs applicable to sales per ounce increased due to increased labor, diesel, power, cyanide and other commodity prices, higher underground contract service costs. Costs applicable to sales were also impacted by the change in accounting for open pit waste removal costs. In 2005, $47 of mining costs was deferred which reduced Costs applicable to sales by $20 per ounce. Depreciation, depletion and amortization increased as a result of placing new equipment and facilities in operation.

Our Midas operations in Nevada were suspended by order of the Mine Safety and Health Administration (“MSHA”) after a fatal accident in June 2007. On October 11, 2007, MSHA lifted the restrictive order that had required Midas to halt mining activities. As a result, mining activities have ramped-up, and we expect Midas to return to historic production levels by early 2008. MSHA’s investigation of the accident is continuing. The related Midas redevelopment costs were $11, and are not included in the cost per ounce amounts above.

The focus at Phoenix during the fourth quarter of 2007 was continued progress on optimization projects. The scope of the in-fill drill program has been increased from 183 to 222 planned drill holes because actual drilling costs have remained lower than originally budgeted. Approximately 80% of the planned drill footage was complete as of December 31, 2007. Continued progress and favorable results were realized through the implementation of continuous improvement projects, with an emphasis on human resources, equipment productivity and cost reduction. Mill capacity utilization continued to improve with nearly 1 million tons processed in each month of the fourth quarter of 2007 compared to almost 900,000 tons each month in the third quarter of 2007. Additionally, the new crusher remains on schedule for start-up by mid-2008 and was approximately 42% complete at the end of the fourth quarter. Phoenix produced 181,400 ounces at Costs applicable to sales of $729 per ounce in 2007. The Company continues to expect a final optimization plan for Phoenix around mid-2008.

Consolidated gold sales are expected to remain stable in 2008 at approximately 2.2 to 2.4 million ounces. Higher production from Phoenix, Leeville and Twin Creeks is expected to be offset by lower grade surface ore at Carlin. Higher mill throughput and mill recoveries are expected to be offset by lower than planned mill grades and leach recoveries in 2008. Costs applicable to sales are expected to decrease in 2008 to approximately $400 to $430 per ounce. Ongoing labor and energy cost pressures are expected to be offset by reduced electricity charges as a result of generating power for approximately half the year from our newly built coal-fired power plant, reduced contracted services and other expenses, as well as lower anticipated maintenance costs associated with a newer mining fleet.

 

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Construction of a 200-megawatt coal-fired power plant is approximately 96% complete as of December 31, 2007. Capital costs for the power plant are expected to be between $620 and $640 and completion is targeted for mid-2008.

Non-governmental organizations have brought a series of actions relating to the Nevada operations, as described in more detail in Note 32 to the Consolidated Financial Statements. While we believe that the legal actions are without merit, unfavorable outcomes could result in additional conditions being imposed on our operations, and such conditions could have a material adverse effect on Nevada’s results of operations or financial position.

Yanacocha Operations

 

     Gold Ounces Sold(1)    Costs Applicable to Sales(2)    Depreciation, Depletion
and Amortization
     2007    2006    2005      2007        2006        2005      2007    2006    2005
     (in thousands)    ($ per ounce)    ($ per ounce)

Year ended December 31,

   1,565    2,572    3,327    $ 345    $ 193    $ 147    $ 103    $ 67    $ 62

 

(1)

Consolidated gold ounces sold includes minority interests’ share (51.35% Newmont owned).

(2)

Excludes depreciation, depletion and amortization and loss on settlement of price-capped forward sales contracts.

Consolidated gold production and sale ounces at Yanacocha decreased, as expected, in 2007 compared to 2006 due to fewer ore tons and lower grade ore placed on the leach pads. Ore mined decreased to 98.6 million tons in 2007 from 115.8 million tons in 2006. Ore grade decreased by 27% in 2007 compared to 2006 due to mine sequencing. The proportion of waste mined increased from 0.9 to 1.1 waste tons per ton of ore in 2007 compared to 2006 as expected in the mine plan. Costs applicable to sales increased $152 per ounce in 2007 primarily due to lower production, which impacted unit costs by approximately $125 per ounce, as well as increased labor, diesel, mine maintenance and other costs, partially offset by lower royalties and workers’ participation costs.

Gold ounces sold decreased in 2006 from 2005, primarily due to a decrease in ore tons mined and placed on the leach pads, as anticipated in the mine plan. The proportion of waste tons mined increased from 0.50 waste tons per ton of ore in 2005 to 0.9 waste tons per ton of ore in 2006. Costs applicable to sales per ounce increased due to the decrease in production, increased consumption and prices of diesel, cyanide, lime and other commodities and higher worker’s participation bonuses and royalties due to increased gold prices, partially offset by increased silver by-product credits.

Consolidated gold sales are expected to increase in 2008 to approximately 1.7 to 1.8 million ounces, primarily as a result of completion of the gold mill partially offset by lower leach pad production. Costs applicable to sales at Yanacocha are expected to increase in 2008 to approximately $370 to $390 per ounce, primarily due to a change in the mine sequencing resulting in increased stripping, higher labor costs and royalty payments.

Construction of the gold mill at Yanacocha was approximately 97% complete at December 31, 2007. Progress on the gold mill continues as expected, with capital costs expected to be between $250 and $270 and commercial production anticipated in the first half of 2008.

In 2007 and 2006, Yanacocha recorded $10 and $22 to Other expense, net, respectively, related to an agreement with the Peruvian government to provide for a royalty payment for community improvements during current high metal prices. The negotiated royalty is based on 3.75% of Yanacocha’s net income beginning January 1, 2006 for a period of up to five years.

 

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On May 31, 2007, the Company signed a new Collective Agreement with the union for the next three years, expiring on February 28, 2010.

Australia/New Zealand Operations

 

     Gold Ounces Sold    Costs Applicable to Sales(1)    Depreciation, Depletion
and Amortization
     2007    2006    2005      2007        2006        2005      2007    2006    2005
     (in thousands)    ($ per ounce)    ($ per ounce)

Tanami

   439    418    494    $ 425    $ 370    $ 328    $ 85    $ 72    $ 67

Kalgoorlie (50% owned)

   323    332    410      605      490      352      74      76      42

Jundee

   298    306    342      480      369      335      88      85      80

Waihi

   93    120    163      502      223      177      226      83      97
                                                        

Total/Weighted-Average

   1,153    1,176    1,409    $ 496    $ 389    $ 319    $ 94    $ 78    $ 66
                                                        

 

(1)

Excludes depreciation, depletion and amortization and loss on settlement of price-capped forward sales contracts.

Australia/New Zealand gold ounces sold decreased slightly in 2007 compared to 2006 as a result of lower production at Kalgoorlie, Jundee and Waihi, partially offset by increased inventory sales. Costs applicable to sales per ounce increased due to the strengthening of the Australian and New Zealand dollar, which increased Costs applicable to sales by approximately $40 per ounce, increased royalties due to the higher gold price and increased diesel, electricity and labor costs.

Australia/New Zealand operations gold ounces sold decreased in 2006 compared to 2005, primarily due to lower production resulting from fewer ore tons mined and lower mill throughput. Costs applicable to sales per ounce increased in 2006 from 2005 primarily due to the decrease in ounces sold and increased commodity costs partially offset by depreciation of the Australian and New Zealand dollars compared to the U.S. dollar. The favorable foreign exchange movements decreased Australia/New Zealand Costs applicable to sales in 2006 from 2005 by $5 per ounce. Costs applicable to sales were also impacted by the change in accounting for open pit waste removal costs. In 2005, $7 of mining costs was deferred which reduced Costs applicable to sales by $5 per ounce.

Consolidated gold sales are expected to decline in 2008 to approximately 1.05 to 1.10 million ounces, primarily as a result of lower ore grades, mainly at Tanami, and reduced inventory sales, partially offset by higher mill throughput at Waihi. Costs applicable to sales are expected to increase to approximately $585 to $625 per ounce in 2008, primarily as a result of lower planned production, anticipated strengthening of the Australian dollar and higher anticipated consumables and labor costs.

Tanami, Australia. Gold ounces sold increased in 2007 compared to 2006 as a result of increased inventory sales. Costs applicable to sales per ounce increased due to the strengthening of the Australian dollar, which increased Costs applicable to sales by approximately $29 per ounce, increased underground mining and milling costs due to being in a deeper part of the mine which results in increased backfill activity and fuel and labor costs, partially offset by decreased royalties.

Gold ounces sold decreased in 2006 from 2005, primarily due to a 23% decline in mill throughput resulting from the completion of processing Groundrush stockpiles, partially offset by higher ore grade from the Granites. Costs applicable to sales per ounce increased due to lower gold production and increased royalties due to the higher gold price.

Kalgoorlie, Australia. Gold ounces sold decreased in 2007 compared to 2006 as a result of a 13% decrease in ore grade milled, partially offset by an increase in inventory sales. Costs applicable to sales per ounce increased due to the strengthening of the Australian dollar, which increased Costs applicable to sales by

 

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approximately $51 per ounce, decreased production and higher mining costs. Mining costs were higher primarily due to sound abatement costs and increased contract maintenance, drilling rates, fuel and tire usage costs.

Gold ounces sold decreased in 2006 from 2005, due to lower mill throughput (harder ore), a decrease in mill ore grade and a decrease in roaster throughput resulting from a higher sulfur to gold ratio and adverse weather conditions. Costs applicable to sales per ounce increased due to lower production and increased labor, diesel and contract services. Milling costs also increased due to mill maintenance costs and higher grinding costs due to the harder ore. Costs applicable to sales were also impacted by the change in accounting for open pit waste removal costs. In 2005, $9 of mining costs was deferred which reduced Costs applicable to sales by $23 per ounce.

Jundee, Australia. Gold ounces sold decreased in 2007 compared to 2006 as a result of lower production, partially offset by increased inventory sales. Mill throughput decreased by 26% due to the consolidation of milling operations into one plant, partially offset by 28% higher mill ore grade. Open pit mining concluded in the fourth quarter of 2007. Underground mining operations will continue in 2008. Costs applicable to sales per ounce increased due to the strengthening of the Australian dollar, which increased Costs applicable to sales by approximately $42 per ounce, lower production, and higher underground mining and electricity generation costs.

Gold ounces sold decreased in 2006 from 2005, due to a 4% decrease in tons milled and a 6% decrease in mill ore grade. The decrease in tons milled was attributable to severe weather conditions, flooding and an extended mill shutdown in the first half of the year. Costs applicable to sales per ounce increased due to lower gold production and higher maintenance costs, partially offset by reduced mining activity.

Waihi, New Zealand. Gold ounces sold decreased in 2007 compared to 2006 as a result of the transition to mining the Martha open pit south layback and Favona underground in 2007. Costs applicable to sales per ounce increased in 2007 compared to 2006 as a result of the strengthening of the New Zealand dollar which increased Costs applicable to sales by approximately $51 per ounce and lower production.

Gold ounces sold decreased in 2006 from 2005, primarily due to a 4% decrease in mill ore grade and a 20% decrease in mill throughput due to reduced open pit mining activity and the commencement of Favona ore treatment which requires finer grinding. Costs applicable to sales per ounce increased due to the decrease in gold production.

Development of the Boddington project was approximately 62% complete at December 31, 2007, with mill start-up still expected in late 2008 or early 2009. The Company completed a definitive estimate to update the Company’s share of Boddington capital costs, which are now expected to be between $1,400 and $1,600, up from $900 to $1,100, including the adverse impact of the strengthening Australian dollar exchange rate. In 2007, the Company commenced a hedging program to reduce the variability of the Australian denominated capital expenditures related to Boddington. As of December 31, 2007, we have hedged 32% of our forecasted Australian denominated capital expenditures in 2008.

Batu Hijau Operations

 

     Gold Ounces or Copper
Pounds Sold
   Costs Applicable to Sales(1)    Depreciation, Depletion
and Amortization
       2007        2006        2005        2007        2006        2005      2007    2006    2005
Gold    (ounces in thousands)    ($ per ounce)    ($ per ounce)

Batu Hijau(2)(3)

   494    435    720    $ 243    $ 209    $ 152    $ 50    $ 46    $ 47
Copper    (pounds in millions)    ($ per pound)    ($ per pound)

Batu Hijau(2)(3)

   428    435    573    $ 1.10    $ 0.71    $ 0.53    $ 0.22    $ 0.15    $ 0.15

 

(1)

Excludes depreciation, depletion and amortization, loss on settlement of price-capped forward sales contracts.

(2)

Consolidated gold ounces or copper pounds sold includes minority interests’ share.

(3)

Economic interest decreased to 45% from 52.875% on May 25, 2007.

 

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Consolidated copper sales decreased slightly in 2007 from 2006, due to increased year-end concentrate inventories, partially offset by 7% higher production. Consolidated gold sales increased in 2007 from 2006 due to 22% higher production, partially offset by increased year-end concentrate inventories. Increased mill throughput from an improved grinding circuit control system was offset by extended mill downtime in the fourth quarter of 2007 to repair a damaged mill motor. Copper production increased due to a 9% increase in ore grade, partially offset by slightly lower recoveries. Gold production increased due to a 17% increase in ore grade and a 3% increase in recovery. Concentrate inventories increased due to the timing of shipments. Costs applicable to sales per pound of copper and per ounce of gold increased in 2007, compared to 2006 due to the significant processing of ore from stockpiles and higher proportion of waste tons mined. The ratio of waste tons to ore tons increased from 1.3 in 2006 to 7.3 in 2007. In 2007, most of the mining occurred with Phase 5 waste stripping to prepare this phase for future production, while 2006 mining occurred substantially in Phase 4 ore. Costs applicable to sales also increased due to higher labor and maintenance costs and regional taxes.

The average realized net copper price increased to $2.86 per pound in 2007 from $1.54 per pound in 2006, as the final copper hedge contract deliveries were made in February 2007.

Batu Hijau revised its mine plan in 2006 to address geotechnical instability of the operation’s east pit wall and harder than modeled ore. Production was impacted by lower grades due to the mining sequence, as well as lower mill throughput due to processing harder ore. Copper and gold sales decreased in 2006 from 2005 as a result of 20% lower copper and 34% lower gold ore grades, and 6% lower mill throughput. Total tons mined were 30% higher in 2006 from 2005 primarily due to the addition of new mining equipment, shorter hauling distance and increased shovel productivity. Costs applicable to sales per pound of copper and per ounce of gold increased due to lower production, the expansion of the mining fleet and increased diesel, tire, labor and process maintenance costs, partially offset by an increased allocation of costs to stockpile inventories. Short-term stockpiles were built in 2006 for processing in 2007.

Consolidated sales are expected to decrease in 2008 to approximately 325,000 to 365,000 ounces of gold and approximately 345 to 365 million pounds of copper as a result of mine plan sequencing that will lead to additional Phase 5 waste stripping compared to 2007. Consolidated gold and copper sales are expected to be impacted by lower grades and throughput and lower copper recoveries. Costs applicable to sales are expected to increase in 2008 to approximately $285 to $325 per ounce of gold and approximately $1.30 to $1.40 per pound of copper. Increasing operating costs are expected to result primarily from higher waste removal costs, as well as rising fuel, energy and consumables prices.

We have a 45% ownership interest in the Batu Hijau mine, held through a partnership (“NTP”) with an affiliate of Sumitomo Corporation of Japan. We have a 56.25% interest in NTP and the Sumitomo affiliate holds the remaining 43.75%. NTP in turn owns 80% of P.T. Newmont Nusa Tenggara (“PTNNT”), the Indonesian subsidiary that owns Batu Hijau. We identified NTP as a Variable Interest Entity as a result of certain capital structures and contracted relationships and have fully consolidated Batu Hijau in the consolidated financial statements since January 1, 2004. The remaining 20% interest in PTNNT is owned by P.T. Pukuafa Indah (“PTPI”), an unrelated Indonesian company. Because PTPI’s interest was a carried interest, and because PTPI had been advanced a loan by NTP, we reported a 52.875% economic interest in Batu Hijau, which reflected our actual economic interest in the mine until such time as the loan was fully repaid (including accrued interest). On May 25, 2007, PTPI fully repaid the loan (including accrued interest) from NTP. As a result of the repayment, our economic interest in Batu Hijau was reduced from 52.875% to 45% and a net charge of $25 (after-tax) was recorded against Minority interest expense in the second quarter of 2007.

Under the Contract of Work, beginning in 2005 and continuing through 2010, a portion of PTNNT’s shares must be offered for sale, first, to the Indonesian government or, second, to Indonesian nationals, equal to the difference between the following percentages and the percentage of shares already owned by the Indonesian government or Indonesian nationals (if such number is positive): 23% by March 31, 2006; 30% by March 31, 2007; 37% by March 31, 2008, 44% by March 31, 2009; and 51% by March 31, 2010. The price at which such

 

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interest must be offered for sale to the Indonesian parties is the highest of the then-current replacement cost, the price at which shares would be accepted for listing on the Jakarta Stock Exchange, or the fair market value of such interest as a going concern, as agreed with the Indonesian government. Pursuant to this provision, it is possible that the ownership interest of the Newmont/Sumitomo partnership in PTNNT, owner of Batu Hijau, could be reduced to 49%.

PTPI has owned and continues to own a 20% interest in PTNNT, and therefore the Newmont/Sumitomo partnership was required to offer a 3% interest for sale in 2006 and an additional 7% interest in 2007. A further 7% interest will be offered for sale in March 2008. In accordance with the Contract of Work, an offer to sell a 3% interest was made to the government of Indonesia in 2006 and an offer for an additional 7% interest was made in 2007. While the central government declined to participate in the offer, local governments in the area in which the Batu Hijau mine is located have expressed interest in acquiring shares, as have various Indonesian nationals. In January 2008, the Newmont/Sumitomo partnership agreed to sell, under a carried interest arrangement, 2% of PTNNT’s shares to Kabupaten Sumbawa, one of the local governments, subject to satisfaction of closing conditions. On February 11, 2008, PTNNT received notification from the Department of Energy and Mineral Resources (DEMR) alleging that PTNNT is in breach of its divestiture requirements under the Contract of Work and threatening to issue a notice to terminate the Contract of Work if PTNNT does not agree to divest the 2006 and 2007 shares, in accordance with the direction of the DEMR, by February 22, 2008. Newmont and Sumitomo believe there is no basis under the Contract of Work for this notification and no grounds for terminating the Contract of Work, and are currently evaluating possible responses to the February 11, 2008 default notice, including filing for international arbitration as provided for under the Contract of Work. Newmont and Sumitomo are in discussions with officials of the Government of Indonesia to attempt to clarify or resolve this issue.

The Company has been in discussions to renew its forest use permit (called a pinjam pakai) for over two years. This permit is a key requirement to continue to efficiently operate the Batu Hijau mine. The permit renewal has not been received and in the event it is not received by May 2008, it could have an adverse impact on operating and financial results. Representatives of the Indonesian government, including the Ministry of Forestry, have assured us that the permit will be issued in due course.

For more information on the results of the Batu Hijau operations, see Note 30 to the Consolidated Financial Statements.

Ahafo Operations

 

     Gold Ounces Sold    Costs Applicable to Sales(1)    Depreciation, Depletion
and Amortization
     2007    2006    2005      2007        2006        2005      2007    2006    2005
     (in thousands)    ($ per ounce)    ($ per ounce)

Year ended December 31,

   446    202       $ 396    $ 297    $    $ 96    $ 94    $

 

(1)

Excludes depreciation, depletion and amortization and loss on settlement of price-capped forward sales contracts.

Gold ounces sold at Ahafo increased in 2007 compared to 2006 as a result of a full year of production in 2007. Costs applicable to sales per ounce increased due to higher mining and milling costs. Mining costs increased primarily due to higher waste stripping in the Apensu pit, higher fuel, pit dewatering and maintenance costs. Milling costs increased due to higher electricity and maintenance costs. Costs applicable to sales in 2006 also benefited from the capitalization of pre-production costs.

During 2007, better than expected ore grades and mill recovery rates were realized, which resulted in higher than expected production at Ahafo. Mill ore grades were higher than expected due to ore control improvement programs implemented during the year. Increased mill recoveries were a result of higher than expected yields from the transitional ore mined at the Apensu deposit.

 

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Consolidated gold sales are expected to increase to approximately 495,000 to 530,000 ounces in 2008 mainly due to the processing of higher grade material. Costs applicable to sales of approximately $485 to $520 per ounce is expected for 2008. The expected increase is mainly due to higher fuel, power, contract services and consumable costs.

During 2007, Newmont and other gold companies with production in Ghana, formed a consortium to import power generation equipment and constructed an 80 mega-watt power plant. The plant was completed during the fourth quarter of 2007 and is being commissioned. As a result of the mining industry’s initiative to install the power plant, the Ghanaian government has agreed, if required to curtail power consumption as a result of power shortages, to distribute power proportionately between participating mines and other industrial and commercial customers.

Other Operations

 

     Gold Ounces Sold    Costs Applicable to Sales(1)    Depreciation, Depletion
and Amortization
     2007    2006    2005      2007        2006        2005      2007    2006    2005
     (in thousands)    ($ per ounce)    ($ per ounce)

Kori Kollo(2) (88% owned)

   87    129    95    $ 340    $ 210    $ 167    $ 117    $ 68    $ 40

La Herradura (44% owned)

   86    79    80      341      248      184      77      114      63

Golden Giant

   12    59    162      205      214      296           10      67
                                                        

Total/Weighted-Average

   185    267    337    $ 332    $ 222    $ 233    $ 91    $ 69    $ 58
                                                        

 

(1)

Excludes depreciation, depletion and amortization and loss on settlement of price-capped forward sales contracts.

(2)

Consolidated gold ounces sold includes minority interests’ share.

Gold ounces sold at Other Operations decreased in 2007 from 2006, primarily due to the completion of operations at Golden Giant and lower production from Kori Kollo. Gold production from Kori Kollo decreased due to the timing of flows from the leach pads. Costs applicable to sales per ounce increased in 2007 from 2006, primarily due to lower production and higher waste removal costs at La Herradura and the completion of operations at Golden Giant.

Gold ounces sold at Other Operations decreased in 2006 from 2005, primarily due to the wind-up of operations at Golden Giant. Mining operations at Golden Giant were completed in December 2005 with remnant mining and milling production continuing into 2006. Costs applicable to sales decreased primarily due to the processing of lower cost remnant production from Golden Giant offset by higher waste removal costs at Kori Kollo and La Herradura. In 2005, $3 mining costs were deferred, reducing Costs applicable to sales by $31 per ounce at La Herradura.

Consolidated gold sales for Other Operations in 2008 are expected to be approximately 200,000 to 220,000 ounces at Costs applicable to sales of approximately $340 to $360 per ounce.

Exploration

Exploration expense was $177, $166 and $143 for 2007, 2006 and 2005, respectively. Exploration expense in 2007 reflects higher funding of exploration and related activities in response to higher gold prices and increased drilling, labor and consumable costs. We anticipate spending between $220 and $230 on exploration activities in 2008, with the increases primarily related to inflation in drilling costs and exploration at our newly acquired Hope Bay property.

During 2007, we added 0.8 million equity gold ounces to proven and probable reserves, with 8.2 million equity gold ounces of depletion and divestitures. Reserve additions from exploration of 3.5 million equity ounces were primarily due to further extension drilling at Boddington, Jundee and Tanami in Australia (2.6 million equity ounces), with the remaining additions from several open pit and underground sites in Nevada as well as La

 

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Herradura in Mexico. Gold reserves were revised down by 3.4 million equity ounces, primarily due to increasing operating and capital costs at Ahafo in Ghana (2.4 million equity ounces), and geotechnical and metallurgical changes, as well as higher operating costs at Nevada (0.8 million equity ounces). The impact of the change in gold price assumption on reserve additions was 0.7 million equity ounces.

Exploration activities during 2006 succeeded in converting significant new reserves at Carlin open pits (2.3 million equity gold ounces), Boddington (1.4 million equity gold ounces), Twin Creeks (1.1 million equity gold ounces), Ahafo (0.7 million equity gold ounces), La Herradura (0.7 million equity gold ounces), and Kalgoorlie (0.6 million equity gold ounces).

Exploration activities during 2005 primarily focused on the conversion of significant new reserves at the Carlin open pits (1.9 million equity gold ounces), the Conga district in Peru (1.6 million equity gold ounces), and the two Ghana projects (Ahafo 1.6 million equity gold ounces, Akyem 1.1 million equity gold ounces). Newmont added a total of 9.4 million equity gold ounces to proven and probable reserves in 2005.

Foreign Currency Exchange Rates

In addition to its domestic operations in the United States, we have operations in Australia, New Zealand, Peru, Indonesia, Ghana, Canada, Bolivia and other foreign locations. Our operations sell their production based on U.S. dollar metal prices.

Fluctuations in local currency exchange rates in relation to the U.S. dollar can increase or decrease profit margins and Costs applicable to sales to the extent costs are paid in local currency at foreign operations. Such fluctuations have not had a material impact on our revenue since gold and copper are sold throughout the world principally in U.S. dollars. Approximately 28%, 33% and 37% of our Costs applicable to sales were paid in local currencies in 2007, 2006 and 2005, respectively. Our Costs applicable to sales are most significantly impacted by variations in the Australian dollar/U.S. dollar exchange rate. However, variations in the Australian dollar/U.S. dollar exchange rate historically have been strongly correlated to variations in the U.S. dollar gold price over the long-term. Increases or decreases in costs at Australian locations due to exchange rate changes have therefore tended to be mitigated by changes in sales reported in U.S. dollars at Australian locations. No assurance, however, can be given that the Australian dollar/U.S. dollar exchange rate will continue to be strongly correlated to the U.S. dollar gold price in the future.

Variations in the local currency exchange rates in relation to the U.S. dollar at our foreign mining operations increased Costs applicable to sales $51 in 2007 from 2006, primarily in Australia, and decreased Costs applicable to sales $1 in 2006 from 2005 primarily at Indonesia, partially offset by Australia.

In 2007, we implemented derivative programs to hedge up to 75% of our future forecasted Australian dollar denominated operating and capital expenditures to reduce the variability in our Australian dollar denominated expenditures. As of December 31, 2007, we have hedged 23%, 18% and 11% of our forecasted Australian denominated operating costs in 2008, 2009 and 2010, respectively. We have also hedged 32% of our forecasted Australian denominated capital expenditures in 2008.

Foreign currency exchange rates in relation to the U.S. dollar have not had a material impact on our determination of proven and probable reserves in the past. However, if a sustained weakening of the U.S. dollar in relation to the Australian dollar, and/or to other foreign currencies that impact our cost structure, were not mitigated by offsetting increases in the U.S. dollar gold price or by other factors, the amount of proven and probable reserves in the applicable foreign country could be reduced as certain proven and probable reserves may no longer be economic. The extent of any such reduction would be dependent on a variety of factors including the length of time of any such weakening of the U.S. dollar, and management’s long-term view of the applicable exchange rate. Future reductions of proven and probable reserves would primarily result in reduced gold or copper sales and increased depreciation, depletion and amortization and, depending on the level of reduction, could also result in impairments of property, plant and mine development, mineral interests and/or goodwill.

 

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Recently Issued Accounting Pronouncements and Developments

In December 2007, the FASB issued FASB Statement No. 141(R), “Business Combinations”, which amends SFAS No. 141, and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for our fiscal year beginning January 1, 2009 and is to be applied prospectively. We are currently evaluating the potential impact of adopting this statement on our consolidated financial position, results of operations or cash flows.

In December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB No. 51” which establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for our fiscal year beginning January 1, 2009. We are currently evaluating the potential impact of adopting this statement on our consolidated financial position, results of operations or cash flows.

In September 2007, the FASB published Proposed FSP No. APB 14-a, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion.” The proposed FSP applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under SFAS 133. Convertible debt instruments within the scope of the proposed FSP are not addressed by the existing APB 14. The proposed FSP would require that the liability and equity components of convertible debt instruments within the scope of the proposed FSP shall be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This will require an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component would be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. If the proposed FSP were to be adopted, we estimate that approximately $300 of debt discount would be recorded and the effective interest rate on our 2014 and 2017 convertible senior notes (see Note 20 to the Consolidated Financial Statements) would increase by approximately 5 percentage points to 6.25% and 6.625%, respectively, for the non-cash amortization of the debt discount.

In June 2007, the EITF reached consensus on Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.” EITF Issue No. 06-11 requires that the tax benefit related to dividend and dividend equivalents paid on equity-classifed nonvested shares and nonvested share units, which are expected to vest, be recorded as an increase to additional paid-in capital. EITF Issue No. 06-11 is to be applied prospectively for tax benefits on dividends declared in our fiscal year beginning January 1, 2008. We are currently evaluating the impact that the adoption of this statement will have on our consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”). FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, with the objective of improving financial reporting by mitigating volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The provisions of FAS 159 are effective for our fiscal year beginning January 1, 2008. We do not expect the adoption of FAS 159 to have a material impact on our consolidated financial statements.

 

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In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of FAS 157 are effective for our fiscal year beginning January 1, 2008. We do not expect the adoption of FAS 157 to have a material impact on our consolidated financial statements.

Liquidity and Capital Resources

Operating Activities

Net cash provided from continuing operations was $525, $1,129 and $1,169 for 2007, 2006 and 2005, respectively, and was significantly impacte