AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ON JANUARY 7, 2002
REGISTRATION STATEMENT NO. 333-75522
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
(AMENDMENT NO. 1)
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NEWMONT MINING CORPORATION
OR, ASSUMING THE COMPLETION OF THE REORGANIZATION OF NEWMONT MINING CORPORATION
AS DESCRIBED HEREIN, DELTA HOLDCO CORP., TO BE RENAMED
NEWMONT MINING CORPORATION UPON COMPLETION OF SUCH REORGANIZATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1041 13-2526632
(STATE OR OTHER JURISDICTION
OFINCORPORATION OR (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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1700 LINCOLN STREET
DENVER, COLORADO 80203
(303) 863-7414
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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BRITT D. BANKS, ESQ.
NEWMONT MINING CORPORATION
1700 LINCOLN STREET
DENVER, COLORADO 80203
(303) 863-7414
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
DAVID A. KATZ, ESQ. GARRY BESSON, ESQ. JONATHAN LAMPE, ESQ.
DANIEL A. NEFF, ESQ. GARY LAWLER, ESQ. NEIL M. SHEEHY, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ GILBERT & TOBIN GOODMANS LLP
51 WEST 52ND STREET TWO PARK STREET 250 YONGE STREET, SUITE 2400
NEW YORK, NEW YORK 10019 SYDNEY, NEW SOUTH WALES 2000 TORONTO, ONTARIO M5B 2M6
UNITED STATES AUSTRALIA CANADA
(212) 403-1000 +61-2-9367-4000 (416) 979-2211
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE OFFERING PRICE(2) REGISTRATION FEE
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Common Stock, US$1.60 par
value, and associated preferred
stock purchase rights.......... 69,618,256 US$1,666,971,370 US$398,406(3)
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(1) Represents the maximum number of shares of common stock of Newmont Mining
Corporation (or, if the reorganization of Newmont Mining Corporation
described herein occurs, Delta Holdco Corp.) estimated to be issuable upon
consummation of this exchange offer for all of the outstanding ordinary
shares and American depositary shares (each American depository share
representing ten ordinary shares) of Normandy Mining Limited held by
persons other than Franco-Nevada Mining Corporation Limited and its
subsidiaries, calculated as the product of (a) 1,808,266,383, the sum of
(i) 1,728,484,021, the number of ordinary shares of Normandy Mining
Limited held by persons other than Franco-Nevada Mining Corporation Limited
and its subsidiaries plus (ii) 58,184,380, the number of shares of Normandy
Mining Limited held in the form of American depositary shares of Normandy
Mining Limited plus (iii) 21,597,982, the number of shares of Normandy
Mining Limited issuable upon exercise of options to acquire shares of
Normandy Mining Limited and (b) the exchange ratio of 3.85 shares of
Newmont common stock for every 100 ordinary shares of Normandy Mining
Limited.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended, and
computed pursuant to Rule 457(f)(1) and Rule 457(c). The proposed maximum
offering price is equal to the sum of (a) the product of (i) US$0.92, the
average of the high and low sale prices per ordinary share of Normandy
Mining Limited as reported on the Australian Stock Exchange on December 13,
2001, converted into U.S. dollars at the noon buying rate for the
Australian dollar on such date of A$1.00=US$0.5179 and (ii) 1,750,082,003,
the sum of (1) 1,728,484,021, the estimated number of ordinary shares of
Normandy Mining Limited held by persons other than Franco-Nevada Mining
Corporation Limited and its subsidiaries plus (2) 21,597,982, the estimated
number of ordinary shares of Normandy Mining Limited issuable upon exercise
of options to acquire shares of Normandy Mining Limited and (b) the product
of (i) US$9.22, the average of the high and low sale prices per American
depositary share of Normandy Mining Limited as reported on the Toronto
Stock Exchange on December 13, 2001, converted into U.S. dollars at the
noon buying rate for the Canadian dollar on such date of C$1.00=US$0.6380
and (ii) 5,818,438, the estimated number of American depositary shares of
Normandy Mining Limited.
(3) The filing fee was previously paid on December 19, 2001 in connection with
the initial filing of the Registration Statement on December 20, 2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE U.S. SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS OFFER DOCUMENT IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS OFFER DOCUMENT IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 7, 2002
NEWMONT MINING CORPORATION
OFFER BY
DELTA ACQUISITION LLC, AN AFFILIATE OF
NEWMONT MINING CORPORATION
TO ACQUIRE ALL OF THE ORDINARY SHARES IN THE CAPITAL OF
NORMANDY MINING LIMITED (ABN 86 009 295 765)
(INCLUDING ORDINARY SHARES OF NORMANDY REPRESENTED BY
NORMANDY AMERICAN DEPOSITARY SHARES)
FOR
3.85 SHARES OF NEWMONT COMMON STOCK AND A$50.00
FOR EVERY 100 ORDINARY SHARES OF NORMANDY,
SUBJECT TO THE TERMS AND CONDITIONS DESCRIBED IN THIS OFFER DOCUMENT.
THE OFFER WILL EXPIRE AT 7:00 P.M., SYDNEY TIME, 3:00 A.M., NEW YORK CITY TIME,
ON FEBRUARY 15, 2002, UNLESS EXTENDED.
Delta Acquisition LLC is an indirect, wholly owned limited liability company
of Newmont Mining Corporation. Assuming consummation of the reorganization
described in section 1.1, "Introduction--The reorganization" of this offer
document, the share consideration offered by Delta Acquisition LLC shall be the
common stock of Delta Holdco Corp., which will be renamed Newmont Mining
Corporation in the reorganization and will be the successor registrant to the
company currently named Newmont Mining Corporation. If the reorganization does
not take place, the share consideration offered by Delta Acquisition LLC shall
be the common stock of Newmont Mining Corporation.
The completion of the offer and any contract that results from your
acceptance of the offer are subject to the satisfaction or waiver by us of
certain conditions set forth in this offer document, including the condition
that before the end of the offer period, we and our associates have relevant
interests in at least 50.1% of the ordinary shares of Normandy (including
shares represented by Normandy ADSs) then issued.
To accept the offer, you must complete the accompanying Acceptance Form or
ADS Letter of Transmittal, as appropriate, together with all other required
documents, as soon as possible, so as to be received by us, in the case of
ordinary shares of Normandy, or to be received by the ADS exchange agent, in
the case of Normandy ADSs, no later than the expiration of the offer. The
procedure for acceptance of the offer is described on pages 50 to 52 of this
offer document and in the accompanying Acceptance Form or ADS Letter of
Transmittal, as appropriate.
ONCE YOU HAVE ACCEPTED THE OFFER, YOU WILL BE UNABLE TO REVOKE YOUR
ACCEPTANCE AND WITHDRAW THE ORDINARY SHARES OF NORMANDY OR NORMANDY ADSS WITH
RESPECT TO WHICH YOUR ACCEPTANCE WAS MADE, EXCEPT IN THE LIMITED CIRCUMSTANCE
DESCRIBED IN THIS OFFER DOCUMENT. FOR MORE INFORMATION, SEE "TERMS OF THE
OFFER--THE EFFECT OF ACCEPTANCE" BEGINNING ON PAGE 55.
Our shares of common stock are listed on the New York Stock Exchange under
the symbol "NEM" and a supplemental listing application has been submitted to
list the shares to be issued in connection with the transaction. We have filed
an application to list our common stock on the Australian Stock Exchange in the
form of CHESS depositary interests.
FOR A DISCUSSION OF THE RISK FACTORS THAT YOU SHOULD CONSIDER IN EVALUATING
THE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 25.
This offer document is important and requires your immediate attention. If
you are in any doubt about what action to take in connection with the offer,
you should immediately seek your own financial advice from your stockbroker,
accountant or other financial advisor.
A COPY OF THIS OFFER DOCUMENT HAS BEEN LODGED WITH THE AUSTRALIAN SECURITIES
AND INVESTMENTS COMMISSION. THE AUSTRALIAN SECURITIES AND INVESTMENTS
COMMISSION AND THE AUSTRALIAN STOCK EXCHANGE TAKE NO RESPONSIBILITY FOR THE
CONTENT OF THIS OFFER DOCUMENT. NO SECURITIES WILL BE ISSUED ON THE BASIS OF
THIS OFFER DOCUMENT AFTER THE DATE WHICH IS THIRTEEN MONTHS AFTER THE DATE OF
THIS OFFER DOCUMENT.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY U.S. STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS OFFER DOCUMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE. WITHOUT LIMITING THE FOREGOING, NO
CANADIAN SECURITIES REGULATORY AUTHORITY HAS EXPRESSED AN OPINION ABOUT THESE
SECURITIES, AND IT IS AN OFFENSE TO CLAIM OTHERWISE.
THE DATE OF THIS OFFER DOCUMENT IS JANUARY . , 2002.
We have not authorized any person to provide any information or to make any
representation in connection with the offer other than the information
contained or incorporated by reference in this offer document, and if any
person provides any of this information or makes any representation of this
kind, that information or representation must not be relied upon as having been
authorized by us.
The distribution of this offer document and the making of the offer may, in
certain jurisdictions, be restricted by law. The offer is not being made,
directly or indirectly, in or into, and will not be capable of acceptance from
within, any jurisdiction in which the making of the offer or the acceptance
thereof would not be in compliance with the laws of that jurisdiction. Persons
who come into possession of this offer document should inform themselves of and
observe any of these restrictions. Any failure to comply with these
restrictions may constitute a violation of the securities laws of any of these
jurisdictions. We do not assume any responsibility for any violation by any
person of any of these restrictions.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
This offer document incorporates important business and financial
information about us which has been provided to the U.S. Securities and
Exchange Commission by us but which is not included in or delivered with this
offer document. The documents containing such information are listed on page
102 of this offer document. Documents incorporated by reference are available
without charge to you upon written or oral request. Such request should be
directed to Innisfree M&A Incorporated, the information agent for the offer:
[InnisFree Logo]
For Normandy shareholders and Normandy ADS
holders located in the United States and Canada:
Banks and brokers call collect:
(212) 750-5833
All others call toll-free in the United States and Canada:
(888) 750-5835
For Normandy shareholders and Normandy ADS holders located in Australia and
other jurisdictions (outside of the United States and Canada), please call
toll-free in Australia: (800) 507-507 or, if you are outside Australia,
+61-2-9278-9331, to obtain offering materials applicable to your jurisdiction.
TO OBTAIN TIMELY DELIVERY OF ANY OF THESE DOCUMENTS, YOU MUST REQUEST THEM
NO LATER THAN FEBRUARY ., 2002.
IMPORTANT NOTE
Although, as of the date of this offer document, the board of directors of
Normandy Mining Limited has recommended, subject to its fiduciary duties, that
Normandy shareholders accept Newmont's bid as described in this offer document,
Normandy, despite repeated requests from Newmont, has declined to supply
certain information to Newmont that would generally be required to be included
in this offer document under rules promulgated by the United States Securities
and Exchange Commission. IT IS IMPORTANT TO NOTE THAT THE UNAUDITED PRO FORMA
FINANCIAL INFORMATION INCLUDED IN THIS OFFER DOCUMENT DOES NOT INCLUDE ANY
INFORMATION WITH RESPECT TO NORMANDY ALTHOUGH THE FRANCO-NEVADA TRANSACTION IS
CONDITIONAL UPON NEWMONT OBTAINING AN INTEREST IN AT LEAST 50.1% OF THE
ORDINARY SHARES OF NORMANDY. NORMANDY HAS DECLINED TO ASSIST IN GATHERING THIS
INFORMATION AND HAS NOT PROVIDED NEWMONT ACCESS TO NORMANDY'S DETAILED
ACCOUNTING RECORDS, NOR HAS NORMANDY ASSISTED IN PREPARING RECONCILIATIONS TO
US GAAP. THEREFORE NO SUCH US GAAP RECONCILIATION IS PROVIDED NOR IS ANY PRO
FORMA FINANCIAL INFORMATION RELATED TO NORMANDY PROVIDED IN THIS OFFER
DOCUMENT. SEE SECTION 3.1, "RISK FACTORS--RISKS RELATED TO THE OFFER--WE HAVE
NOT VERIFIED THE RELIABILITY OF THE NORMANDY INFORMATION INCLUDED IN, OR WHICH
MAY HAVE BEEN OMITTED FROM, THIS OFFER DOCUMENT" ON PAGE 27.
TABLE OF CONTENTS
PAGE
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1 Introduction............................................................... 1
1.1 The reorganization...................................................... 1
1.2 Companies............................................................... 2
1.3 Format and distribution of this offer document.......................... 3
1.4 Regulatory statements................................................... 3
1.5 Time zones.............................................................. 4
1.6 Exchange rates.......................................................... 4
1.7 Disclosure regarding forward-looking statements......................... 5
1.8 Other................................................................... 5
2 Overview and selected information.......................................... 5
2.1 Questions and answers about this offer.................................. 5
2.2 Information regarding Normandy and Franco-Nevada........................ 21
2.3 Summary unaudited comparative historical and pro forma per share data... 22
2.4 Comparative market price data........................................... 23
3 Risk factors............................................................... 25
3.1 Risks related to the offer.............................................. 25
3.2 Risks related to the gold mining industry generally..................... 29
3.3 Risks related to our operations......................................... 31
4 Reasons for and background to the transactions............................. 34
4.1 Reasons for the transactions............................................ 34
4.2 Effect of a transaction without Franco-Nevada........................... 38
4.3 Background to the transactions.......................................... 40
5 Terms of the offer......................................................... 48
5.1 Our offer............................................................... 48
5.2 Offer period............................................................ 49
5.3 Offerees................................................................ 50
5.4 How to accept the offer if you hold ordinary shares of Normandy......... 50
5.5 How to accept the offer if you hold Normandy ADSs....................... 52
5.6 Validity of acceptances................................................. 54
5.7 Entitlement to offer.................................................... 54
5.8 The effect of acceptance................................................ 55
5.9 Dividends and other entitlements........................................ 57
5.10 Conditions of this offer................................................ 57
5.11 Payment of consideration................................................ 61
5.12 Withdrawal or termination of this offer................................. 62
5.13 Variation of this offer................................................. 62
5.14 Stamp duty and brokerage fees........................................... 63
5.15 Costs and taxes......................................................... 63
5.16 Notices................................................................. 63
6 Regulatory and other approvals............................................. 64
6.1 Australian Foreign Investment Review Board.............................. 64
6.2 Newmont stockholder approval............................................ 64
6.3 Governmental and regulatory approvals................................... 64
7 Information about New Newmont.............................................. 66
7.1 General description of New Newmont's operations......................... 66
i
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7.2 Pro forma financial information for New Newmont........................................ 89
7.3 Outlook information on New Newmont..................................................... 99
8 Information about Newmont................................................................. 100
8.1 General description of Newmont's operations............................................ 100
8.2 Selected financial information for Newmont............................................. 101
8.3 Where you can find more information on Newmont......................................... 101
8.4 Newmont's board of directors and management............................................ 103
9 Information about Normandy................................................................ 105
9.1 Disclaimer information in relation to Normandy......................................... 105
9.2 General description of Normandy's operations........................................... 106
9.3 Presentation of Normandy accounting information........................................ 111
9.4 Selected financial information for Normandy............................................ 113
9.5 Where you can find more information on Normandy........................................ 114
10 Information about Franco-Nevada........................................................... 115
10.1 General description of Franco-Nevada's operations...................................... 115
10.2 Selected financial information for Franco-Nevada....................................... 116
10.3 Where you can find more information on Franco-Nevada................................... 117
11 Intentions................................................................................ 118
11.1 Introduction........................................................................... 118
11.2 Intentions if compulsory acquisition is achieved....................................... 118
11.3 Intentions upon gaining control but less than 90% of Normandy.......................... 119
11.4 Effects of the offer on the market for ordinary shares of Normandy and Normandy ADSs... 120
11.5 Business, assets and employees......................................................... 120
12 Share information......................................................................... 121
12.1 Share capital of Newmont............................................................... 121
12.2 Listing on other exchanges............................................................. 121
12.3 Comparison of the rights of shareholders of Newmont and Normandy....................... 121
12.4 Rights attaching to Newmont CDIs....................................................... 134
12.5 Rights attaching to other Newmont securities........................................... 136
12.6 Employee incentive plans............................................................... 139
12.7 Certain beneficial shareholders of Newmont............................................. 140
13 Taxation.................................................................................. 141
13.1 Material Australian tax consequences................................................... 141
13.2 Material U.S. federal income tax consequences.......................................... 145
13.3 Material Canadian tax consequences..................................................... 149
14 Certain relationships and transactions with respect to Newmont, Normandy and Franco-Nevada 151
14.1 Deeds of undertaking................................................................... 151
14.2 Franco-Nevada lock-up agreement........................................................ 153
14.3 Arrangement agreement.................................................................. 154
14.4 Other agreements....................................................................... 161
14.5 Certain relationships.................................................................. 162
15 Additional information.................................................................... 164
15.1 Security structure of Normandy......................................................... 164
15.2 Normandy options....................................................................... 164
15.3 Normandy securities covered by bid..................................................... 164
15.4 Sources of consideration............................................................... 164
ii
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15.5 Purchases during previous four months.................. 166
15.6 Benefits to Normandy shareholders...................... 166
15.7 Market price and dividend data......................... 166
15.8 Selected exchange rate data............................ 168
15.9 Dissenter's or appraisal rights........................ 169
15.10 Accounting treatment................................... 169
15.11 Modifications to the Corporations Act.................. 169
15.12 Statements from Franco-Nevada.......................... 170
15.13 Franco-Nevada Shareholders Meeting..................... 171
15.14 Takeover Panel Proceedings............................. 171
15.15 Delta Acquisition LLC approval of bidder's statement... 171
15.16 Expiration date........................................ 171
15.17 Approval of bidder's statement......................... 172
15.18 Disclosure of fees, benefits and interests............. 172
15.19 Supplementary statement................................ 173
15.20 Capital raising........................................ 173
15.21 Other material information............................. 174
15.22 Experts................................................ 174
ANNEXES:
ANNEX A--Newmont Financial Information
ANNEX B--Excerpts from Publicly Available Normandy Documents
ANNEX C--Franco-Nevada Financial Information
iii
1 INTRODUCTION
1.1 THE REORGANIZATION
In connection with its bid, Newmont intends that it will merge with an
indirect, wholly owned subsidiary, with Newmont as the surviving corporation of
the merger. During the offer period, Newmont proposes to seek stockholder
approval for the merger. As a result of the merger, Newmont will become a
direct, wholly owned subsidiary of Delta Holdco Corp., which is currently a
direct, wholly owned subsidiary of Newmont. The merger will be effected in
accordance with the laws of Delaware, where all three entities described above
are incorporated.
Pursuant to the merger, stockholders of Newmont will receive one share of
Delta Holdco Corp. common stock for each of their shares of Newmont common
stock. As a result of this reorganization, Delta Holdco Corp., which will have
the same amount of issued common stock immediately after the reorganization as
Newmont will have immediately prior to the reorganization, will become the
holding company for the Newmont group and will directly own all of the common
stock of Newmont.
Upon completion of this reorganization, "Delta Holdco Corp." will be renamed
"Newmont Mining Corporation" and will become the successor registrant for U.S.
securities law purposes to the company currently named Newmont Mining
Corporation. Following the reorganization, Delta Holdco Corp. will have the
same board of directors as Newmont and its certificate of incorporation and
by-laws will be substantially the same as the existing restated certificate of
incorporation and by-laws of Newmont.
Prior to the start of the trading day following the completion of the
reorganization, Newmont common stock will cease to trade on the New York Stock
Exchange (NYSE), and on that trading day, Delta Holdco Corp. (as "Newmont
Mining Corporation") common stock will commence trading on the NYSE.
Unless the context otherwise requires, references in the offer to "Newmont
Mining Corporation" and "Newmont" (including references to words such as "we,"
"us" and "our") include Delta Holdco Corp. from the time the reorganization has
been completed and references to "New Newmont" refer to the combined company
following the completion of the transactions described in this offer document.
Delta Acquisition LLC, which is an indirect, wholly owned limited liability
company of Newmont (and a direct, wholly owned limited liability company of
Delta Holdco Corp.), is making the bid described in this offer document.
Therefore, references in this offer document to "Newmont" (including references
to words such as "we," "us" and "our") as the entity making the bid are
references to Delta Acquisition LLC.
THE FOLLOWING DIAGRAM ILLUSTRATES IN SIMPLIFIED TERMS (1) THE CURRENT
STRUCTURE OF NEWMONT AND (2) THE STRUCTURE OF NEWMONT SHOULD THE REORGANIZATION
DESCRIBED IN THIS SECTION 1.1 OCCUR.
[FLOW CHART]
1
1.2 COMPANIES
NEWMONT MINING CORPORATION
Newmont Mining Corporation is a company incorporated in Delaware with its
shares listed on the New York Stock Exchange (NYSE) under the symbol "NEM" and
a supplemental listing application has been submitted to list the shares to be
issued in connection with the transaction.
We have filed an application to list our common stock on the Australian
Stock Exchange (ASX) as Clearing House Electronic Subregister System depositary
interests (CDIs). We anticipate that ten Newmont CDIs will represent one share
of our common stock. Because of the contemplated reorganization described in
section 1.1, our ASX listing application covered the possibility that either
Newmont or New Newmont will be the listed company.
We are a leading world gold producer, with operations in the United States,
Canada, Mexico, Peru, Bolivia, Uzbekistan, Australia and Indonesia. We are
engaged in the production of and exploration for gold and the acquisition and
development of gold properties worldwide. We expect to produce 5.4 million
ounces of gold in 2001 and have extensive gold reserves, totalling more than 66
million ounces at December 31, 2000. We are also a producer of copper
concentrates, and a recognized research and development leader in exploration
and metal extraction.
Our principal executive offices are located at 1700 Lincoln Street, Denver,
Colorado 80203 (United States). Our telephone number is (303) 863-7414.
NORMANDY MINING LIMITED
Normandy Mining Limited is a company incorporated in Australia with its
ordinary shares listed on the ASX under the symbol "NDY" and its American
depositary shares (ADSs) listed on The Toronto Stock Exchange (TSE) under the
symbol "NDY". One Normandy ADS is equivalent to ten ordinary shares of Normandy.
Normandy is Australia's largest gold producer, producing over 2 million
ounces of gold annually. Normandy has extensive production and exploration
interests, with operations in Australia, the United States, New Zealand,
Greece, Turkey, Chile, Brazil, Canada, Ghana and Uganda. Normandy is also a
producer of zinc concentrates (from its Golden Grove operations in Western
Australia), cobalt (from Kasese Cobalt Company Limited in Uganda) and magnesium
(from its interest in Australian Magnesium Corporation Limited).
Normandy's principal executive offices are located at 100 Hutt Street,
Adelaide, 5000, South Australia (Australia). Normandy's telephone number is
+61-8-8303-1700.
FRANCO-NEVADA MINING CORPORATION LIMITED
Franco-Nevada Mining Corporation Limited is a company incorporated under the
laws of Canada. Its common shares are listed on the TSE under the symbol "FN",
its class A warrants are listed on the TSE under the symbol "FN.WT" and its
class B warrants are listed on the Canadian Venture Exchange (CDNX) under the
symbol "YFN.WT.B".
Franco-Nevada is the leading precious minerals royalty company and, by
market capitalization, ranks among the largest gold companies in the world.
Franco-Nevada continues to deliver superior returns to investors through its
high-quality, high-margin assets in gold, platinum group metals, diamonds and
oil and gas located in politically secure countries. Franco-Nevada, which is
debt-free, has a very strong track record of successful investments.
Franco-Nevada's key assets include its Goldstrike gold royalty in Nevada, its
Stillwater platinum group metal royalty in Montana and oil and gas royalties in
western Canada. Franco-Nevada is also Normandy's largest shareholder, holding
446.1 million ordinary shares of Normandy, which represents a 19.79% interest
in Normandy, calculated on a fully-diluted basis.
Franco-Nevada's principal executive offices are located at Suite 1900, 20
Eglington Avenue West, Toronto, Ontario (Canada) M4R 1K8. Franco-Nevada's
telephone number is (416) 480-6480.
2
1.3 FORMAT AND DISTRIBUTION OF THIS OFFER DOCUMENT
The offer is subject to securities laws, regulations and disclosure
requirements in Australia, the United States and Canada. We intend to apply for
an exemption from certain of the securities laws, regulations and disclosure
requirements in Canada.
The offer is being made through two separate offer documents. The offer will
be made in Australia and, to the extent permitted by applicable law, other
jurisdictions outside of the United States and Canada through a separate
Australian offer document called a "bidder's statement" prepared in accordance
with Australian requirements. Additionally, this offer document will be made
available upon request to Normandy shareholders and Normandy ADS holders
located in these jurisdictions. The offer will be made in the United States and
Canada only through this offer document, and Normandy shareholders and Normandy
ADS holders located in the United States and Canada will receive only this
offer document in connection with the making of the offer in these
jurisdictions.
This offer document is substantially similar to the Australian bidder's
statement and has been prepared substantially in accordance with the Australian
format and style. However, adjustments have been made to reflect the
requirements of U.S. securities laws. Nevertheless, the format and style differ
from the custom in the United States and Canada for exchange offer documents.
1.4 REGULATORY STATEMENTS
AUSTRALIA
The offer is subject to the provisions of the Corporations Act 2001 (Cth) of
Australia, as amended by exemptions or modifications granted by the Australian
Securities and Investments Commission (ASIC).
The fact that the ASX may admit Newmont to its official list is not to be
taken as an indication of the merits of Newmont.
A copy of this offer document has been lodged with ASIC. ASIC and ASX take
no responsibility for the content of this offer document. No securities will be
issued on the basis of this offer document after the date which is thirteen
months after the date of this offer document.
UNITED STATES
This offer document constitutes a prospectus under Section 5 of the U.S.
Securities Act of 1933, as amended, with respect to shares of our common stock
to be issued under the offer to persons located in the United States.
The offer is subject to the tender offer rules of the United States
applicable to equity securities not registered under Section 12 of the U.S.
Securities Exchange Act of 1934, as amended.
IT IS IMPORTANT TO NOTE THAT THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
INCLUDED IN THIS OFFER DOCUMENT DOES NOT INCLUDE ANY INFORMATION WITH RESPECT
TO NORMANDY ALTHOUGH THE FRANCO-NEVADA TRANSACTION IS CONDITIONAL UPON NEWMONT
OBTAINING AN INTEREST IN AT LEAST 50.1% OF THE ORDINARY SHARES OF NORMANDY.
Under the U.S. securities laws, pro forma financial information for Normandy
would generally be required to be provided in this offer document. However,
Normandy has declined to assist in gathering this information and has not
provided Newmont access to Normandy's detailed accounting records, nor has
Normandy assisted in preparing reconciliations to US GAAP. Therefore, no such
US GAAP reconciliation is provided, nor is any pro forma financial information
related to Normandy provided in this offer document. See Section 3.1, "Risk
Factors--Risks related to the Offer--We have not verified the reliability of
the Normandy information included in, or which may have been omitted from, this
offer document" on page 27.
3
CANADA
The offer ordinarily would be subject to the take-over bid laws of the
provinces of Canada. The plan of arrangement between Franco-Nevada and Newmont
is subject to securities laws of the provinces of Canada. We have applied to
securities regulatory authorities in Canada for orders exempting the offer from
the requirements of the take-over bid laws in certain provinces of Canada.
No Canadian securities regulatory authority has expressed an opinion about
the securities offered hereunder and it is an offense to claim otherwise.
We are incorporated, continued or otherwise organized under the laws of a
non-Canadian jurisdiction and reside outside of Canada. Although we have
appointed Goodmans LLP, our Canadian legal counsel, as our agent for service of
process in Ontario, it may not be possible for investors to collect from us
judgments obtained in courts in Canada predicated on the civil liability
provisions of securities legislation.
OTHER JURISDICTIONS
The distribution of this offer document and the making of the offer may, in
certain jurisdictions, be restricted by law. The offer is not being made,
directly or indirectly, in or into, and will not be capable of acceptance or be
available from within, any jurisdiction in which the making of the offer or the
acceptance or availability thereof would not be in compliance with the laws of
that jurisdiction. Persons who come into possession of this offer document
should inform themselves of and observe any of these restrictions. Any failure
to comply with these restrictions may constitute a violation of the securities
laws of any of these jurisdictions. We do not assume any responsibility for any
violation by any person of any of these restrictions. Normandy shareholders and
Normandy ADS holders who are residents or citizens of, or have addresses (or
are otherwise located) in, any jurisdiction in which the making or acceptance
of the offer would not be in compliance with the laws of that jurisdiction, or
who are acting as nominee or trustee for or on behalf of such persons, will not
be entitled to receive shares of our common stock (or their equivalent in
Newmont CDIs) on acceptance of the offer. Normandy shareholders and Normandy
ADS holders who are legally permitted to and who do accept the offer but are
not permitted to receive shares of our common stock or Newmont CDIs will
receive the cash proceeds of a nominee sale of their entitlement to shares of
our common stock or Newmont CDIs. No assurance can be given as to the value of
the proceeds from any such nominee sale. In addition, we may, in our sole
discretion, take such action as we deem necessary to make one or more offers in
any of these jurisdictions, and extend one or more offers to any or all
Normandy shareholders and Normandy ADS holders in any of these jurisdictions.
1.5 TIME ZONES
Where a time is stated in this offer document, it is generally given in the
local time of each of Sydney and New York City. At the date of this offer
document, local time in New York City is 16 hours behind local time in Sydney.
Unless the context requires a different meaning, where we state a time
without designating a location, we mean Sydney time.
1.6 EXCHANGE RATES
References in this offer document to "A$," "US$" and "C$" refer to the
Australian dollar, the U.S. dollar and the Canadian dollar, respectively. On
January ., 2002, the most recent practicable date prior to the mailing of this
offer document to you, the exchange rate between Australian dollars and U.S.
dollars was A$1.00 = US$.; the exchange rate between Canadian dollars and U.S.
dollars was C$1.00 = US$.; and the exchange rate between Canadian dollars and
Australian dollars was C$1.00 = A$..
See section 15.8, "Additional information--Selected exchange rate data" on
page 168 for more information.
4
You should obtain current quotes of the relevant exchange rates.
1.7 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This offer document contains both historical and forward-looking statements.
All statements other than statements of historical fact are, or may be deemed
to be, forward-looking statements. These forward-looking statements are not
based on historical facts, but rather reflect our current expectations
concerning future results and events and generally may be identified by the use
of forward-looking words or phrases such as "believe," "aim," "expect,"
"anticipate," "intend," "foresee," "likely," "should," "planned," "may,"
"estimated," "potential" or other similar words and phrases. Similarly,
statements that describe our objectives, plans or goals are or may be
forward-looking statements.
These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to differ materially from the anticipated results, performance
or achievements expressed or implied by these forward-looking statements. You
should review carefully all information, including the financial statements and
the notes to the financial statements, included in this offer document.
The risk factors described in section 3 beginning on page 25 could affect
our future results, causing these results to differ materially from those
expressed, implied or projected in any forward-looking statements. These
factors are not necessarily all of the important factors that could cause our
actual results to differ materially from those expressed in any forward-looking
statements. Other unknown or unpredictable factors also could have material
adverse effects on future results. The forward-looking statements included in
this offer document are made only as of the date of this offer document. We
cannot assure you that projected or implied results or events will be achieved.
All subsequent written and oral forward-looking statements attributable to
us or any person acting on our behalf are qualified by the cautionary
statements in this section.
1.8 OTHER
To the extent permissible under applicable law, this offer document will be
governed by Australian law.
In this offer document and the Acceptance Form, unless the context otherwise
requires, words and phrases have the same meaning and interpretation (if any)
given to them in Chapter 6 of the Corporations Act of Australia or the
Securities Clearing House Business Rules of the ASX.
2 OVERVIEW AND SELECTED INFORMATION
THE INFORMATION IN THIS SECTION SUMMARIZES INFORMATION AND STATEMENTS
ELSEWHERE IN THIS OFFER DOCUMENT. IT SHOULD BE READ IN CONJUNCTION WITH THE
WHOLE OFFER DOCUMENT.
2.1 QUESTIONS AND ANSWERS ABOUT THIS OFFER
Q: WHAT WILL HAPPEN IN THE OVERALL TRANSACTION?
A: In the proposed transactions, we intend to acquire both Normandy
Mining Limited and Franco-Nevada Mining Corporation Limited to create
the world's largest gold producer. It is also possible
5
that we will acquire less than all of the shares of Normandy, either
together with or separately from an acquisition of Franco-Nevada. We
refer to the combined company that will result from these
transactions as "New Newmont." To acquire Normandy, we are making an
off-market bid for all of the outstanding ordinary shares in the
capital of Normandy in exchange for 3.85 shares of Newmont common
stock plus A$50.00 for every 100 Normandy shares. To acquire
Franco-Nevada, we have entered into an arrangement agreement with
Franco-Nevada, pursuant to which we will acquire all of the shares of
Franco-Nevada for 0.8 of a share of Newmont common stock (or
exchangeable shares, exchangeable for our common stock) for each
Franco-Nevada common share. OUR BID FOR NORMANDY IS NOT CONDITIONED
ON COMPLETION OF THE FRANCO-NEVADA TRANSACTION. However, completion
of the Franco-Nevada transaction is conditioned on, among other
things, Newmont and its associates achieving a relevant interest in
at least 50.1% of the ordinary shares in the capital of Normandy,
calculated on a fully-diluted basis.
Q: WHAT WOULD I RECEIVE IN EXCHANGE FOR MY ORDINARY SHARES OF NORMANDY?
A: The consideration offered is 3.85 shares of our common stock and
A$50.00 for every 100 ordinary shares of Normandy (including shares
represented by Normandy ADSs), or the U.S. dollar equivalent thereof
for holders outside Australia.
See section 5.1 on page 48 of this offer document for additional
information.
Q: WHAT WILL NEW NEWMONT LOOK LIKE FOLLOWING THE TRANSACTIONS?
A: If the transactions are consummated in their entirety, New Newmont
will become the world's leading gold company in terms of gold
reserves, gold production and leverage to gold and will derive more
than 70% of its production from politically and economically stable
locations. The combination of Newmont, Normandy and Franco-Nevada
will create one of the financially strongest companies in the gold
industry. The transactions will strengthen our balance sheet and
decrease our net-debt to net-book capitalization (after transaction
costs) from 41% to an estimated 24%.
Although we currently expect to consummate both transactions, there
is a possibility that we will acquire Normandy while being unable to
acquire Franco-Nevada. If we only acquire Normandy, New Newmont would
still be the world's leading gold company in terms of reserves, gold
production and leverage to gold and would still derive approximately
70% of its production from politically stable locations. However, our
net-debt to net-book capitalization (after transaction costs) after
the acquisition of Normandy only would be an estimated 40%.
Q: WHY DOES NEWMONT WANT TO ACQUIRE CONTROL OF NORMANDY AND
FRANCO-NEVADA?
A: We believe that the acquisition of Normandy and Franco-Nevada will
provide us with a number of benefits and allow us to pursue our
strategy to deliver superior stockholder value, including:
. SCALE AND BALANCED POLITICAL RISK PROFILE. New Newmont will be
the leader in gold production and gold reserves. New Newmont will
have interests in 22 mines on five continents, including
preeminent land positions in world-class gold districts in
Nevada, Australia and Peru and a unique and diversified portfolio
of development and exploration projects. Approximately 70% of the
production (41% in the United States, 25% in Australia and 5% in
Canada) will be in countries rated "AAA" by Standard & Poor's
local currency credit rating. Approximately 60% of New Newmont's
reserves (39% in the United States, 18% in Australia and 4% in
Canada) will be in countries rated "AAA" by Standard & Poor's
local currency credit rating. The size and diversification of
these world-class assets and their balanced political risk
profile will better position New Newmont to develop its attractive
6
exploration properties around the world and will serve as an
excellent platform for future growth.
. EXPLORATION AND DEVELOPMENT. New Newmont will have several
advanced gold projects in its portfolio of assets and will have
the flexibility to optimize the development of these projects
based on project economics, political risk and and free cash flow
profiles.
. POTENTIAL COST SAVINGS AND SYNERGIES. New Newmont expects to
realize from the combination of Newmont, Normandy and
Franco-Nevada approximately US$70 million to US$80 million in
after-tax synergies in the first full year, increasing to
approximately US$80 million to US$90 million a year by the end of
the second full year. Newmont has a strong track record of
delivering on synergy expectations based on previous acquisition
experience. The synergies will arise from rationalization of
corporate overhead and exploration and development budgets,
rationalization of operating efficiencies, and reductions in
procurement costs, interest savings and tax benefits.
. FINANCIAL STRENGTH AND FLEXIBILITY. New Newmont's net-debt to
net-book capitalization will be an estimated 24%, compared to
approximately 41% for Newmont on a stand-alone basis. New Newmont
will benefit from the free cash flow generated by Franco-Nevada's
royalty stream and low cash cost operations that, together with
an improved balance sheet, will provide the combined company with
the ability to pursue growth while continuing to reduce overall
debt. New Newmont will help manage financial risk by preserving
and growing Franco-Nevada's royalty business, which will serve as
a natural hedge in the event of a low gold price environment. New
Newmont will also capitalize on the investment skill and
expertise of Franco-Nevada's management through a merchant
banking unit, which is expected to have the opportunity for
growth by taking advantage of Newmont's processing technologies
and the combined company's vast land package. The size and scope
of New Newmont's holdings and the strength of management will
afford a significant opportunity for strategic industry
rationalization. If 100% of Normandy is acquired the combined
company will review opportunities to further rationalize its
asset base through the consolidation of separately held and
managed assets and the sale or disposal of lower margin or
non-core operations.
. LEVERAGE TO GOLD PRICE. We have a strong belief in the long-term
value of gold. We intend to continue Newmont's "no-hedging"
philosophy, creating the gold industry's largest unhedged,
uncommitted reserve base of approximately 85 million ounces. The
largely unhedged reserve base will offer shareholders the
opportunity to benefit from New Newmont's substantial leverage to
gold, although this strategy also increases the exposure to a
fall in the gold price. New Newmont's annual pre-tax cash flow is
estimated to increase US$162 million for every US$25 per ounce
increase in the price of gold (this is the largest exposure in
the industry by approximately 80%). Over time, New Newmont plans
to opportunistically unwind Normandy's hedge book (currently at
10.4 million ounces, exclusive of TVX Normandy) to further its
upside potential from increases in the price of gold.
. SUPERIOR MANAGEMENT. The management of New Newmont will employ
best practices and personnel, focusing on core mining operations,
reducing costs and applying the latest innovations and technology
to increase cash flows from operations and effectively develop
new opportunities. The combined management of the three companies
will bring an array of expertise and skills to New Newmont, such
as Newmont's and Normandy's strength in global operations, mine
development and exploration, Franco-Nevada's corporate
development skills and expertise in the management of royalty
assets and investments and Newmont's proven ability to integrate
acquisitions successfully by delivering synergies on schedule.
7
. GROWTH. New Newmont intends to use its experience in the
discovery, evaluation, development and operation of large,
sophisticated mining projects to continually optimize returns
from existing core operations, pursue rational and effective
development of Normandy's portfolio of development projects,
enhance and grow its operations and project pipeline through
strategic and opportunistic high-quality asset and equity
acquisitions and maintain a geographically and politically
diverse group of mining operations.
. MARKET LIQUIDITY. New Newmont will have significant capital
market scale, providing global trading liquidity to investors.
With an expected equity value of approximately US$8 billion and
listings on the NYSE, ASX, TSE, the Swiss stock exchange and
Euronext Brussels, investors in New Newmont will benefit from
enhanced volume expected to be the largest in the gold sector
with approximately US$62 million in average daily trading volume
(based on historic trading of Newmont, Normandy and
Franco-Nevada) and increased stockholder diversity. New Newmont
will also be a member of the S&P 500 index, one of the world's
leading trading indices and will pursue inclusion in key ASX
indices as well.
Q: WOULD THE FAILURE TO ACQUIRE FRANCO-NEVADA PREVENT NEWMONT FROM
ACHIEVING THESE BENEFITS?
A: If we do not acquire Franco-Nevada, the expected benefits of the
transaction and their magnitude will be reduced; however, there would
still be significant benefits realized from a combination of Newmont
and Normandy.
See section 4.2 on page 38 of this offer document for additional
information.
Q: WHAT IS THE PREMIUM IMPLIED BY THIS OFFER?
A: Based on the closing price of our common stock on the NYSE on January
2, 2002, the last trading day in the United States prior to our
announcement of our intention to make this offer for all of the
outstanding ordinary shares of Normandy, and the relevant exchange
rate on that date of A$1.00=US$0.5148 as quoted by Bloomberg, the
consideration currently being offered by us, including the cash
consideration, represents a 5% premium over the closing price of
ordinary shares of Normandy on the ASX on that date. Based on the 30
trading day weighted average share prices prior to January 2, 2002 of
Newmont and Normandy on the NYSE and ASX, respectively, and the
exchange rate on January 2, 2002 of A$1.00=US$0.5148 as quoted by
Bloomberg, this offer, including the cash consideration, represents a
premium of 16%.
Our current offer values each ordinary share of Normandy at A$1.93,
based on the closing price of our common stock on the NYSE on January
2, 2002 and the relevant exchange rate on that date of
A$1.00=US$0.5148 as quoted by Bloomberg.
Based on the closing price of our common stock on the NYSE on
September 4, 2001, the last trading day in the United States prior to
the initial announcement of AngloGold Limited, a South African
corporation, of its intention to make an offer for all of the
outstanding ordinary shares of Normandy, and the relevant exchange
rate on that date of A$1.00=US$0.5210 as quoted by Bloomberg, the
consideration currently being offered by us, including the cash
consideration, represents an 82% premium over the closing price of
ordinary shares of Normandy on the ASX on that date.
Our current offer values each ordinary share of Normandy at A$2.00,
based on the closing price of our common stock on the NYSE on
September 4, 2001 and the relevant exchange rate on that date of
A$1.00=US$0.5210 as quoted by Bloomberg.
See section 2.4 on page 23 of this offer document for more
information.
8
Q: WHY IS NEWMONT'S OFFER SUPERIOR TO THE OFFER MADE BY ANGLOGOLD?
A: We believe that our offer is superior to AngloGold's offer for the
following reasons:
. HIGHER PREMIUM. Our offer values Normandy at A$1.93 per share,
based on the closing price of our common stock on the NYSE on
January 2, 2002, the last trading day in the United States prior
to our announcement of our intention to make this offer, and the
exchange rate on that date of A$1.00 = US$0.5148. Our offer is
A$0.12 (or 7%) more than AngloGold's offer, based on the closing
price of AngloGold ADRs on the NYSE on that same date and at the
same exchange rate.
. MORE CASH. Under our offer, Normandy shareholders will receive a
cash payment per ordinary share of Normandy of A$0.50, or the
U.S. dollar equivalent thereof for holders outside Australia,
which is 67% more than the A$0.30 offered under AngloGold's
offer, in addition to the 3.85 shares of our common stock for
every 100 ordinary shares of Normandy.
. BETTER PAPER. In general, North American gold stocks trade at
higher multiples as compared with either South African or
Australian gold stocks. By accepting our offer, Normandy
shareholders who receive shares of our common stock or Newmont
CDIs will hold common stock or CDIs of a North American company
and receive the benefits of these higher multiples. Achieving
these multiples has been an important long-term objective of
Normandy's management to improve shareholder value. AngloGold has
argued that its current low-multiple stock valuation will be
re-rated into a higher multiple stock. We believe this claim is
dependent on first moving its market valuation from an even lower
South African multiple to an Australian market valuation and
then, over time, to a North American market valuation. We believe
this is a proposition with uncertainty as to timing and success.
. GREATER FINANCIAL FLEXIBILITY TO DEVELOP NEW PROJECTS. Assuming
we complete our proposed acquisitions of Normandy and
Franco-Nevada, New Newmont will be one of the best-capitalized
gold companies in the world. New Newmont will be the industry
leader in gold production and gold reserves. Upon completion of
the transactions, New Newmont will have approximately US$380
million in cash and short-term investments (after payment of the
A$0.50 per ordinary share cash consideration to Normandy
shareholders and prior to transaction costs). With strong free
cash flow generating capacity and a net-debt to net-book
capitalization ratio of an estimated 24%, we will have enhanced
financial flexibility. This flexibility will allow us to create
value by developing Normandy's and Newmont's attractive portfolio
of new projects and exploration properties. We believe that
AngloGold has considerably less financial flexibility than we do
because over the past two years, it has had a cash flow deficit
of approximately US$153 million before financing activities,
while paying out approximately US$589 million in dividends. The
level of dividend payments has been sustained with continued
borrowings or proceeds from hedging future production. This
policy (compounded by the additional borrowings of approximately
A$670 million cash consideration under AngloGold's offer) is
likely to hinder AngloGold's ability to maximize shareholder
returns through the development of Normandy's properties.
. MORE LIQUIDITY. We expect that the common stock of New Newmont
will be the world's most liquid gold stock, with listings on the
NYSE, the ASX, the TSE, the Swiss stock exchange and Euronext
Brussels. New Newmont will be a member of the S&P 500 index, one
of the world's leading trading indices. AngloGold, on the other
hand, has its primary listing in South Africa. On a pro forma
basis and based on historical trading volumes, we will have
approximately US$62 million of daily trading volume compared to
approximately US$23 million for AngloGold. In addition to having
significantly more liquidity than AngloGold, we
9
do not have a controlling shareholder, as AngloGold does, which
serves to decrease the public float and depress liquidity. In
March 2001, AngloGold was removed from the S&P/ASX 200 for
failing to provide adequate liquidity in Australia.
. BETTER UPSIDE TO GOLD PRICE. New Newmont expects to continue to
be largely unhedged to provide gold equity investors the greatest
possible upside to rising gold prices. New Newmont will have the
largest unhedged reserve base in the world, and consequently the
most leverage to gold price among major producers, generating
approximately US$162 million in incremental pre-tax cash flow
from a US$25 increase in the spot gold price. By comparison, the
same increase in the spot gold price generates only approximately
US$36 million in additional pre-tax cash flow for AngloGold on a
pro forma basis. On a stand-alone basis after giving effect to
the sale of certain South African assets, AngloGold currently
provides its investors with only approximately US$8 million in
incremental pre-tax cash flow from a US$25 increase in the spot
gold price. Since its inception as a public company, AngloGold
has had a history of hedging a significant portion of its
production. New Newmont's leverage will increase as we
opportunistically unwind the Normandy hedge book over time.
. LOWER RISK. New Newmont will generate approximately 70% of its
production and will hold approximately 60% of its reserves in
countries rated "AAA" by Standard & Poor's local currency credit
rating. New Newmont will generate approximately 12% of its
production from Yanacocha in Peru, the largest mine in South
America and one of the lowest cost gold mines in the world. In
contrast, approximately 53% of AngloGold's pro forma production
and approximately 58% of its pro forma reserve base would be
located in Africa, with only approximately 35% of pro forma
reserves located in "AAA"-rated countries. In addition, New
Newmont's earnings have not been dependent on significant
currency devaluations as is the case for AngloGold and the South
African Rand, which has depreciated approximately 30% since
AngloGold announced its bid on September 5, 2001.
. LESS MINING COMPLEXITY. All of New Newmont's reserves will be
contained in either surface or shallow underground deposits,
which are easier to develop and have lower capital and operating
costs than deep underground mines. AngloGold, on the other hand,
operates high-risk, deep underground mines that characterize gold
mining in South Africa, where approximately 45% of AngloGold's
total reserves would be located on a pro forma basis.
. BOARD ENDORSEMENT. Subject to its fiduciary duties, the Normandy
board has reaffirmed its recommendation to recommend that you
accept our bid and reject the AngloGold offer. However, despite
providing its recommendation of Newmont's offer, the Normandy
board of directors, despite repeated requests from Newmont, has
declined to supply certain information to Newmont that would
generally be required to be included in this offer document under
rules promulgated by the SEC. It is important to note that the
unaudited pro forma financial information included in this offer
document does not include any information with respect to
Normandy although the Franco-Nevada transaction is conditional
upon Newmont obtaining an interest in at least 50.1% of the
ordinary shares of Normandy. Normandy has declined to assist in
gathering this information and has not provided Newmont access to
Normandy's detailed accounting records, nor has Normandy assisted
in preparing reconciliations to US GAAP. Therefore, no such US
GAAP reconciliation is provided nor is any pro forma financial
information related to Normandy provided in this offer document.
See "Risk factors--Risks related to the offer--We have not
verified the reliability of the Normandy information included in,
or which may have been omitted from, this offer document" on page
27.
We have received Franco-Nevada's unanimous board recommendation for
our acquisition of Franco-Nevada and full support for the
Franco-Nevada/Newmont transaction.
10
Q: WHAT WILL BE THE FORM OF THE CONSIDERATION TO BE PAID TO ME IF I
ACCEPT THIS OFFER?
A: If you have a registered address in the United States or have a
registered address in Canada, you will receive your share
consideration in the form of our common stock (traded on the NYSE).
If you have a registered address outside the United States or outside
Canada, you will receive your share consideration in the form of
Newmont CDIs (traded on the ASX). We anticipate that ten Newmont CDIs
will represent one share of our common stock.
If you have a registered address outside Australia and its external
territories, and Newmont has not determined that the making or
accepting of the offer would be in compliance with the laws of that
jurisdiction, you will not receive or be entitled to receive Newmont
CDIs. Instead, you are offered and you will receive the cash proceeds
of a sale, on Newmont's behalf, on the open market of Newmont CDIs to
which you otherwise would have been entitled.
Whatever form of share consideration you receive, it will be
equivalent to 3.85 shares of our common stock for every 100 ordinary
shares of Normandy (including shares represented by Normandy ADSs).
In addition, whatever form of share consideration you receive, you
will also receive in cash A$0.50 per ordinary share of Normandy
(including shares represented by Normandy ADSs), or the U.S. dollar
equivalent thereof for holders outside Australia.
If your registered address on the Normandy shareholder register or
Normandy ADS register maintained by Normandy's depositary is within
Australia, you will receive your cash consideration in Australian
dollars. If your registered address on the Normandy shareholder
register or Normandy ADS register maintained by Normandy's depositary
is within any other jurisdiction (including the United States and
Canada), you will receive your cash consideration in U.S. dollars. If
you are to receive payment in U.S. dollars, we will convert the
Australian dollar sum into U.S. dollars using the noon buying rate,
as published by the Federal Reserve Bank of New York, on the date
your acceptance is received.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON YOUR CASH
CONSIDERATION, REGARDLESS OF ANY DELAY IN REMITTING SUCH
CONSIDERATION TO YOU.
See section 5.1 on page 48 of this offer document for more
information.
Q: MAY I RECEIVE A COMBINATION OF NEWMONT SHARES AND NEWMONT CDIS?
A: No. You may receive only one form of share consideration with respect
to your ordinary shares of Normandy (including shares represented by
Normandy ADSs) as to which the offer has been accepted.
Q: CAN I ACCEPT THE OFFER IF I HOLD A NUMBER OF ORDINARY SHARES OF
NORMANDY THAT IS NOT EXACTLY DIVISIBLE BY 100?
A: Yes. If you hold ordinary shares of Normandy other than in multiples
of 100 ordinary shares of Normandy (or the equivalent represented by
Normandy ADSs), you can still accept the offer and you will be
entitled to (1) a pro rata entitlement to our shares (in the form of
shares of our common stock or Newmont CDIs) based on the ratio of
3.85 of our shares for every 100 of your ordinary shares of Normandy
(including shares represented by Normandy ADSs) and (2) cash of
A$0.50 per ordinary share of Normandy (including shares represented
by Normandy ADSs), or the U.S. dollar equivalent thereof for holders
outside Australia.
11
In either case, you will be subject to the provisions of this offer
document with respect to the treatment of fractional shares of our
common stock and fractional Newmont CDIs, regardless of the form of
consideration you receive.
See section 5.1 on page 48 of this offer document for more
information.
Q: HOW WILL FRACTIONAL NEWMONT SHARES AND NEWMONT CDIS BE TREATED?
A: If under the offer you become entitled to a fraction of a share of
our common stock or a fraction of a Newmont CDI, your entitlement to
that fraction will be aggregated with the fractional shares of our
common stock or fractional Newmont CDIs, as the case may be, of other
persons (so as to obtain whole shares of our common stock or whole
Newmont CDIs, as the case may be) and sold on the open market, and
you will receive your proportionate share of the net sale proceeds of
your fractional shares of our common stock or fractional Newmont
CDIs, as the case may be.
See section 5.1 on page 48 of this offer document for more
information.
Q: HAS THE NORMANDY BOARD OF DIRECTORS MADE ANY RECOMMENDATION REGARDING
THE OFFER TO NORMANDY SHAREHOLDERS AND HOLDERS OF NORMANDY ADSS?
A: Yes. Subject to its fiduciary duties, the Normandy board of directors
has agreed to recommend our offer to Normandy shareholders and
holders of Normandy ADSs. However, despite providing its
recommendation of Newmont's offer, the Normandy board of directors,
despite repeated requests from Newmont, has declined to supply
certain information to Newmont that would generally be required to be
included in this offer document under rules promulgated by the SEC.
See "Risk factors--Risks related to the offer--We have not verified
the reliability of the Normandy information included in, or which may
have been omitted from, this offer document" on page 27.
Q: HAS THE FRANCO-NEVADA BOARD OF DIRECTORS MADE ANY RECOMMENDATION
REGARDING NEWMONT'S PROPOSED ACQUISITION OF ALL OF THE OUTSTANDING
FRANCO-NEVADA COMMON SHARES?
A: Yes. Other than Mr. Seymour Schulich, Mr. Pierre Lassonde and Mr. M.
Craig Haase, who are members of the management of Franco-Nevada and
recused themselves from voting, each member of the Franco-Nevada
board of directors has voted to approve Newmont's proposed
acquisition of all of the outstanding Franco-Nevada common shares
pursuant to the arrangement agreement between the two parties, and
recommends that Franco-Nevada shareholders vote to approve the
arrangement. Messrs. Schulich and Lassonde recused themselves from
voting due to their interests in the transaction, but have
independently agreed with Newmont to escrow a significant portion of
their Franco-Nevada common shares that will be exchanged for shares
of our common stock as a demonstration of their commitment to the
success of New Newmont.
Q: HOW MANY ORDINARY SHARES OF NORMANDY OR NORMANDY ADSS DOES NEWMONT
CURRENTLY OWN?
A: We do not directly own any ordinary shares of Normandy or Normandy
ADSs. However, Franco-Nevada and one of its subsidiaries, which
together own 446.1 million ordinary shares of Normandy, representing
19.79% of the ordinary shares of Normandy (calculated on a fully
diluted
12
basis), have granted to us the right, exercisable at our discretion
(but subject to obtaining Foreign Investment and Review Board (FIRB)
approval in respect of 4.99% of the ordinary shares in Normandy), to
acquire their block of ordinary shares of Normandy for the price of
3.85 of our shares for every 100 Normandy shares.
See section 14.2 on page 153 of this offer document for more
information.
Q: HOW LONG DO I HAVE TO ACCEPT THIS OFFER?
A: Unless the offer is extended, you will have until 7:00 p.m., Sydney
time, 3:00 a.m., New York City time, on February 15, 2002, to accept
the offer.
See section 5.2 on page 49 of this offer document for more
information.
Q: CAN NEWMONT EXTEND THE OFFER PERIOD?
A: Yes. We reserve the right, exercisable at our sole discretion, to
extend the offer period. In addition, if we vary (that is, amend) the
offer to increase the consideration offered, we will extend the offer
period to the extent required by the Corporations Act and U.S.
federal securities laws. In the event that the offer period is
extended, we will be obliged under the Corporations Act to give
Normandy and every Normandy shareholder (including every Normandy ADS
holder) written notice of such extension, so long as the extension is
not an extension of the offer period subsequent to the offer period
being declared unconditional in all respects, in which case such
notice will only be given to Normandy shareholders (including
Normandy ADS holders) who have not previously accepted the offer.
See section 5.2 on page 49 of this offer document for more
information.
Q: I HOLD ORDINARY SHARES OF NORMANDY IN MY NAME ON NORMANDY'S ISSUER
SPONSORED SUBREGISTER. HOW DO I PARTICIPATE IN THIS OFFER?
A: To accept the offer for ordinary shares of Normandy held in your name
on Normandy's issuer-sponsored subregister, you should:
. complete and sign the accompanying Acceptance Form in accordance
with the terms of the offer and the instructions on the
Acceptance Form, and
. ensure that the Acceptance Form and any documents required by the
terms of the offer are received in accordance with section 5.4(b)
of this offer document before 7:00 p.m., Sydney time, 3:00 a.m.,
New York City time, on February 15, 2002 (or any later date to
which the period of the offer is extended) at an address or
facsimile number specified in section 5.4(b) on page 50 of this
offer document.
See section 5.4 on page 50 of this offer document for more
information.
Q: I HOLD ORDINARY SHARES OF NORMANDY IN A CHESS HOLDING. HOW DO I
PARTICIPATE IN THIS OFFER?
A: To accept the offer for ordinary shares of Normandy held in a CHESS
Holding (as defined in the Securities Clearing House Business Rules),
you should:
. instruct your broker or a controlling participant (for
non-institutional Normandy shareholders, this is normally the
stockbroker either through whom you bought your ordinary shares
of Normandy or through whom you ordinarily acquire ordinary
shares of Normandy
13
on the ASX) to initiate acceptance of the offer in accordance
with Rule 16.3 of the Securities Clearing House Business Rules
before 7:00 p.m., Sydney time, 3:00 a.m., New York City time, on
February 15, 2002 (or any later date to which the period of the
offer is extended), or
. if you are a CHESS participant who is not a broker (such as an
institution, custodian, trustee or the like), initiate acceptance
of the offer in accordance with Rule 16.3 of the Securities
Clearing House Business Rules before 7:00 p.m., Sydney time, 3:00
a.m., New York City time, on February 15, 2002 (or any later date
to which the period of the offer is extended).
Alternatively, you may sign and complete the accompanying Acceptance
Form in accordance with the terms of the offer and the instructions
on the Acceptance Form and ensure that it is received by 7:00 p.m.,
Sydney time, 3:00 a.m., New York City time, on February 15, 2002 (or
any later date to which the period of the offer is extended) at an
address or facsimile number specified in section 5.4(b) on page 50 of
this offer document.
See section 5.4 on page 50 of this offer document for more
information.
Q: I HOLD NORMANDY AMERICAN DEPOSITARY RECEIPTS EVIDENCING NORMANDY
ADSS. HOW DO I PARTICIPATE IN THIS OFFER?
A: If you hold Normandy ADRs evidencing Normandy ADSs and wish to accept
the offer, you should complete and sign the ADS Letter of Transmittal
and deliver it, together with your Normandy ADRs and any other
required documents, to the ADS exchange agent at an address specified
in section 5.5(b) on page 52 of this offer document before 7:00 p.m.,
Sydney time, 3:00 a.m., New York City time, on February 15, 2002 (or
any later date to which the period of the offer is extended). DO NOT
SEND YOUR NORMANDY ADRS TO US.
See section 5.5 on page 52 of this offer document for more
information, including more information about the ADS exchange agent.
Q: I HOLD NORMANDY ADSS IN BOOK-ENTRY FORM. HOW DO I PARTICIPATE IN THIS
OFFER?
A: If you hold Normandy ADSs in book-entry form with a bank, broker or
other nominee and wish to accept the offer, you must have your
nominee transfer your Normandy ADSs to an account at The Depository
Trust Company, commonly known as DTC, after which time your nominee
will complete the confirmation of a book-entry transfer of your
Normandy ADSs into the ADS exchange agent's account at DTC, and
deliver it, together with an agent's message and any other required
documents, to the ADS exchange agent at an address specified in
section 5.5(b) on page 52 of this offer document before 7:00 p.m.,
Sydney time, 3:00 a.m., New York City time, on February 15, 2002 (or
any later date to which the period of the offer is extended).
See section 5.5 on page 52 of this offer document for more
information.
Q: I BENEFICIALLY HOLD NORMANDY ADSS REGISTERED IN THE NAME OF A
FINANCIAL INSTITUTION. HOW DO I PARTICIPATE IN THIS OFFER?
A: If you are a beneficial owner of Normandy ADSs that are registered in
the name of a broker, dealer, commercial bank, trust company or other
nominee and wish to accept the offer, you must contact this
institution promptly and instruct it to accept the offer on your
behalf before 7:00 p.m., Sydney time, 3:00 a.m., New York City time,
on February 15, 2002 (or any later date to which the period of the
offer is extended).
14
Q: I HOLD OPTIONS ISSUED BY NORMANDY UNDER ITS EMPLOYEE SHARE BONUS PLAN
OR EXECUTIVE SHARE INCENTIVE PLAN. HOW DO I PARTICIPATE IN THIS OFFER?
A: If you are a holder of options issued by Normandy under its employee
share bonus plan or executive share incentive plan, you may only
accept the offer if you exercise those options in accordance with
their terms and accept the offer with respect to the ordinary shares
of Normandy received by you upon exercise of your options before 7:00
p.m., Sydney time, 3:00 a.m., New York City time, on February 15,
2002 (or any later date to which the period of the offer is extended).
See section 5.3 on page 50 of this offer document for more
information.
Q: CAN I CHANGE MY MIND AND WITHDRAW MY ORDINARY SHARES OF NORMANDY OR
NORMANDY ADSS AFTER I ACCEPT THIS OFFER?
A: Once you have accepted the offer, you will be unable to revoke your
acceptance, the contract resulting from your acceptance will be
binding on you and YOU WILL BE UNABLE TO WITHDRAW THE ORDINARY SHARES
OF NORMANDY OR NORMANDY ADSS with respect to which your acceptance
was made, except in the limited circumstance described below. If the
offer period is extended for more than one month and, at the time,
the offer is subject to a condition (which means that a condition to
the offer has not been satisfied or waived at that time), you will be
able to withdraw your acceptance and your ordinary shares of Normandy
or Normandy ADSs, as appropriate. A notice will be sent to you at
such time explaining your rights in this regard.
See section 5.8 on page 55 of this offer document for more
information.
Q: HOW WILL I KNOW THE PROGRESS OF THIS OFFER?
A: We will notify the ASX:
. by 9:30 a.m. on the next Australian business day if the
percentage of ordinary shares of Normandy (including shares
represented by Normandy ADSs) which are accepted under the offer
increases by 1% or more, based on the total number of ordinary
shares of Normandy (including shares represented by Normandy
ADSs) then issued,
. as soon as possible upon satisfaction or waiver of any condition
to our obligation to accept ordinary shares of Normandy
(including shares represented by Normandy ADSs) for exchange
pursuant to the offer, and
. as soon as possible if the offer is declared unconditional in all
respects.
You will be able to obtain copies of these notifications from the
ASX's website at http://www.asx.com.au. In addition, we will publicly
announce the offer being declared unconditional in all respects no
later than one Australian business day after the occurrence of this
event. We, in our sole discretion, may make further announcements
regarding the progress of the offer from time to time.
See section 5.2 on page 49 of this offer document for more
information.
Q: WHEN WILL I RECEIVE MY NEWMONT SHARES OR NEWMONT CDIS AND MY CASH
CONSIDERATION?
A: In accordance with the Corporations Act, we will provide the
consideration for your ordinary shares of Normandy (including shares
represented by Normandy ADSs) within five business days
15
after the date of your acceptance of the offer if the offer is
unconditional at that time, or if the offer is conditional when you
accept it within five business days after the date upon which all the
conditions are satisfied or waived.
See section 5.11 on page 61 of this offer document for more
information.
Q: WILL I HAVE TO PAY BROKERAGE FEES OR STAMP DUTY?
A: If your ordinary shares of Normandy or Normandy ADSs are registered
in your name and you deliver them directly to us or the ADS exchange
agent, as appropriate, you will not incur any brokerage or other
transaction fees in connection with your acceptance of the offer. If
you hold your ordinary shares of Normandy or Normandy ADSs through a
bank, broker or other nominee, you should ask your bank, broker or
other nominee whether it will charge any transaction fees or service
charges in connection with your acceptance of the offer.
Any stamp duty payable in respect of transfers of ordinary shares of
Normandy and Normandy ADSs to us pursuant to the offer will be paid
by us.
See section 5.14 on page 63 of this offer document for more
information.
Q: ARE THERE ANY CONDITIONS TO NEWMONT'S OBLIGATION TO COMPLETE THIS
OFFER?
A: Yes. The completion of the offer is subject to the satisfaction or
waiver by us of the following conditions upon or prior to the
expiration of the offer:
. the Treasurer of the Commonwealth of Australia advises us in
writing, before the expiration date of the offer that there is no
objection under the Australian Federal Government's foreign
investment policy or under the Foreign Acquisitions and Takeovers
Act 1975 (Cth) of Australia to the acquisition of ordinary shares
of Normandy (including shares represented by Normandy ADSs) by us
as contemplated by the offer, such an acquisition otherwise not
being in breach of that legislation or the Treasurer ceases to be
entitled to make an order under Part II of that legislation
regarding the acquisition of such ordinary shares by us;
. before the end of the offer period, we and our associates have
relevant interests in at least 50.1% of the ordinary shares of
Normandy (including shares represented by Normandy ADSs) then
issued (taking into account the 19.79% owned by Franco-Nevada),
calculated on a fully-diluted basis;
. before the end of the offer period, our stockholders shall have
taken all actions necessary to approve the issue of the shares of
our common stock under the offer;
. none of the following prescribed occurrences happening during the
period from the date of this offer document to the expiration of
the offer:
. Normandy converting all or any of its shares into a larger or
smaller number of shares under section 254H of the
Corporations Act;
. Normandy or a subsidiary of Normandy resolving to reduce its
share capital in any way;
. Normandy or a subsidiary of Normandy entering into a buyback
agreement or resolving to approve the terms of a buyback
agreement under sections 257C(1) or 257D(1) of the
Corporations Act;
. Normandy or a subsidiary of Normandy making an issue of its
shares (other than ordinary shares of Normandy issued as a
result of the exercise of options issued under Normandy's
employee share bonus plan and executive share incentive plan)
or granting an option over its shares or agreeing to make such
an issue or grant such an option;
16
. Normandy or a subsidiary of Normandy issuing, or agreeing to
issue, convertible notes;
. Normandy or a subsidiary of Normandy disposing, or agreeing to
dispose, of the whole, or a substantial part, of its business
or property;
. Normandy or a subsidiary of Normandy charging, or agreeing to
charge, the whole, or a substantial part, of its business or
property;
. Normandy or a subsidiary of Normandy resolving that it be
wound up;
. the appointment of a liquidator or provisional liquidator of
Normandy or of a subsidiary of Normandy;
. the making of an order by a court for the winding up of
Normandy or of a subsidiary of Normandy;
. an administrator of Normandy or of a subsidiary of Normandy
being appointed under section 436A, 436B or 436C of the
Corporations Act;
. Normandy or a subsidiary of Normandy executing a deed of
company arrangement; or
. the appointment of a receiver, receiver and manager, other
controller (as defined in the Corporations Act) or similar
official in relation to the whole, or a substantial part, of
the property of Normandy or of a subsidiary of Normandy;
. before the end of the offer period, no material adverse change
occurs or is announced in the business, financial or trading
position or condition, assets or liabilities, profitability or
prospects of Normandy and its subsidiaries taken as a whole;
. before the end of the offer period, Normandy does not disclose
any untrue statement of, or omit to state, a fact that was
required to be stated, or necessary so as to make a statement not
misleading, in any document filed by or on behalf of Normandy
with ASX or ASIC since January 1, 2001, where the untrue
statement or omission of fact results in a material adverse
effect in relation to the business, financial or trading position
or condition, assets or liabilities, profitability or prospects
of Normandy and its subsidiaries taken as a whole;
. during the period from the date of this offer document to the
expiration of the offer:
. there is not in effect any preliminary or final decision,
order or decree issued by any government or governmental,
semi-governmental, statutory or judicial entity or authority,
whether in Australia or elsewhere, including, without
limitation, any self-regulatory organization established under
statute or any stock exchange (a "Public Authority"), or
. no application is made to any Public Authority (other than by
us), or commenced by a Public Authority against either us or
Normandy, in consequence or in connection with the offer, any
public against either Newmont or Normandy,
which restrains or prohibits or otherwise materially adversely
impacts upon, the making of the offer or the completion of any
transaction contemplated by the offer or the deed of undertaking
entered into by us and Normandy or the rights of us or our
associates in respect of Normandy and the ordinary shares of
Normandy to be acquired under the offer or otherwise;
. before the end of the offer period, no breach of any covenant,
warranty or representation made by Normandy or in the deed of
undertaking entered into by us and Normandy occurs or is
announced which has a material adverse effect on the business,
financial or trading position or condition, assets or
liabilities, profitability or prospects of Normandy and its
subsidiaries taken as a whole;
17
. all necessary governmental or regulatory filings (including under
the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (which we refer to as the "HSR Act"), and other
competition and foreign investment approval filings or
notifications) having been made, all applicable waiting periods
with respect to any governmental or regulatory filings having
expired or having been terminated, no action having been taken to
restrain the offer by any governmental authority, and all
necessary governmental or regulatory approvals having been
obtained to ensure that:
(A) we can vote and acquire all ordinary shares of Normandy
(including shares represented by Normandy ADSs) under the
offer; and
(B) our shares of common stock and Newmont CDIs can be issued
under the offer and traded without restriction, including,
without limitation, under the U.S. Securities Act of 1933, as
amended;
. neither Normandy nor any subsidiary of Normandy is a party to any
agreement with Australian Magnesium Corporation Limited or is
subject to any other obligation in respect of Australian
Magnesium Corporation Limited for an amount greater than A$20
million other than:
. those agreements and obligations disclosed in the Australian
Magnesium Corporation Limited prospectus dated October 15,
2001, or
. an obligation by Normandy to subscribe for Australian
Magnesium Corporation Limited shares in the manner and subject
to the conditions contained in the Australian Magnesium
Corporation Limited prospectus dated October 15, 2001; and
. before the end of the offer period, there is no waiver of any
condition precedent to the commitment of either Normandy, any
subsidiary of Normandy, the syndicate of banks, the Australian
Federal Government or the State Government of Queensland to
provide funds to Australian Magnesium Corporation Limited being
conditions precedent to commitments disclosed or referred to in
the Australian Magnesium Corporation Limited prospectus dated
October 15, 2001.
The completion of the offer is also conditioned on (1) the
application, within seven days after the start of the offer period,
for admission or quotation of Newmont on ASX and of the shares of our
common stock on the NYSE and (2) the granting of permission for
admission to quotation of the Newmont CDIs on ASX and for quotation
of our shares on the NYSE no later than seven days after the end of
the offer period.
See section 5.10 on page 57 of this offer document for more
information.
Q. ARE THERE ANY REGULATORY REQUIREMENTS THAT MUST BE COMPLIED WITH IN
CONNECTION WITH THIS OFFER?
A. Yes. Pursuant to the HSR Act, on November 28, 2001, we filed a
Premerger Notification and Report Form in connection with the offer
with the Antitrust Division of the U.S. Department of Justice (which
we refer to as the "Antitrust Division") and the U.S. Federal Trade
Commission (which we refer to as the "FTC"). Under the applicable
provisions of the HSR Act, the acquisition of ordinary shares of
Normandy and Normandy ADSs in the offer may not be consummated until
the expiration or earlier termination of a 30-calendar day waiting
period following the filing by us. On December 21, 2001, the
applicable waiting period was terminated early by the FTC.
Under the Foreign Acquisitions and Takeovers Act 1975 (Cth) of
Australia, we must notify the Foreign Investment Review Board (which
we refer to as "FIRB"), which acts on behalf of the
18
Treasurer of Australia, before we acquire more than 15% of Normandy.
The Treasurer may prohibit the acquisition, if he considers that it
would be contrary to the national interest. The Treasurer must decide
within 30 days whether he has any objection to the acquisition, or
extend the time for making a decision by up to a further 90 days. The
notification was lodged with FIRB on December 7, 2001; hence, the
initial period for a decision was due to expire on January 6, 2002.
On January 7, 2002 FIRB made an interim order in relation to our
proposal. Although the interim order allows for a further period of
90 days for FIRB to examine our proposal, FIRB has stated that it has
all the information which it requires to consider our proposal and
anticipates that a recommendation to the Treasurer will be made much
sooner.
We and Normandy conduct operations in a number of other jurisdictions
where regulatory filings or approvals may be required in connection
with the offer. We have made or will make antitrust filings with the
relevant authorities in Brazil and Canada and anticipate making
appropriate antitrust filings in Germany. We received advance ruling
certificates from the Canadian Competition Bureau with respect to
both transactions. We are currently in the process of reviewing
whether any other filings will be required or advisable in other
jurisdictions, and currently intend to make the appropriate
regulatory filings and applications if it is determined that such
filings are required or advisable.
See section 6 on page 64 of this offer document for more information.
Q: IF I ACCEPT THE OFFER, WILL THIS BE A TAXABLE TRANSACTION TO ME FOR
AUSTRALIAN TAX PURPOSES?
A: The disposal of your ordinary shares of Normandy or Normandy ADSs by
accepting the offer may be a taxable transaction for Australian tax
purposes. However, if you are an Australian resident and hold your
ordinary shares of Normandy or Normandy ADSs on capital account, then
you may be able to choose roll-over relief from Australian capital
gains tax if we acquire 80% or more of all shares of Normandy
(including shares represented by Normandy ADSs) pursuant to the
offer. The roll-over will not apply to the cash you receive as part
of the consideration.
If you are a non-resident of Australia, then the disposal of your
ordinary shares of Normandy or Normandy ADSs may be a taxable
transaction for Australian tax purposes depending on a number of
factors.
See section 13.1 on page 141 of this offer document for more
information.
Q: IF I ACCEPT THE OFFER, WILL THIS BE A TAXABLE TRANSACTION TO ME FOR
U.S. FEDERAL INCOME TAX PURPOSES?
A: We have structured this transaction so that it is anticipated that
the exchange of ordinary shares of Normandy or Normandy ADSs for our
common stock or Newmont CDIs pursuant to the offer will, taken
together with the exchange of Newmont common stock for New Newmont
common stock and the exchange of Franco-Nevada common shares for New
Newmont common stock, be treated as an exchange described in Section
351 of the Internal Revenue Code. Assuming the offer is treated as an
exchange described in Section 351 of the Internal Revenue Code, U.S.
holders of ordinary shares of Normandy or Normandy ADSs will not
recognize gain or loss for U.S. federal income tax purposes in the
offer (except for gain or loss recognized because of cash received
instead of fractional shares of our common stock or because we pay
additional cash consideration). If the offer is consummated but fails
to be treated as an exchange described in Section 351 of the Internal
Revenue Code, the exchange of ordinary shares of Normandy or Normandy
ADSs for our common stock or Newmont CDIs by a U.S. holder pursuant
to the offer will be a taxable transaction for U.S. federal income
tax purposes. With regard to non-U.S. holders, the exchange of
ordinary shares of Normandy or Normandy ADSs for our common stock or
Newmont CDIs generally will not be subject to U.S. federal income tax.
19
However, determining the actual tax consequences of the exchange to
you may be complicated and will depend on your specific situation and
on variables not within our control. We encourage you to consult your
own tax advisor for a full understanding of the exchange's tax
consequences for you.
See section 13.2 on page 145 of this offer document for more
information.
Q: IF I ACCEPT THE OFFER, WILL THIS BE A TAXABLE TRANSACTION TO ME FOR
CANADIAN FEDERAL INCOME TAX PURPOSES?
A: Generally, if you are a resident of Canada, the exchange of your
ordinary shares of Normandy or Normandy ADSs for consideration that
consists of shares of our common stock and cash will be a taxable
transaction for Canadian tax purposes.
See section 13.3 on page 149 of this offer document for more
information.
Q: FOLLOWING MY RECEIPT OF NEWMONT SHARES OR NEWMONT CDIS, WILL I BE
ENTITLED TO RECEIVE DIVIDENDS DECLARED BY NEWMONT?
A: Yes. Our shares of common stock (and Newmont CDIs through the shares
of our common stock they represent) will participate fully in all
dividends, other distributions and entitlements declared by us in
respect of fully paid shares of our common stock.
Q: IS THERE A U.S. WITHHOLDING TAX ON DIVIDENDS DECLARED BY NEWMONT?
A: In general, dividends paid to a non-U.S. holder with respect to our
common stock or Newmont CDIs will be subject to withholding of U.S.
federal income tax at a 30% rate, or such lower rate as may be
specified by an applicable income tax treaty. Dividends paid to a
U.S. holder are generally not subject to withholding.
Q: ARE THERE ANY DISSENTERS' OR APPRAISAL RIGHTS AVAILABLE TO ME WITH
RESPECT TO MY ORDINARY SHARES OF NORMANDY OR NORMANDY ADSS?
A: No. There are no dissenters' rights or appraisal rights available to
holders of ordinary shares of Normandy or Normandy ADSs. This means
that you will not have the right to contest the fairness of the
consideration that you will receive in the offer.
See section 15.9 on page 169 of this offer document for more
information.
Q: WHO CAN HELP ANSWER MY QUESTIONS ABOUT THIS OFFER?
A: If you have any questions about the offer, or if you would like
additional copies of this offer document, the Acceptance Form or the
ADS Letter of Transmittal, you can contact Innisfree M&A
Incorporated, the information agent for the offer:
[InnisFree Logo]
For Normandy shareholders and Normandy ADS holders
located in the United States and Canada:
Banks and brokers call collect:
(212) 750-5833
All others call toll-free in the United States and Canada:
(888) 750-5835
20
For Normandy shareholders and Normandy ADS holders located in
Australia and other jurisdictions (except the United States and
Canada), please call toll-free in Australia: (800) 507-507 or, if
you are outside Australia, +61-2-9278-9331.
2.2 INFORMATION REGARDING NORMANDY AND FRANCO-NEVADA
NORMANDY
We have included in this offer document information concerning Normandy
insofar as it is known or reasonably available to us. However, Normandy is not
affiliated with us and, except as otherwise specified in section 9.1, has not
permitted us access to its books and records and any other material non-public
information regarding Normandy.
Normandy prepares its financial statements in accordance with Australian
GAAP, which differs in certain significant respects from U.S. GAAP. These
differences as they relate to Normandy cannot be fully quantified due to the
limited disclosure provided in publicly available information. Such differences
are likely to be material. See section 9.3, "Information about
Normandy--Presentation of Normandy accounting information" on page 111.
Pursuant to Rule 409 promulgated under the U.S. Securities Act of 1933, on
December 17, 2001, we requested that Normandy and its independent public
accountants provide to us all material information required to be included in
this offer document or required to make statements made herein not misleading.
On December 11, 2001, we requested that Normandy's independent public
accountants consent in a customary manner to the inclusion of its audit reports
with respect to the financial statements of Normandy included in this offer
document. On December 14, 2001, Normandy's independent public accountants
responded in writing to our December 11, 2001 letter stating that they were
reluctant to give consent for the inclusion of its audit report where consent
has not been given for the financial statements themselves, and believed it was
appropriate that its consent be given concurrently with Normandy's consent. On
December 19, 2001, Normandy, on its own behalf and on behalf of its
accountants, responded in writing to our December 17, 2001 letter and stated
that it was not appropriate for Normandy to bear any burden as to what the
offer document should contain and whether or not such document was misleading.
Normandy further stated that if there were specifics which Newmont wished to
refer to Normandy for review and comment, Normandy would consider whether it
could be of assistance and to what extent, on a case by case basis. In
addition, Normandy stated that its accountants were not in a position to
provide assistance to us, that work on U.S. GAAP reconciliation of its
financial statements had not been completed to Normandy's satisfaction and that
Normandy had not yet determined whether it would allow U.S. GAAP reconciliation
of its financial statements to be made public at this time. On December 31,
2001, we reiterated our requests previously made to Normandy to provide the
information required for inclusion in our United States filings, including the
consent of Normandy's independent accountants and the information necessary to
permit Normandy's financial statements to be reconciled to US GAAP. On January
2, 2002, Normandy responded to Newmont's reiterated request stating that
Normandy had carefully considered our requests and determined that it must
maintain Normandy's stance as expressed in Normandy's letter dated December 19,
2001. Normandy stated that in its opinion it was not appropriate that Normandy
or its directors should have any legal responsibility for the content of
Newmont's registration statement. Normandy noted that the issue was
deliberately not covered in the pre-bid documentation because Normandy was not
prepared to take responsibility for the content of Newmont's offer document or
registration statement and that, in Normandy's opinion responsibility for the
content of the Newmont registration statement must remain with Newmont.
Normandy also noted that its own work on US GAAP reconciliation was still not
complete and, therefore, Normandy's directors were not prepared to permit the
publication of US GAAP reconciliations of Normandy's accounts. Normandy also
noted that it did not know whether its work on US GAAP reconciliation would
ever be completed, in view of the two competing bids and their announced
timeframes. See Section 4.3 "Reasons for and background to the
transactions--Background to the transactions" on page 40. See Section 3.1,
"Risk factors--Risks related to the offer--Although Normandy has recommended
the Newmont offer, it has declined to provide Newmont with financial
information that Newmont has requested for inclusion in this offer document"
and "--We have not verified the reliability of the Normandy information
included in, or which may have been omitted from, this offer document" on page
27.
21
Normandy reports reserves in accordance with the JORC Code in accordance
with the requirements of the ASX. We prepare reserve information in accordance
with Securities and Exchange Commission (SEC) requirements.
FRANCO-NEVADA
The information in this offer document concerning Franco-Nevada was prepared
by Franco-Nevada management. We are not in a position to verify the information
concerning Franco-Nevada which is included in this offer document.
To the maximum extent permitted by law, we and our directors and officers
disclaim all liability for information concerning Franco-Nevada included in
this offer document.
Normandy shareholders and Normandy ADS holders should form their own views
concerning Franco-Nevada from the full range of public information available
concerning Franco-Nevada.
2.3 SUMMARY UNAUDITED COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
The table set forth below depicts the Pro Forma Earnings (Loss) Per Share,
the Book Value Per Share and Cash Dividends Declared Per Common Share on an
equivalent share basis in U.S. dollars (1) for Newmont and Franco-Nevada on a
historical basis, (2) for the combination of Newmont and Franco-Nevada, on a
pro forma combined basis and (3) for the combination of Newmont and
Franco-Nevada, on a per share equivalent pro forma basis for Franco-Nevada. The
pro forma data for the combined company was derived by combining the historical
consolidated financial information of Newmont and Franco-Nevada, using the
purchase method of accounting for business combinations as described under
section 7.2, "Information about New Newmont--Pro forma financial information
for New Newmont" on page 89. The Franco-Nevada equivalent share pro forma
information shows the effect of the combination of Newmont and Franco-Nevada,
from the perspective of an owner of common shares of Franco-Nevada.
You should read the information presented in this table below together with
the historical financial information appearing elsewhere in this offer document
or incorporated herein by reference. See section 8.2, "Information about
Newmont--Selected financial information for Newmont," section 8.3, "Information
about Newmont--Where you can find more information on Newmont," section 9.4,
"Information about Normandy--Selected financial information for Normandy,"
section 9.5, "Information about Normandy--Where you can find more information
on Normandy," section 10.2,"Information about Franco-Nevada--Selected financial
information for Franco-Nevada," and section 10.3, "Information about
Franco-Nevada--Where you can find more information on Franco-Nevada." The
unaudited pro forma combined data is for illustrative purposes only. The
companies may have performed differently had they always been combined. You
should not rely on this information as being indicative of the historical
results that would have been achieved had the companies always been combined or
the future results that the combined company will experience after the
acquisitions.
IT IS IMPORTANT TO NOTE THAT THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
INCLUDED IN THIS OFFER DOCUMENT DOES NOT INCLUDE ANY INFORMATION WITH RESPECT
TO NORMANDY ALTHOUGH THE FRANCO-NEVADA TRANSACTION IS CONDITIONAL UPON NEWMONT
OBTAINING AN INTEREST IN AT LEAST 50.1% OF THE ORDINARY SHARES OF NORMANDY.
Under the U.S. securities laws, pro forma financial information for Normandy
would generally be required to be provided in this offer document. However,
Normandy has declined to assist in gathering this information and has not
provided Newmont access to Normandy's detailed accounting records, nor has
Normandy assisted in preparing reconciliations to US GAAP. Therefore, no such
US GAAP reconciliation is provided, nor is any pro forma financial information
related to Normandy provided in this offer document. See Section 3.1, "Risk
Factors--Risks related to the Offer--We have not verified the reliability of
the Normandy information included in, or which may have been omitted from, this
offer document" on page 27.
22
The following table outlines the Pro Forma Earnings (Loss) Per Share
information on an equivalent share basis for the Newmont/Franco-Nevada
transaction:
NEWMONT MINING
CORPORATION
------------------------
US$
------------------------
PRO FORMA
HISTORICAL NEWMONT AND
(US$) FRANCO-NEVADA
---------- -------------
Nine Months Ended September 30, 2001--Loss per
share--basic and diluted................................ $(0.26) $(0.01)
====== ======
Cash Dividends Declared Per Common Share................ $ 0.09 $ 0.09
====== ======
Twelve Months Ended December 31, 2000--Loss per
share--basic and diluted................................ $(0.47) $(0.17)
====== ======
Cash Dividends Declared Per Common Share................ $ 0.12 $ 0.12
====== ======
As of September 30, 2001--Book Value Per Share........... $ 7.45 $12.17
====== ======
FRANCO-NEVADA MINING CORPORATION
LIMITED
----------------------------------
US $
----------------------------------
PRO FORMA
HISTORICAL EQUIVALENT
HISTORICAL CONVERTED NEWMONT AND
(C$) TO (US$) FRANCO-NEVADA
---------- ---------- -------------
Nine Months Ended September 30, 2001--Earnings (Loss) from continuing operations per
share--basic and diluted........................................................... $0.47 $0.31 $(0.01)
===== ===== ======
Cash Dividends Declared Per Common Share............................................ $0.35 $0.23 $ 0.07
===== ===== ======
Twelve Months Ended March 31, 2001--Earnings (Loss) from continuing operations per
share--basic and diluted........................................................... $0.51 $0.34 $(0.14)
===== ===== ======
Cash Dividends Declared Per Common Share.......................................... $0.35 $0.23 $ 0.10
===== ===== ======
As of September 30, 2001--Book Value Per Share...................................... $9.58 $6.07 $ 9.74
===== ===== ======
2.4 COMPARATIVE MARKET PRICE DATA
The following table presents the closing prices per share as reported on the
NYSE for shares of our common stock, on the ASX for ordinary shares of
Normandy, and on the TSE for Normandy ADSs as of:
(a) January 2, 2002, which was the last trading day in the United States
prior to our announcement of our intention to commence this offer, and
(b) . , 2002, the last trading day prior to the date of this offer
document for which prices for shares of our common stock, ordinary shares of
Normandy and Normandy ADSs were available.
The "equivalent basis shares" price of ordinary shares of Normandy and
Normandy ADSs represents the applicable market price for shares of our common
stock on the corresponding date, multiplied by the equivalent exchange ratio of
3.85 shares of our common stock plus A$50.00 for every 100 ordinary shares of
Normandy and converted at the relevant exchange rate as quoted by Bloomberg in
Australian dollars on January 2, 2002 of A$1.00 = US$0.5148 and on . , 2002 of
A$1.00 = US$ . , respectively, and in Canadian dollars on January 2, 2002 of
C$1.00 = US$0.6264 and on January . , 2002 of C$1.00 = US$ . , respectively.
See section 15.8, "Additional information--Selected exchange rate data" for
further information on the exchange rate between Australian dollars and U.S.
dollars, and Canadian dollars and U.S. dollars.
HISTORICAL NORMANDY
------------------------------------- ----------------
NEWMONT NORMANDY EQUIVALENT BASIS
------------- ----------------------- ----------------
SHARES (NYSE) SHARES (ASX) ADSS (TSE) SHARES ADSS
US$ A$ C$ A$ C$
------------- ------------ ---------- ------ -----
(a) January 2, 2002 19.09 1.83 15.00 1.93 15.84
(b) ., 2002....... . . . . .
23
Based on the closing price of shares of our common stock on the NYSE on
January 2, 2002, the last trading day in the United States prior to our
announcement of our intention to make this offer and the relevant exchange rate
on that date of A$1.00 = US$0.5148, the consideration being offered, including
the cash consideration, represents a 5% premium over the closing price of
ordinary shares of Normandy on the ASX on that date. Based on the 30 trading
day weighted average share prices to January 2, 2002 of ordinary shares of
Normandy on the ASX and shares of our common stock on NYSE, and the exchange
rate on that date of A$1.00 = US$0.5148, the consideration being offered,
including the cash consideration, represents a premium of 16%. The offer,
including the cash component, values each ordinary share of Normandy at A$1.93,
based on the closing price of shares of our common stock on the NYSE on January
2, 2002 and the relevant exchange rate in Australian dollars on that date of
A$1.00 = US$0.5148.
Normandy shareholders and Normandy ADS holders are urged to obtain current
market information regarding shares of our common stock, ordinary shares of
Normandy and Normandy ADSs. The market prices of these securities will
fluctuate during the pendency of the offer and thereafter, and may be different
from the prices set forth above at the time you accept the offer and at the
time you receive shares of our common stock or Newmont CDIs, as applicable.
24
3 RISK FACTORS
IN DECIDING WHETHER TO ACCEPT THE OFFER, YOU SHOULD READ THIS ENTIRE OFFER
DOCUMENT AND ITS ANNEXES CAREFULLY. YOU SHOULD ALSO CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS, WHICH HAVE BEEN SEPARATED INTO THREE GROUPS:
. risks related to the offer,
. risks related to the gold mining industry generally, and
. risks related to our operations.
3.1 RISKS RELATED TO THE OFFER
MARKET FLUCTUATIONS MAY REDUCE THE MARKET VALUE OF THE CONSIDERATION OFFERED
TO YOU BECAUSE THE EXCHANGE RATIO CONTEMPLATED BY THE OFFER IS FIXED.
You are being offered consideration under the offer that consists, in part,
of a specified number of shares of our common stock or Newmont CDIs, rather
than a number of shares of our common stock or Newmont CDIs with a specified
market value. Thus, the market value of the shares of our common stock or
Newmont CDIs received pursuant to the offer will fluctuate depending upon the
market value of the shares of our common stock or Newmont CDIs. Accordingly,
the market value of shares of our common stock or Newmont CDIs at the time you
receive them may vary significantly from their market value on the date of your
acceptance of the offer.
The cash consideration under our offer is fixed. However, if you are a
Normandy shareholder located outside Australia, you will receive this cash
consideration in U.S. dollars. The value of this cash consideration will
fluctuate based upon the relative exchange rate between U.S. and Australian
dollars.
UNCERTAINTIES EXIST IN INTEGRATING THE BUSINESS OPERATIONS OF THE THREE
COMPANIES.
We intend, to the extent possible, to integrate our operations with those of
Normandy and, if the plan of arrangement is completed, Franco-Nevada. This
intention, and the risks associated with it, apply whether or not we acquire
Franco-Nevada. Our goal in integrating these operations is to increase earnings
and achieve cost savings by taking advantage of the synergies of consolidation
and enhanced growth opportunities. We may encounter substantial difficulties
integrating our operations with Normandy's and Franco-Nevada's operations,
resulting in a delay or the failure to achieve the anticipated synergies and,
therefore, the expected increases in earnings. Moreover, the integration
process may cause us to incur substantial costs as a result of, among other
things:
. loss of key employees,
. possible inconsistencies in standards, controls, procedures and
policies, business cultures and compensation structures among us,
Normandy and Franco-Nevada, and the need to implement, integrate and
harmonize various business-specific operating procedures and systems, as
well as company-wide financial, accounting, information and other
systems, and
. the diversion of management's attention from day-to-day business as a
result of the need to deal with integration issues.
For these reasons, we may fail to complete successfully the necessary
integration of Newmont, Normandy and Franco-Nevada, or Newmont and Normandy (as
the case may be), or to realize any of the anticipated benefits of the
integration of the three companies. Actual cost savings and synergies may be
lower than we currently expect and may take a longer time to achieve than we
currently anticipate.
25
FULL INTEGRATION OF OUR OPERATIONS WITH NORMANDY'S OPERATIONS MAY NOT BE
ACHIEVED IF WE CANNOT COMPULSORILY ACQUIRE ALL OUTSTANDING ORDINARY SHARES OF
NORMANDY (INCLUDING SHARES REPRESENTED BY NORMANDY ADSS).
Our offer (and the respective obligations of us and Franco-Nevada to
complete our acquisition of Franco-Nevada) are subject to a condition that,
before the end of the offer period, we and our associates have relevant
interests in at least 50.1% of the ordinary shares of Normandy (including
shares represented by Normandy ADSs) including the 19.79% owned by
Franco-Nevada, calculated on a fully-diluted basis. To effect the compulsory
acquisition of all of the ordinary shares of Normandy (including shares
represented by Normandy ADSs) under the Corporations Act of Australia, we are
required to have a relevant interest in at least 90% (by number) of all of the
shares of Normandy (including shares represented by Normandy ADSs) at the end
of the offer period. It is possible that, at the end of the offer period, we
will not hold a sufficient number of ordinary shares of Normandy (including
shares represented by Normandy ADSs) to effect a compulsory acquisition of the
remaining outstanding ordinary shares of Normandy (including shares represented
by Normandy ADSs) under the Corporations Act. This could prevent or delay us
from realizing some or all of the anticipated benefits from the integration of
our operations with Normandy's operations.
See section 4.1, "Reasons for and background to the transactions--Reasons
for the transactions" on page 34.
EVEN IF WE AND OUR ASSOCIATES HAVE RELEVANT INTERESTS IN AT LEAST 50.1% OF
THE ORDINARY SHARES OF NORMANDY, WE MAY BE UNABLE TO COMPLETE THE ACQUISITION
OF FRANCO-NEVADA.
The respective obligations of us and Franco-Nevada to complete the
acquisition of Franco-Nevada by us are subject to the condition that we and our
associates have relevant interests in at least 50.1% of the ordinary shares of
Normandy, calculated on a fully diluted basis (including Normandy shares
represented by ADSs and Franco-Nevada's holding of approximately 19.79% of
Normandy shares calculated on a fully diluted basis). There is no condition to
our offer for Normandy that the Franco-Nevada transaction be completed. Even if
we and our associates have such relevant interests, however, Newmont may be
unable to acquire Franco-Nevada due to the non-satisfaction of any one of a
number of other conditions to that acquisition, including shareholder and
regulatory approvals. Accordingly, we may succeed in acquiring Normandy while
failing to acquire Franco-Nevada, and could thus be prevented from realizing
the benefits from the integration of our operations with Franco-Nevada's
operations that we expect to result from the acquisition of all of the
outstanding common shares of Franco-Nevada. Absent these benefits, we may not
achieve all of the strategic objectives we expect to achieve from the
combination of us, Normandy and Franco-Nevada into a single company.
For further details on these consequences, see section 3.3, "Risk
factors--Risks related to our operations" on page 31 and see section 4.2,
"Reasons for and background to the transactions--Effect of a transaction
without Franco-Nevada" on page 38.
ANTITRUST AND COMPETITION AUTHORITIES IN VARIOUS JURISDICTIONS MAY ATTEMPT TO
DELAY OR PREVENT OUR ACQUISITION OF VOTING AND CONTROL RIGHTS OR MAY REQUIRE
DIVESTITURES.
We and Normandy conduct operations in a number of jurisdictions where
antitrust filings or approvals may be required in connection with the offer. We
have made or will make antitrust filings with the relevant authorities in the
United States, Brazil and Canada. Until the applicable waiting period in the
United States under the HSR Act expires or is terminated, we may not purchase
ordinary shares of Normandy (including shares represented by Normandy ADSs)
under the offer. We are currently in the process of reviewing whether any other
filings will be required or advisable in other jurisdictions, and we intend to
make the appropriate regulatory filings and applications if we decide that such
filings are required or advisable. We are confident that the necessary
regulatory approvals will be obtained. Nevertheless, we cannot provide any
assurance that the necessary approvals will be obtained or that there will not
be any adverse consequences to our or Normandy's business resulting from the
failure to obtain these regulatory approvals or from conditions that could be
imposed in connection with obtaining these approvals, including divestitures or
other operating restrictions upon our business.
26
NORMANDY SHAREHOLDERS AND NORMANDY ADS HOLDERS WILL HAVE LIMITED WITHDRAWAL
RIGHTS WITH RESPECT TO THE OFFER, WHICH MEANS THAT A DECISION TO ACCEPT THE
OFFER MAY BE IRREVOCABLE.
Once you have accepted the offer for your ordinary shares of Normandy or
Normandy ADSs, you will only have limited rights to withdraw your acceptance of
the offer. Under Australian law, if, after you have accepted the offer and
while it remains subject to conditions, the offer period is extended for more
than one month and, you will be able to withdraw your acceptance. Otherwise,
you may be unable to withdraw your acceptance of the offer even if the market
value of shares of our common stock or Newmont CDIs varies significantly from
their value on the date of your acceptance of the offer.
ALTHOUGH NORMANDY HAS RECOMMENDED THE NEWMONT OFFER, IT HAS DECLINED TO
PROVIDE NEWMONT WITH FINANCIAL INFORMATION THAT NEWMONT HAS REQUESTED FOR
INCLUSION IN THIS OFFER DOCUMENT.
Although, as of the date of this offer document, the board of directors of
Normandy has recommended, subject to its fiduciary duties, that Normandy
shareholders accept Newmont's offer, Normandy, despite repeated requests from
Newmont, has declined to supply certain information to Newmont that would
generally be required to be included in this offer document under rules
promulgated by the SEC. For example, the unaudited pro forma financial
information included in this offer document does not include any information
with respect to Normandy. Normandy has declined to assist in gathering this
information and has not provided Newmont access to Normandy's detailed
accounting records, nor has Normandy assisted in preparing reconciliations to
US GAAP. Therefore, no such US GAAP reconciliation is provided, nor is any pro
forma financial information related to Normandy provided in this offer document
although the Franco-Nevada transaction is conditional upon Newmont obtaining an
interest in at least 50.1% of the ordinary shares of Normandy. See "--We have
not verified the reliability of the Normandy information included in, or which
may have been omitted from, this offer document" on page 27. Normandy justified
its position for not providing Newmont with the requested information on the
basis that it was necessary that the Normandy board maintain a "level playing
field" between Newmont and the other bidder seeking to acquire Normandy. Thus,
according to Normandy, the fact that Normandy has recommended the current
Newmont offer should not be construed as making Newmont's offer a "friendly"
bid. According to Normandy, Newmont's offer is being assessed by the Normandy
board in the context of a true competitive auction. There is no real constraint
on the Normandy board from changing its recommendation of the Newmont offer,
consistent with the board's fiduciary duties.
WE HAVE NOT VERIFIED THE RELIABILITY OF THE NORMANDY INFORMATION INCLUDED IN,
OR WHICH MAY HAVE BEEN OMITTED FROM, THIS OFFER DOCUMENT.
In respect of information relating to Normandy presented in, or omitted
from, this offer document, including all Normandy financial information, we
have relied exclusively upon publicly available information. Pursuant to Rule
409 promulgated under the U.S. Securities Act of 1933, on December 17, 2001, we
requested that Normandy and its independent public accountants provide to us
all material information required to be included in this offer document or
required to make statements made herein not misleading. On December 11, 2001,
we requested that Normandy's independent public accountants consent in a
customary manner to the inclusion of its audit reports with respect to the
financial statements of Normandy included in this offer document. On December
14, 2001, Normandy's independent public accountants responded in writing to our
December 11, 2001 letter stating that they were reluctant to give consent for
the inclusion of its audit report where consent has not been given for the
financial statements themselves, and believed it was appropriate that its
consent be given concurrently with Normandy's consent. On December 19, 2001,
Normandy, on its own behalf and on behalf of its accountants, responded in
writing to our December 17, 2001 letter and stated that it was not appropriate
for Normandy to bear any burden as to what the offer document should contain
and whether or not such document was misleading. Normandy further stated that
if there were specifics which Newmont wished to refer to Normandy for review
and comment, Normandy would consider whether it could be of assistance and to
what extent, on a case by case basis. In addition, Normandy stated that its
accountants were not in a position to provide assistance to us, that work on
U.S. GAAP reconciliation of its financial statements had not been completed to
Normandy's satisfaction and that Normandy had not yet determined whether it
would allow U.S. GAAP
27
reconciliation of its financial statements to be made public at this time. On
December 31, 2001, we reiterated our requests previously made to Normandy to
provide the information required for inclusion in our United States filings,
including the consent of Normandy's independent accountants and the information
necessary to permit Normandy's financial statements to be reconciled to US
GAAP. On January 2, 2002, Normandy responded to Newmont's reiterated request
stating that Normandy had carefully considered our requests and determined that
it must maintain Normandy's stance as expressed in Normandy's letter dated
December 19, 2001. Normandy stated that in its opinion it was not appropriate
that Normandy or its directors should have any legal responsibility for the
content of Newmont's registration statement. Normandy noted that the issue was
deliberately not covered in the pre-bid documentation because Normandy was not
prepared to take responsibility for the content of Newmont's offer document or
registration statement and that, in Normandy's opinion responsibility for the
content of the Newmont registration statement must remain with Newmont.
Normandy also noted that its own work on US GAAP reconciliation was still not
complete and, therefore, Normandy's directors were not prepared to permit the
publication of US GAAP reconciliations of Normandy's accounts. Normandy also
noted that it did not know whether its work on US GAAP reconciliation would
ever be completed, in view of the two competing bids and their announced
timeframes. See Section 4.3 "Reasons for and background to the
transactions--Background to the transactions" on page 40. Any inaccuracy in the
Normandy information contained in this offer document could adversely affect
the results of operations of the combined company. For further information, see
section 9.3, "Information about Normandy--Presentation of Normandy accounting
information" on page 111.
CHANGE OF CONTROL PROVISIONS IN NORMANDY'S AGREEMENTS TRIGGERED UPON THE
ACQUISITION OF CONTROL OF NORMANDY MAY LEAD TO ADVERSE CONSEQUENCES.
Normandy is a party to agreements that contain change of control provisions
that may be triggered if, following completion of the offer, we hold ordinary
shares of Normandy (including shares represented by Normandy ADSs) representing
a majority of the voting rights of Normandy. The operation of these change of
control provisions, if triggered, could result in significant debt acceleration
or prepayments and require Normandy to renegotiate its financings or sell joint
venture interests. These provisions may be waived with the consent of the other
party and we intend to consider seeking such waivers. In the absence of these
waivers, the operation of any of these change of control provisions could
adversely affect the operations of New Newmont.
INFORMATION PROVIDED TO AND BY FRANCO-NEVADA REGARDING THE VARIOUS MINING
PROPERTIES IN WHICH IT HOLDS ROYALTY INTERESTS HAS NOT BEEN INDEPENDENTLY
VERIFIED.
Franco-Nevada holds most of its producing mineral interests in the form of
net smelter return ("NSR") royalties and net profit interest ("NPI") royalties.
This means that Franco-Nevada does not, itself, own or operate any mines and,
aside from any audit rights that it may have with respect to the payments
received from mining companies, may not, in all cases, have access to
non-public or internal records of mining companies or may otherwise be
restricted by confidentiality obligations. Accordingly, the information
provided by Franco-Nevada with respect to the production, reserves, mining
operations and exploration and development of the various mining properties in
which Franco-Nevada holds royalty interests has been taken from information
published by the operating companies in their annual reports, other public
disclosure documents and information prepared by management. Franco-Nevada, and
therefore we, cannot be certain that all of such information is complete and
accurate in all material respects. Changes in the reserves, mining operations
or development of any of the various properties in which Franco-Nevada holds
royalty interests could result in a material reduction in the royalty income of
the combined company.
NORMANDY IS A SUBSTANTIAL SHAREHOLDER IN AUSTRALIAN MAGNESIUM CORPORATION
(AMC).
Normandy is a substantial holder of AMC securities and has significant
future obligations to AMC.
AMC announced:
. on November 21, 2001, that all conditions of its public offer of
distribution entitled securities pursuant to its prospectus dated
October 15, 2001 have been satisfied; and
28
. on November 22, 2001, that the AMC board of directors has given formal
approval to commence development of the $1.3 billion Stanwell Magnesium
Project.
There are a number of significant risks related to investments in AMC,
including:
. risks related to the Stanwell Magnesium Project which has no operating
history;
. AMC's substantial dependence on the Stanwell Magnesium Project;
. risks related to the magnesium market;
. financial risks specific to AMC's business and operations;
. risk factors related to general market conditions; and
. AMC's reliance upon Normandy for financial and operational support.
Additionally, AMC announced on November 29, 2001 that Normandy has agreed to
continue as guarantor of AMC's foreign exchange hedging position and $72
million corporate facility with ANZ Banking Group Limited. If AMC is unable to
perform its obligations under these arrangements, there is a risk that
Normandy, as guarantor, may incur liabilities under these arrangements.
3.2 RISKS RELATED TO THE GOLD MINING INDUSTRY GENERALLY
A SUBSTANTIAL OR EXTENDED DECLINE IN GOLD PRICES WOULD HAVE A MATERIAL
ADVERSE EFFECT ON NEW NEWMONT.
The businesses of Newmont, Normandy and Franco-Nevada are extremely
dependent on the price of gold, which is affected by numerous factors beyond
our control. Factors tending to put downward pressure on the price of gold
include:
. sales or leasing of gold by governments and central banks;
. a low rate of inflation and a strong U.S. dollar;
. global and regional recession or reduced economic activity;
. speculative trading;
. the demand for gold for industrial uses, use in jewelry, and investment;
. high supply of gold from production, disinvestment, scrap and hedging;
. interest rates;
. sales by gold producers in forward transactions and other hedging;
. the production and cost levels for gold in major gold-producing nations;
and
. the cost level (in local currencies) for gold in major consuming nations.
Any drop in the price of gold adversely impacts our revenues, profits and
cash flows, particularly in light of our "no hedging" philosophy. Normandy and
Franco-Nevada have recorded asset writedowns in recent years as a result of a
sustained period of low gold prices. The combined company may experience
additional asset impairment as a result of continuing low gold prices.
In addition, sustained low gold prices can: (1) reduce revenues further by
production cutbacks due to cessation of the mining of deposits or portions of
deposits that have become uneconomic at the then-prevailing gold price; (2)
halt or delay the development of new projects; (3) reduce funds available for
exploration, with the result that depleted reserves are not replaced; and (4)
reduce the existing reserves, by removing ores from reserves that cannot be
economically mined or treated at prevailing prices.
29
WE NEED TO CONTINUALLY OBTAIN ADDITIONAL RESERVES FOR GOLD PRODUCTION.
We must continually replace gold reserves depleted by production. Depleted
reserves must be replaced by expanding known orebodies or by locating new
deposits in order for us to maintain our production levels over the long term.
Success in exploration for gold is uncertain. As a result, the reserve base of
the combined company may decline as reserves are produced without adequate
replacement.
ESTIMATES OF PROVEN AND PROBABLE RESERVES ARE UNCERTAIN.
Estimates of proven and probable reserves and cash operating costs are
subject to considerable uncertainty. Such estimates are, to a large extent,
based on interpretations of geologic data obtained from drill holes and other
sampling techniques. Gold producers use feasibility studies to derive estimates
of cash 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, comparable facility, equipment and
operating costs, and other factors. Actual cash operating costs and economic
returns on projects may differ significantly from original estimates. Further,
it may take many years from the initial phase of drilling before production is
possible and, during that time, the economic feasibility of exploiting a
discovery may change.
INCREASED COSTS COULD AFFECT PROFITABILITY.
The cash cost of production at any particular mining location is frequently
subject to great variation from one year to the next due to a number of
factors, such as changing waste-to-ore ratios, ore grade and metallurgy. In the
past, a cash cost swing of 10% at any one location has not been a significant
factor in our profitability. However, this may not always be the case.
MINING ACCIDENTS OR OTHER ADVERSE EVENTS 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 are encountered, ore grades
are lower than expected, or the physical or metallurgical characteristics of
the ore are less amenable to mining or treatment than expected.
THE USE OF HEDGING INSTRUMENTS MAY PREVENT GAINS BEING REALIZED FROM
SUBSEQUENT PRICE INCREASES.
Consistent with our position as a largely unhedged producer, New Newmont
does not intend to enter into new gold hedging positions. This creates a risk
that, as gold prices fall, New Newmont's revenues will be adversely affected.
Further, over time, our intention is to deliver into Normandy's existing hedge
contracts, and we will seek to unwind New Newmont's hedge position when
economically attractive. Nonetheless, New Newmont will retain a gold hedging
position at the outset. If the gold price rises above the price at which future
production has been committed under these hedge instruments, we will have an
opportunity loss. However, if the gold price falls below that committed price,
New Newmont's revenues will be protected to the extent of such committed
production.
CURRENCY FLUCTUATIONS MAY AFFECT THE COSTS THAT WE INCUR.
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 can increase
the costs of gold production in U.S. dollar terms at mines located outside the
United States.
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GOLD MINING COMPANIES ARE SUBJECT TO EXTENSIVE ENVIRONMENTAL LAWS AND
REGULATIONS.
Our exploration, production and processing operations are extensively
regulated under various U.S. federal, state and local and foreign laws relating
to the protection of air and water quality, hazardous waste management and mine
reclamation. We have incurred current liabilities and may have potential future
liability for environmental costs. Further, the regulatory environment for our
operations could change in ways that would substantially increase our liability
or the costs of compliance and that could have a material adverse effect on our
operations or financial position.
3.3 RISKS RELATED TO OUR OPERATIONS
IN ADDITION TO THE RISKS RELATED TO THE GOLD MINING INDUSTRY GENERALLY, OUR
OPERATIONS ARE ALSO SUBJECT TO THE FOLLOWING RISKS SPECIFIC TO US:
OUR OPERATIONS OUTSIDE NORTH AMERICA AND AUSTRALIA ARE SUBJECT TO THE RISKS
OF DOING BUSINESS ABROAD.
Exploration, development and production activities outside of North America
and Australia 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;
. changes in tax laws;
. royalty and tax increases or claims by governmental entities;
. retroactive tax or royalty 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, and 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;
. environmental controls;
. risks of loss due to civil strife, acts of war, guerrilla activities,
insurrection and terrorism; and
. other risks arising out of foreign sovereignty over the areas in which
our operations are conducted.
Consequently, our exploration, development and production activities outside
of North America and Australia may be substantially affected by factors beyond
our control, any of which could materially adversely affect our financial
position or results of operations. Furthermore, in the event of a dispute
arising from such activities, we may be subject to the exclusive jurisdiction
of courts outside North America or Australia or may not be successful in
subjecting persons to the jurisdiction of the courts in North America or
Australia, 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
31
secession of East Timor, one of its former provinces. Despite democratic
elections in 1999, a change in government occurred in late July 2001, and civil
unrest, independence movements and tensions between the civilian government and
the military continue. These problems heighten the risk of abrupt changes in
leadership or in the national policy toward foreign investors, which in turn
could result in unilateral modification of concessions or contracts, increased
taxation, or expropriation of assets.
In October 2000, Peru's President, Alberto Fujimori, resigned as a result of
various revelations and accusations relating to his national security advisor
Vladimiro Montesinos. An interim government was appointed, and elections for a
new president and Congress were held in April 2001, with run-off elections for
the presidency held in June 2001. During the last two years, Minera Yanacocha,
a gold mine which Newmont owns, 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. New Newmont cannot predict whether these
incidents will continue, nor can it predict the new government's continuing
positions on foreign investment, mining concessions, land tenure, environmental
regulation or taxation.
WE INCUR COSTS TO COMPLY WITH ENVIRONMENTAL AND OTHER GOVERNMENTAL
REGULATIONS, AND REMEDIATION COSTS FOR FEDERAL SUPERFUND LAW LIABILITIES MAY
EXCEED THE PROVISIONS WE HAVE MADE.
We have conducted extensive remediation work at two inactive sites in the
U.S. as a result of liability under the U.S. Superfund Law. At one of these two
sites, remediation requirements have not been finally determined and the
ultimate cost cannot be estimated with certainty. At a third site in the U.S.,
an inactive uranium mine and mill formerly operated by a subsidiary of Newmont,
final remediation has not begun due to the failure to date of federal agencies
to agree on a remediation plan. Newmont disputes its liability for remediation
costs at this site. 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 Newmont's subsidiary has made for such remediation by
a material amount.
Whenever a previously unrecognized remediation claim becomes known or a
previously estimated cost is increased, that amount of additional cost is
expensed in the same period and this can materially reduce net income in that
period.
We also incur costs to comply with health and safety laws and regulations in
each country where we operate.
WE COULD HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS.
If we complete the acquisition of both Normandy and Franco-Nevada, our level
of indebtedness will increase. If we acquire Normandy and do not acquire
Franco-Nevada, the net debt level of New Newmont will be higher by
approximately US$517 million (after transaction costs) than if we had acquired
Franco-Nevada. This level of indebtedness could have important consequences on
our operations, including:
. we may need to use a large portion of the money we earn to repay
principal and pay interest on our debt, which will reduce the amount of
money available to finance our operations and other business activities;
. our debt level may make us more vulnerable to economic downturns and
adverse developments in our businesses and markets;
. our debt level may reduce our flexibility in responding to changing
business and economic conditions, including increased competition in our
industry; and
. our debt level may limit our ability to pursue other business
opportunities, borrow money for operations or capital in the future or
implement our business strategy.
32
We expect to obtain the money to pay our expenses and to pay principal and
interest on our debt from our cash flow and refinancings. Our ability to meet
these requirements will depend on our future financial performance, which will
be affected by financial, business, economic and other factors. We will not be
able to control many of these factors, such as economic conditions in the
markets in which we operate. We cannot be certain that our future cash flow
will be sufficient to allow us to pay principal and interest on our debt and
meet our other obligations. If we do not have enough money to do so, we may be
required to refinance all or part of our existing debt, sell assets or borrow
more money. We cannot assure you that we will be able to do so on commercially
reasonable terms, if at all.
OCCURRENCE OF EVENTS FOR WHICH WE ARE NOT INSURED MAY AFFECT OUR CASH FLOWS
AND OVERALL PROFITABILITY.
We maintain insurance to protect ourselves against certain risks related to
our operations. This insurance is maintained in amounts that are believed to be
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. Occurrence of events for which we are not insured may affect our cash
flows and overall profitability.
OUR BUSINESS DEPENDS ON GOOD RELATIONS WITH OUR EMPLOYEES.
We will have a significant number of employees subject to collective
bargaining agreements. New Newmont may experience difficulties in integrating
labor policies, practices and strategies. In addition, problems with or changes
affecting employees of one company may affect relations with employees of one
or both of the other companies. The process of combining our companies
increases the risk of labor disputes, work stoppages, or other disruptions in
production that could adversely affect the combined company.
THE EARNINGS OF NEW NEWMONT ALSO COULD BE AFFECTED BY THE PRICES FOR OTHER
COMMODITIES.
The revenues and earnings of New Newmont also could be affected, to a lesser
extent than by the price of gold, by the prices of other commodities such as
copper and zinc.
WE MAY NOT HAVE SATISFACTORY TITLE TO OUR PROPERTIES.
The validity and ownership of mining property holdings can be uncertain and
may be contested. Although we have attempted to acquire satisfactory title to
our properties, some risk exists that some titles, particularly titles to
undeveloped properties, may be defective. In addition, there are currently a
number of pending native title or traditional landowner claims relating to
certain of Normandy's properties in Australia.
33
4 REASONS FOR AND BACKGROUND TO THE TRANSACTIONS
The material in this section (other than that relating to Newmont) is based
on publicly available information about Normandy and information about Normandy
referred to in section 9 of this offer document, and public information about
Franco-Nevada.
4.1 REASONS FOR THE TRANSACTIONS
We are making the offer to facilitate the creation of what we believe will
be the premier global gold company. We have determined to pursue the
acquisition of each of Normandy and Franco-Nevada because we believe that the
enhanced benefits outlined below will arise from the combination of their
respective businesses with ours. Our offer for Normandy is not conditional on
the acquisition of Franco-Nevada, but the acquisition is conditioned upon,
among other things, our acquisition of a relevant interest in at least 50.1% of
Normandy ordinary shares on a fully-diluted basis. While we fully expect that
we will complete the acquisition of Franco-Nevada, it is possible that the
conditions to that acquisition will not be satisfied or waived. There can be no
assurance that we will be successful in completing the acquisition of
Franco-Nevada even if we acquire a relevant interest in at least 50.1% of
Normandy Shares. If we do not acquire Franco-Nevada, the expected benefits of
the transaction and their magnitude will be reduced; however, there would still
be benefits realized from a combination of Newmont and Normandy. This matter is
dealt with in item 4.2 of this section, which outlines the benefits that we
expect to result from the combination of Newmont and Normandy alone.
Our goals in pursuing each of these transactions are to:
(1) be the leading global gold investment vehicle, founded on a belief
in gold's intrinsic, long-term value and its relevance to a balanced
portfolio, and
(2) deliver consistent and superior shareholder returns.
To achieve these goals, New Newmont will draw on the complementary operating
and management skills of each of Newmont, Normandy and Franco-Nevada with the
intention of building a company with stable, profitable operations, a broad and
balanced portfolio of development opportunities, a strong balance sheet and
dedication to providing investors with the most leverage to a rising gold price.
We will provide New Newmont a global operating base, a record of successful
project development and a strong investor base focused on returns from gold.
Normandy will contribute a significant portfolio of development projects and a
solid operating platform that is complementary to our global operations.
Franco-Nevada will contribute a valuable portfolio of mineral royalties and
investments, a strong balance sheet and a management team with a successful
track record in resource merchant banking.
FORWARD-LOOKING STATEMENTS
We believe that the inclusion of financial forecasts would be unduly
speculative and potentially misleading for Normandy shareholders, particularly
due to the effect that variations in the price of gold and exchange rates may
have on future earnings performance. This uncertainty is exacerbated by the
current level of uncertainty surrounding the global economy and financial
markets generally.
In making this determination, we have taken into account the facts that
Newmont's, Normandy's and Franco-Nevada's shares have been listed on securities
exchanges around the world for some time and that international practice is not
to give forecasts of financial performance where there is uncertainty of
outcome.
The statements made in this offer document about the anticipated impact the
combination of Newmont, Normandy and Franco-Nevada, or Newmont and Normandy may
have on the combined results of operations, as well as the benefits expected to
result from the combination, are forward-looking statements. Newmont's
operations (and those of Normandy and Franco-Nevada) and financial performance
are subject to numerous risks.
34
As a result, New Newmont's actual results of operations and earnings, as well
as the actual benefits of the combination, may differ significantly from these
estimates in respect of timing, amount or nature and may be never achieved. For
a more detailed discussion of risks involving New Newmont that may affect
results of operations, earnings, and expected benefits of the combination, see
section 3, "Risk factors."
PRODUCTION AND RESERVES
New Newmont will be the industry leader in gold production and gold reserves:
New Newmont will have interests in 22 mines on five continents, including
preeminent land positions in world-class gold districts in Nevada, Australia
and Peru and a unique and diversified portfolio of development and exploration
projects.
New Newmont will have estimated combined 2001 production of 8.2 million
ounces (the largest in the industry by approximately 34%), including production
attributable to Franco-Nevada and Franco-Nevada's anticipated interest in Echo
Bay, a 52% increase over our estimated 2001 production of 5.4 million ounces.
Approximately 70% of the production (41% in the US, 25% in Australia and 5% in
Canada) will be in countries rated "AAA" by Standard & Poor's local currency
credit rating. Since 1996 we have reduced our cash costs of production from
US$220 per ounce to US$183 per ounce (as estimated for 2001).
New Newmont will have estimated combined reserves (based on latest public
filings) of 97 million ounces (the largest in the industry by approximately
23%), including reserves attributable to Franco-Nevada and Echo Bay, a 46%
increase over our reserves of 66.3 million ounces. Over 60% of New Newmont's
reserves (39% in the United States, 18% in Australia and 4% in Canada) will be
in countries rated "AAA" by Standard & Poor's local currency credit rating.
Approximately 300,000 ounces of 2001 production, and approximately 2.2
million ounces of reserves, are attributable to Franco-Nevada's anticipated
interest in Echo Bay. As detailed in section 7.1, "Information about New
Newmont--General description of New Newmont's operations--Investments" on page
81, Franco-Nevada's acquisition of an equity interest in Echo Bay is subject to
the approval of Echo Bay shareholders and is conditional on regulatory
approvals.
The size and diversification of these world-class assets and their balanced
political risk profile will better position New Newmont to develop its
attractive exploration properties around the world and will serve as an
excellent platform for future growth.
35
EXPLORATION AND DEVELOPMENT
New Newmont will have several advanced gold projects in its portfolio of
assets. It will have the flexibility to optimize the development of these
projects based on project economics, political risk and free cash flow profiles.
The following table sets out certain information with respect to New
Newmont's principal development projects:
% ESTIMATED EQUITY RESERVES
PROJECT LOCATION OWNERSHIP (MM/OZ)
------- -------- --------- -------------------------
Leeville Nevada, USA 100 3.0
Twin Creeks South Nevada, USA 100 1.9
Gold Quarry Expansion Nevada, USA 100 3.0
Phoenix Nevada, USA 100 6.0
Yanacocha Sulfides & covered oxides Peru, S.A. 51.35 (a)
Boddington Expansion Australia 44.4 4.9
Martabe Indonesia 90 (a)
Yamfo-Sefwi Ghana, Africa 90 3.3
Akim Ghana, Africa 80 (a)
-----
(a) Not included in Proven and Probable Reserves.
New Newmont would have a 2002 exploration and research budget of
approximately US$75 million. It is expected that approximately 70% would be
applied to near-mine and regional exploration in existing districts, plus work
on advanced exploration and development projects in Indonesia and West Africa,
and approximately 30% on the worldwide search for new reserve opportunities
outside current operating districts, acceleration of select programs having
positive results, and on metallurgical research, operational optimization
studies and project evaluation.
POTENTIAL COST SAVINGS AND SYNERGIES
New Newmont expects to realize from the combination of Newmont, Normandy and
Franco-Nevada approximately US$70 million to US$80 million in after-tax
synergies for the first full year, increasing to approximately US$80 million to
US$90 million a year by the second full year. Newmont has a strong track record
of delivering on synergy expectations based on previous acquisition experience.
RATIONALIZATION OF CORPORATE OVERHEAD AND EXPLORATION AND DEVELOPMENT
BUDGETS. New Newmont expects to generate significant savings by consolidating
various functions (including selected corporate services and establishment of a
global exploration team), eliminating redundant functions and prioritizing
exploration efforts across the worldwide portfolio. It is expected that an
estimated US$30 million of synergies will be realized through an estimated
US$10 million benefit from exploration and development synergies and a further
estimated US$20 million in general and administrative savings.
REALIZATION OF OPERATING EFFICIENCIES. New Newmont's mining operations will
benefit from the application of Newmont's Gold Medal Performance program, the
sharing of best operating practices across a large and diverse portfolio of
operations and eliminating duplicative activities. The Gold Medal Performance
program focuses on improving operating efficiencies, time management and
employee productivity, input and communication, and has been a key element in
Newmont's ability to reduce operating costs.
REDUCTIONS IN OPERATIONS/PROCUREMENT COSTS, INTEREST SAVINGS AND TAX
BENEFITS. New Newmont will realize approximately US$15-20 million benefits from
general operating improvements and from economies of scale in purchasing,
operating supplies and capital equipment along with savings from the operation
of mines in close proximity to Newmont's existing mines. New Newmont will
benefit from increased operating efficiencies and
36
increased economies of scale in managing global procurement of equipment and
operating supplies through centralized and coordinated purchasing, including
use of Newmont's electronic marketplace connection, utilization of global
supply agreements with key vendors, and sharing of surplus equipment among a
larger portfolio of operations.
The transactions will also allow a financial restructuring of New Newmont.
New Newmont will use its cash to repay current and maturing debt, resulting in
further interest savings. With a more modestly geared balance sheet and
substantially improved cash flows, the possibility exists for New Newmont to
improve, perhaps significantly, its credit rating thereby realizing savings in
financing costs.
We also expect that New Newmont will be able to achieve substantial tax
savings through the utilization of the tax attributes of each of Newmont,
Normandy and Franco-Nevada.
FINANCIAL STRENGTH AND FLEXIBILITY
Following the combination of Newmont, Normandy and Franco-Nevada, New
Newmont's net debt to net book capitalization will be an estimated 24%,
compared to approximately 41% for Newmont on a stand-alone basis.
New Newmont will benefit from the free cash flow generated by
Franco-Nevada's royalty stream and low cash cost operations that, together with
an improved balance sheet, will provide New Newmont with the ability to pursue
growth while continuing to reduce overall debt.
New Newmont will help manage financial risk by preserving and growing
Franco-Nevada's royalty business, which will serve as a natural hedge in the
event of a low gold price environment. New Newmont will also capitalize on the
investment skill and expertise of Franco-Nevada's management through a merchant
banking unit, which is expected to have the opportunity for growth by taking
advantage of our processing technologies and the New Newmont's vast land
package.
The size and scope of New Newmont's holdings and the strength of management
will afford a significant opportunity for strategic industry rationalization.
If 100% of Normandy is acquired New Newmont will review opportunities to
further rationalize its asset base through the consolidation of separately held
and managed assets and the sale or disposal of lower margin or non-core
operations.
LEVERAGE TO GOLD PRICE
We have a strong belief in the long-term value of gold. New Newmont intends
to continue Newmont's "no-hedging" philosophy, creating the gold industry's
largest unhedged, uncommitted reserve base of approximately 85 million ounces.
The largely unhedged reserve base will offer shareholders the opportunity to
benefit from New Newmont's substantial leverage to gold (although this strategy
also increases the exposure to a fall in the gold price). New Newmont's annual
pre-tax cash flow is estimated to increase by US$162 million for every US$25
per ounce increase in the price of gold (this is the largest exposure in the
industry by approximately 80%). Over time, New Newmont plans to
opportunistically unwind the current Normandy hedge book (currently at 10.4
million ounces, exclusive of TVX Normandy) to further its upside potential from
increases in the price of gold.
BOARD OF DIRECTORS AND MANAGEMENT
New Newmont's board of directors will initially consist of 17 members,
including the current 12 directors of Newmont, the two Co-Chief Executive
Officers of Franco-Nevada (Messrs. Seymour Schulich and Pierre Lassonde), one
additional nominee from the board of Franco-Nevada, and two nominees from the
board of Normandy. Mr. Champion de Crespigny willl be invited to fill one of
the Normandy positions.
Wayne W. Murdy will serve as Chairman and Chief Executive Officer of New
Newmont and Pierre Lassonde will serve as its President.
37
New Newmont's combined management expects to employ best practices and
personnel, focusing on core mining operations, reducing costs and applying the
latest innovations and technology to increase cash flows from operations and
effectively develop new opportunities. The combined management of the three
companies will bring an array of expertise and skills to the combined company,
such as:
. GLOBAL DEVELOPMENT. Newmont's and Normandy's strength in global
operations and mine development and Newmont's gold processing technology
skills.
. MERCHANT BANKING. Franco-Nevada's corporate development skills and
expertise in the management of royalty assets.
. MERGER INTEGRATION. Newmont's proven ability to successfully integrate
acquisitions and deliver synergies on schedule.
GROWTH
Newmont intends to use its experience in the discovery, evaluation,
development and operation of large, sophisticated mining operations to:
(1) Continually optimize returns from existing core operations.
(2) Pursue rational and effective development of Normandy's portfolio of
development projects.
(3) Enhance and grow its operations and project pipeline through
strategic and opportunistic high-quality asset and equity acquisitions, and
aggressive, worldwide exploration.
(4) Maintain a geographically and politically diverse group of mining
operations.
MARKET LIQUIDITY
New Newmont will have significant capital market scale, providing global
trading liquidity to investors. With an expected equity value of approximately
US$8 billion, and listings on the NYSE, the Swiss stock exchange and Euronext
Brussels and expected listings on the ASX and TSE, New Newmont investors will
benefit from enhanced trading volume, expected to be the largest in the gold
sector with approximately US$62 million in average daily trading volume (based
on historic trading of Newmont, Normandy and Franco-Nevada) and increased
stockholder diversity. New Newmont will also be a member of the S&P 500 index,
one of the world's leading trading indexes and will pursue inclusion in key ASX
indices as well.
4.2 EFFECT OF A TRANSACTION WITHOUT FRANCO-NEVADA
While Newmont believes that it will complete the acquisition of
Franco-Nevada, it is possible that the conditions to that acquisition will not
be satisfied. Consequently, it is possible that we may succeed in acquiring
Normandy but fail to acquire Franco-Nevada.
Although the inability to acquire Franco-Nevada will prevent New Newmont
from realizing all of the benefits that would arise from a combination of the
three companies as described above, New Newmont would still expect to achieve
benefits from the combination of Newmont and Normandy alone. New Newmont would
be the premier unhedged gold investment vehicle.
COMBINED PRODUCTION AND RESERVE ESTIMATES WOULD NOT BE MATERIALLY DIFFERENT
A combination of Newmont and Normandy alone would not result in material
changes to the production and reserve figures set forth in section 7.1. New
Newmont would still have had estimated combined 2001 production of 7.9 million
ounces (the largest in the industry) and estimated combined reserves (based on
latest public filings) of 92.7 million ounces (again, the largest in the
industry), based on latest public filings.
New Newmont would still have 22 mines on five continents and the industry's
largest land package. The absence of Franco-Nevada would not affect the balance
of the new company's political risk profile, with
38
approximately 70% of combined production and approximately 60% of its combined
reserves in countries rated "AAA" by Standard & Poors local currency credit
rating.
New Newmont also would expect to be a low cash cost producer. For the twelve
months ended September 30, 2001, the combined average cash cost of production
would have been US$173 per ounce.
STRONG MANAGEMENT
If the Normandy transaction is completed but the Franco-Nevada transaction
is not, the board of directors initially will consist of 14 members, including
the current 12 directors of Newmont, and two nominees from Normandy. Mr.
Champion de Crespigny will be invited to fill one of the Normandy positions.
Wayne W. Murdy will serve as Chairman, President and Chief Executive Officer
of the company.
New Newmont would still draw on the complementary operating and management
skills of the two companies to build an integrated enterprise based on stable,
profitable operations, a broad and balanced portfolio of investment
opportunities, a sustainable balance sheet and dedication to providing
investors with the most leverage to a rising gold price. Newmont's track record
of exploration success, technical expertise and project development matches
well with Normandy's success in identifying and operating properties in the
region, and the combined enterprise will benefit from the sharing of best
practices and knowledge among the two companies.
MARKET LIQUIDITY
New Newmont would still have significant capital market scale, and would
still provide global trading liquidity for investors. With an expected market
equity value of approximately US$5.6 billion, and listings on the NYSE, ASX,
the TSE, the Swiss stock exchange and Euronext Brussels, investors in New
Newmont would still benefit from enhanced trading volume and increased
stockholder diversity. New Newmont would also be a member of the S&P 500 index
and would pursue inclusion in key ASX indices.
CAPITAL STRUCTURE AND FINANCIAL FLEXIBILITY
New Newmont would have a ratio of net debt to book capitalization of an
estimated 40% compared to approximately 41% for Newmont on a stand-alone basis.
Absent the acquisition of Franco-Nevada, New Newmont would not have the benefit
of Franco-Nevada's royalty income stream or cash balance and would have a
substantial amount of debt. It is unlikely, without Franco-Nevada, that New
Newmont would be able to pursue its growth objectives as aggressively, or be
able to immediately improve its credit rating to the same extent as if both
Normandy and Franco-Nevada are acquired.
We expect that New Newmont would focus on improving its financial strength
and flexibility by taking advantage of the new company's scale, broad project
portfolio and global operating experience to reduce its cash costs of
production and increase free cash flow from operations. It also would focus
attention on rationalizing its asset base and disposing of non-core assets.
Cash raised as part of that process and from operations would be used to
further reduce the debt of New Newmont.
POTENTIAL COST SAVINGS AND SYNERGIES
Synergies with respect to the rationalization of corporate overhead and
exploration and development budgets, operating efficiencies and reductions in
procurement costs would remain largely unaffected by the absence of
Franco-Nevada. The ability of a combined Newmont/Normandy to repay debt and
realize interest savings would be significantly reduced. Further, most of the
tax savings could not be achieved, as most of the tax synergies are
attributable to the combination of the three companies.
New Newmont would expect to realize approximately US$40 million to US$45
million in after tax synergies in the first full year, increasing to US$45
million to US$50 million a year by the end of the second full
39
year. The synergies will come primarily from rationalization of corporate
overhead and exploration and development budgets, rationalization of operating
efficiencies and reductions in procurement costs. Again, Newmont has a strong
track record of delivering on synergies.
LEVERAGE TO GOLD PRICE
The absence of Franco-Nevada would not change Newmont's belief in the
long-term value of gold or its desire to continue Newmont's "no-hedging"
philosophy. Without Franco-Nevada, New Newmont would still have the industry's
largest unhedged reserve base of approximately 83 million ounces, and it would
still propose to opportunistically unwind Normandy's hedge book over time,
giving shareholders the same opportunity to benefit from the company's
substantial leverage to gold.
4.3 BACKGROUND TO THE TRANSACTIONS
From time-to-time in recent years, Newmont has considered acquisitions of
other gold mining companies as opportunities in the industry presented
themselves. In January 2001, Newmont completed its acquisition of Battle
Mountain Gold Company in a stock-for-stock merger involving the issuance of
Newmont common shares in a transaction accounted for as a pooling of interests
for financial reporting purposes. As a result of this merger, Newmont acquired
Australian operations.
In the ordinary course of business, Newmont, Franco-Nevada and Normandy
attend industry conferences where members of senior management will
occasionally discuss strategic opportunities potentially available in the
industry. Newmont and Franco-Nevada had a limited business relationship
(related primarily to Franco-Nevada's royalty interests in Newmont's Deep Post
and Deep Star properties) prior to entering into discussions regarding the
transactions; Newmont had contact with Franco-Nevada pertaining to royalties
held by Franco-Nevada on some of Newmont's peripheral lands in the Carlin
trend. Newmont and Normandy also had limited prior business relationships,
primarily related to the Pajingo joint venture.
In May 2001, at a gold mining conference in Ireland, members of senior
management of Franco-Nevada and Newmont met and discussed the general state of
the gold mining industry and general corporate philosophy, including hedging
philosophies and approaches. There were no discussions at the conference
regarding a possible business combination involving the two companies or
Normandy.
In June and July 2001, senior management of Newmont and Franco-Nevada had
several conversations concerning the general state of the industry.
In late August 2001, Mr. Wayne W. Murdy, Newmont's Chief Executive Officer
and President, received a call from Mr. Pierre Lassonde, Franco-Nevada's
President and Co-Chief Executive Officer, suggesting a meeting to discuss a
potential business opportunity that Franco-Nevada was then working on. This
meeting concerned an exploratory discussion of possible Nevada operating
synergies that might result from Franco-Nevada's investment in Echo Bay Mines.
On September 5, 2001, AngloGold Limited, a South African mining company,
announced its intention to make an offer to acquire all of the issued Normandy
shares on the basis of 2.15 AngloGold shares for each 100 Normandy shares,
subject to a minimum of 50.1% of the Normandy Shares, calculated on a
fully-diluted basis, being deposited in acceptance into AngloGold's bid and
other conditions. The AngloGold bid was announced without prior consultation
with Franco-Nevada which, together with its subsidiary Franco-Nevada Mining
Corporation, Inc., owns approximately 19.79% of the Normandy shares issued and
outstanding on a fully diluted basis.
On September 6, 2001, Mr. Murdy had a discussion with the Co-Chief Executive
Officers of Franco-Nevada, where the decision was made to schedule a meeting
for September 11, 2001 to discuss in general terms the possibility of a
transaction involving Newmont, Normandy and Franco-Nevada. Several members of
Newmont's management were planning to go to Toronto on September 11, 2001, to
meet with Franco-Nevada's
40
Co-Chief Executive Officers. As a result of the terrorist acts in New York City
and Washington, D.C. on September 11, this meeting did not take place. Between
September 11 and September 20, Mr. Murdy and Mr. Lassonde had several
conversations concerning the possibility of a three-way transaction as well as
the impact on the industry of the events that took place on September 11, 2001.
Mr. Murdy and Mr. Lassonde spoke on September 20 and, in that conversation,
Mr. Lassonde expressed his frustration with the "move" that AngloGold had made
on Normandy and his belief that there was substantial upside to the Normandy
asset portfolio, which Franco-Nevada had hoped to participate in bringing to
all Normandy shareholders.
In September 2001, National Bank Financial began providing advice to
Franco-Nevada with respect to a possible transaction with Newmont. On October
1, 2001, Franco-Nevada formally engaged National Bank Financial to act as its
financial advisor in connection with a possible transaction with Newmont. In
addition, CIBC World Markets was engaged as a special advisor to Franco-Nevada
with respect to due diligence relating to Newmont.
In September 2001, Newmont contacted J.P. Morgan for assistance in analyzing
the potential acquisition of Normandy and, possibly, Franco-Nevada.
Subsequently, Newmont entered into an engagement letter with J.P. Morgan as its
financial advisor; Goldman Sachs & Co. also was retained by Newmont as its
financial advisor.
On September 25, 2001, two senior executives of Newmont spoke with
Franco-Nevada's Co-Chief Executive Officers about the relative position of each
company in the industry, their shared belief in the value of gold and the
responsibility of gold executives to deliver value to shareholders. They also
spoke about the potential to "unlock value" through industry rationalisation
and consolidation. On September 25, 2001, Newmont and Franco-Nevada entered
into a mutual confidentiality agreement and the two companies began to exchange
due diligence information. In the case of Franco-Nevada, the information
exchanged did not include information Franco-Nevada had obtained concerning
Normandy in connection with the transaction by which Franco-Nevada had become a
substantial Normandy shareholder.
On September 26, 2001, representatives of AngloGold met in Toronto with
senior management of Franco-Nevada concerning AngloGold's bid for Normandy.
On September 28, 2001, four senior Newmont executives had a lengthy
conversation with senior representatives of Franco-Nevada about Franco-Nevada's
business plans, Normandy (in very general terms), Franco-Nevada's plans for
Echo Bay, industry rationalization and the potential for value creation, as
well as perceptions of relative asset values among Franco-Nevada and Newmont.
On September 30, 2001, Mr. Murdy had a meeting with Mr. Seymour Schulich,
Co-Chief Executive Officer of Franco-Nevada, where the possibility of a
transaction was discussed, as well as possible approaches to Normandy.
At the beginning of October 2001, representatives of Newmont, Franco-Nevada
and Normandy attended the Mining Investment Forum (an annual conference for
gold investors held in Denver, Colorado) during which the various meetings and
discussions described below occurred.
On October 1, 2001, as a follow-up to the September 30th discussions,
Newmont senior executives met with Franco-Nevada's Co-Chief Executive Officers,
at which meeting Messrs. Schulich and Lassonde provided Newmont certain
materials prepared by Franco-Nevada's investment banker, National Bank
Financial, which described the merits of a possible three-way transaction
involving Newmont, Normandy and Franco-Nevada. The executives also discussed
different potential strategies to approach Normandy.
41
Also on October 1, 2001, representatives of Newmont met with Mr. Robert
Champion de Crespigny, Normandy's Chairman and Chief Executive Officer, in
Denver. The meeting was arranged by Newmont at the request of representatives
of Franco-Nevada. Prior to this meeting, Normandy was not made aware of the
proposed September 11th meeting or of any of the subsequent meetings and
conversations involving Franco-Nevada and Newmont prior to the October 1st
meeting. Mr. Murdy began the October 1st meeting by stating that Newmont was
interested in exploring the possibility of a three-way transaction involving
Newmont, Normandy and Franco-Nevada. At that meeting, Mr. Champion de Crespigny
indicated that while the AngloGold bid represented a premium to Normandy's
currently depressed stock price, it was his preliminary view that it did not
reflect Normandy's fair value if compared with the value offered by Barrick
Gold Corporation for Homestake Mining Company (the most recent comparable
transaction, in his view). He further indicated that Normandy's board had not
yet made any recommendation to Normandy shareholders with respect to the
AngloGold bid. Mr. Champion de Crespigny indicated that Normandy's board would
honor its fiduciary responsibilities should another qualified bidder express an
interest in Normandy, but the board was not then soliciting other bids, nor was
it then prepared to permit due diligence.
On October 2, 2001, Mr. Murdy and Mr. W. Durand Eppler, head of Newmont's
corporate development group, again met with Normandy's Chief Executive Officer.
During this meeting, they described Newmont's desire to be the industry leader.
They expressed a potential interest in pursuing a transaction with Normandy,
but made it clear that Newmont was not making an offer and that Newmont would
only consider making an offer if it had the opportunity to undertake due
diligence. No decisions were reached at the conclusion of the meeting but Mr.
Champion de Crespigny emphasized that any Newmont proposal would need to be at
a substantial premium to the current AngloGold bid and provided an indicative
pricing hurdle that any Newmont proposal would need to pass. In a separate
meeting with Mr. Lassonde, Newmont was advised that a bid for Normandy would
have to be at a substantial premium to the AngloGold offer before the board of
directors of Franco-Nevada would have an interest in pursuing a transaction
involving its shares in Normandy.
On October 3rd and October 4th (following Newmont's understanding of Mr.
Champion de Crespigny's positions as raised at the October 2nd meeting),
members of the senior management of Newmont, Franco-Nevada and Normandy engaged
in preliminary discussions regarding a possible combination of the three
companies and how that transaction could be structured. During these
discussions, representatives of Franco-Nevada and Newmont also addressed the
advantages and general terms of a potential transaction between Franco-Nevada
and Newmont and between Normandy and Newmont. Newmont indicated that it was not
prepared to consider a transaction that was not structured as an acquisition by
Newmont of Normandy and Franco-Nevada, and Newmont indicated a strong desire
for an all stock transaction. In addition, Newmont noted that as part of any
transaction involving Newmont and Normandy, Newmont would require a binding
commitment with respect to Franco-Nevada's shares in Normandy as well as a
recommendation from the Normandy board regarding the proposed transaction. As a
result of these discussions, Newmont determined that it would have to undertake
a due diligence investigation of Franco-Nevada before it would be prepared to
consider a transaction that would involve all three companies.
During the week of October 8th, Newmont and Franco-Nevada commenced their
respective due diligence investigations of each other. At that time, Newmont
undertook due diligence in Reno and Toronto but was not provided with access to
the due diligence that Franco-Nevada had done in connection with its investment
in Normandy. In addition, representatives of Franco-Nevada and National Bank
Financial met with Newmont management and representatives from JP Morgan to
conduct due diligence on Newmont. Due diligence continued through the week of
October 15th and thereafter.
Also during the week of October 8th, representatives of Normandy met in
Denver with representatives of Newmont and assisted Newmont in better
understanding Normandy, its business and its operations.
On October 12, 2001, members of Newmont's and Franco-Nevada's senior
management, together with financial advisors from National Bank Financial and
JP Morgan, met in Toronto to discuss further a possible
42
transaction between Newmont and Franco-Nevada in the context of an acquisition
of Normandy by Newmont. At this meeting, Newmont indicated its preliminary
views with respect to a possible range of exchange ratios for Franco-Nevada and
noted that Newmont was not prepared to consider a transaction involving
Normandy and Franco-Nevada that would result in more than 50% share dilution
for Newmont. At this meeting, no indication was given to Franco-Nevada of
Newmont's transaction or bidding strategy for Normandy. On the basis of these
meetings, the parties determined to continue discussions and to develop more
specific terms for the proposed business combination.
Late in the week of October 15, 2001, Franco-Nevada senior management met
with representatives of Newmont in Denver to discuss due diligence, integration
and employment issues in connection with a possible transaction. During these
meetings, Newmont explored the commitment of Franco-Nevada's management to a
possible transaction. Representatives of Franco-Nevada continued their due
diligence investigation of Newmont and Franco-Nevada retained CIBC World
Markets to assist Franco-Nevada in its ongoing due diligence investigation of
Newmont.
On October 17th, outside counsel to Newmont provided internal counsel to
Normandy a draft form of mutual confidentiality agreement, which was dated
October 18th and was discussed by the parties on October 18th and 19th.
On October 19th, Newmont's board of directors was briefed regarding the
possibility of a transaction and determined that it was appropriate for
management to continue discussions with Franco-Nevada and initiate further
discussions with Normandy. Following the board meeting, Mr. Murdy contacted Mr.
Champion de Crespigny to advise him of the outcome of the Newmont board meeting
and to outline preliminary views regarding transaction structure, relative
values and the terms on which Newmont might be prepared to pursue a transaction
for Normandy. Mr. Murdy indicated Newmont's willingness to pursue a potential
transaction that would offer Normandy shareholders a significant premium to the
offer from AngloGold, provided that Newmont was given the opportunity to
conduct due diligence on Normandy and that due diligence confirmed Newmont's
preliminary views on value. Following these conversations, the parties executed
a mutual confidentiality agreement dated October 18, 2001, that had previously
been provided to Normandy by Newmont and previously been discussed between the
parties.
On October 22, 2001, the board of directors of Franco-Nevada engaged in a
lengthy discussion as to the potential merits of a business combination with
Newmont and Normandy and received the preliminary results of management's due
diligence investigation and other input from National Bank Financial.
Newmont's due diligence team for Normandy began work in Australia on October
22, 2001 and continued working through mid-November. On October 31, 2001
members of Newmont's senior management, together with financial and legal
advisors met with representatives of Normandy, Macquarie Bank and Allens,
Arthur Robinson (Normandy's financial and legal advisers engaged in connection
with the AngloGold bid and whose engagements had been extended to encompass the
possible Newmont bid), to discuss prerequisites to Newmont making a bid for
Normandy. Later that day, Mr. Murdy met with the outside directors of the board
of Normandy on an informal basis. In addition, members of Newmont's senior
management engaged in discussions with members of Normandy's management team.
On November 6, 2001, representatives of senior management of Franco-Nevada
and Newmont, together with their respective financial advisors and Newmont's
U.S. and Canadian counsel, met in Denver in an effort to negotiate significant
business issues and begin the process of drafting definitive documentation.
These discussions continued in New York through to the execution of definitive
documentation.
The Newmont board of directors met on November 9, 2001 to be briefed on the
status of the potential transactions. The Newmont board authorized management
to continue to pursue the potential transactions with Normandy and
Franco-Nevada. Following these discussions, the parties continued to work on
the terms of
43
definitive agreements for Newmont and Franco-Nevada that would provide for an
exchange ratio of 0.80 shares of Newmont common stock for each share of
Franco-Nevada. Newmont and Franco-Nevada also began negotiations of the terms
of the lock-up agreement with respect to Franco-Nevada's shares in Normandy and
Newmont began negotiating agreements with Messrs. Schulich and Lassonde with
respect to their shares in Franco-Nevada. These negotiations continued until
the execution of definitive agreements.
On November 12, 2001, the board of directors of Franco-Nevada received
presentations from senior management and from its financial advisors as to the
results of the due diligence examination of Newmont, a presentation from senior
management on the results of the negotiation of the Arrangement Agreement, a
presentation from National Bank Financial and reviewed the terms and conditions
of the Arrangement Agreement. Following discussion by the board of directors,
those directors who are management of Franco-Nevada (Seymour Schulich, Pierre
Lassonde and M. Craig Haase) withdrew from the meeting. The board of directors
of Franco-Nevada then voted to approve the proposed transactions with Newmont,
subject to satisfactory completion of the definitive agreements.
Also on November 12, 2001, the Newmont board of directors met in New York to
consider the proposed transactions. At this meeting, the Newmont board was
advised of the results of Newmont's due diligence investigation of
Franco-Nevada and Normandy. Newmont's financial and legal advisors also
participated in the meeting. At the conclusion of this meeting, the Newmont
board authorized senior management to make a proposal to Normandy that Mr.
Murdy communicated to Mr. Champion de Crespigny on behalf of the Normandy board
of directors. Normandy was informed that Newmont would only proceed with a
transaction if the Normandy board agreed to recommend the transaction and if
Normandy would enter into a Deed of Undertakings which would provide for a
customary "break" fee payable upon the occurrence of certain specified events,
as well as a security bond with respect to the break fee. Following discussions
with members of the Normandy board of directors, Mr. Champion de Crespigny
informed Mr. Murdy that Newmont's proposal would not be sufficient to receive
the support and recommendation of the Normandy board of directors.
Beginning around November 8, 2001, first drafts of the Deed of Undertaking
were presented to Normandy and its legal advisers to consider and negotiate in
anticipation of Newmont making a formal proposal to Normandy. Over the next
four days there was considerable intense negotiation over the terms of the Deed
of Undertaking and particularly the break fee which culminated in the
negotiation of the Second Deed of Undertaking to be entered into if Newmont
came forward with a proposal acceptable to Normandy's board.
On November 13, the Newmont board of directors again met in New York and
authorized Mr. Murdy to make a new proposal to Normandy. Subject to the
Normandy board agreeing to support the transaction and agree to Newmont's
terms, the Newmont board of directors authorized the transactions and the
related agreements, including the Deed of Undertaking and the Second Deed of
Undertaking with Normandy, the Arrangement Agreement, the Normandy Lock-up
Agreement, the lock-up agreements and escrow agreements with Messrs. Lassonde
and Schulich, as well as related agreements and other related matters.
Negotiations between Newmont and Normandy with respect to the Normandy Deeds
of Undertaking continued throughout November 13, 2001, New York time. As a
result of these negotiations, Newmont proposed an exchange ratio of 0.0385
shares of Newmont common stock plus a payment of an additional A$0.05 per share
if Newmont received acceptances for at least 90% of the Normandy shares and a
necessary ASIC modification. The Normandy board of directors then met to
consider the proposed transaction. Subject to their fiduciary duties, the
Normandy board of directors approved and agreed to recommend that Normandy
shareholders accept Newmont's offer and reject the offer from AngloGold. The
terms of the transactions were publicly announced in a joint press release
issued in New York on Wednesday, November 14, 2001, prior to the opening of
trading on the Toronto and New York Stock Exchanges. The transaction was
announced concurrently by Normandy in Australia at approximately 10:30 p.m. on
November 14, 2001 (resulting in Normandy's announcement being made available in
Australia before the opening of trading on November 15, 2001).
44
Although the board of directors of Normandy agreed to recommend, subject to
its fiduciary duties, that Normandy shareholders accept Newmont's offer,
Normandy, despite repeated requests from Newmont, which were received in late
December, has declined to supply certain information to Newmont that would
generally be required to be included in this offer document under rules
promulgated by the SEC. See Section 3.1 "Risk factors--Risks related to the
Offer--Although Normandy has recommended the Newmont offer, it has declined to
provide Newmont with financial information that Newmont has requested for
inclusion in this document" and "--We have not verified the reliability of the
Normandy information included in, or which may have been omitted from, this
offer document" on page 27.
On November 19, 2001, Normandy released its target statement in response to
the AngloGold offer. Normandy's target statement details reasons why Normandy
shareholders should reject the AngloGold offer and includes an Independent
Experts Report by Grant Samuel. This document may be obtained from Normandy.
On November 29, 2001, AngloGold announced that it was increasing its offer
by adding a cash payment of A$0.20 per share (subject to AngloGold shareholder
approval) and declared that its offer was free of defeating conditions. In
response to the revised AngloGold bid, Newmont advised Mr. Champion de
Crespigny by telephone and issued a press release saying it was reviewing the
revised AngloGold offer and that Newmont would respond in due course.
Following the announcement by AngloGold on November 29, 2001, Newmont
updated Franco-Nevada regarding Newmont's proposed acquisition of Normandy as
the acquisition of Franco-Nevada is conditional upon (among other things)
Newmont acquiring a relevant interest in at least 50.1% of the Normandy Shares,
calculated on a fully-diluted basis, although no approval by Franco-Nevada was
required for Newmont to increase its bid for Normandy.
On December 3, 2001, Normandy issued a press release stating, among other
things: "Given the interest in Normandy from two bidders and the extension of
AngloGold's offer period, the Normandy board believes it is premature for it to
make any recommendation on whether or not to accept the revised AngloGold offer
at this time." Normandy advised its shareholders that they should do nothing
until they received a formal recommendation from the Normandy board, which they
indicated would be issued no later than December 13, 2001.
At a board meeting held on December 3, 2001, the Normandy board of directors
asked Mr. Champion de Crespigny to offer to meet with both Mr. Murdy and
AngloGold's Chief Executive Officer over the next few days. As a result, on
December 4, 2001 and again on December 6, 2001, Mr. Murdy met with Mr. Champion
de Crespigny in Denver to discuss the circumstances involving Normandy and the
revised AngloGold bid, as well as Mr. Champion de Crespigny's views with
respect to a possible response by Newmont. On December 5, 2001, Mr. Champion de
Crespigny met with the Chief Executive Officer of AngloGold in New York.
On Friday, December 7, 2001, the Newmont board of directors met to review
the situation and authorized Newmont management to increase its bid for
Normandy by A$0.35 in cash, subject to a recommendation by the Normandy board
of directors of the revised bid. Also on December 7, 2001, the board of
directors of Franco-Nevada met and indicated that they would support an
increase by Newmont in its bid for Normandy, although no approval by the
Franco-Nevada board was required for Newmont to proceed with its revised bid.
On December 8, 2001, Mr. Murdy telephoned Mr. Champion de Crespigny to indicate
that Newmont would be prepared to revise its bid for Normandy if such revised
bid would receive the recommendation of the Normandy board of directors.
On December 9, 2001, in Australia, representatives of Newmont and Normandy
negotiated the terms of the Third Deed of Undertaking and on December 10, 2001,
the Normandy board of directors approved the revised transaction and the Third
Deed of Undertaking was executed. Newmont's revised bid of 0.0385 Newmont
common shares plus A$0.40 in cash for each Normandy share was publicly
announced on December 10, 2001 in Australia. Payment by Newmont of the cash
consideration was no longer conditioned upon achievement of 90%
45
acceptance by the Normandy shareholders. Subject to their fiduciary duties, the
Normandy board of directors approved and agreed to recommend that Normandy
shareholders accept Newmont's revised offer and therefore reject the revised
offer from AngloGold.
Although the board of directors of Normandy agreed to recommend, subject to
its fiduciary duties, that Normandy shareholders accept Newmont's revised
offer, Normandy, despite repeated requests from Newmont, which were received in
late December, has declined to supply certain information to Newmont that would
generally be required to be included in this offer document under rules
promulgated by the SEC. See Section 3.1 "Risk factors--Risks related to the
Offer--Although Normandy has recommended the Newmont offer, it has declined to
provide Newmont with financial information that Newmont has requested for
inclusion in this document" and "--We have not verified the reliability of the
Normandy information included in, or which may have been omitted from, this
offer document" on page 27.
On December 13, 2001, Normandy released its supplementary target statement
in response to the revised AngloGold offer. Normandy's supplementary target
statement details reasons why Normandy shareholders should reject the revised
AngloGold offer and includes an analysis of the risks of the revised AngloGold
offer and the proposed Newmont offer. This document may be obtained from
Normandy.
On December 19, 2001, at a general meeting of AngloGold shareholders held in
Johannesburg, there was a 99.7% vote to approve the increased offer for
Normandy that AngloGold had announced on November 29, 2001.
On December 20, 2001, Newmont lodged its bidder's statement with Normandy,
the Australia Securities and Investment Commission and the ASX, and on December
21, 2001, Newmont announced that its bidder's statement had been dispatched to
Normandy shareholders outside the United States and Canada.
On December 21, 2001, Newmont filed its Registration Statement on Form S-4
relating to the Normandy offer with the SEC.
On December 26, 2001, Newmont filed its preliminary proxy statement with the
SEC.
On December 27, 2001 AngloGold announced that it had increased its offer for
Normandy by an additional A$0.10 per Normandy share following discussions
regarding "possible patterns of cooperation" with Barrick. The closing date for
AngloGold's offer was extended from December 27, 2001 to January 11, 2002. In
this announcement, AngloGold stated that if it acquired Normandy, it intended
to offer the management of the Kalgoorlie Super Pit in Australia to Barrick and
to offer Barrick participation in the Boddington Expansion Project.
On December 27, 2001, Franco-Nevada obtained the requisite interim order
from the Ontario Superior Court approving, among other things, calling the
Franco-Nevada shareholders meeting to be held on January 30, 2002 in connection
with the plan of arrangement. On December 27, 2001, Franco-Nevada dispatched
its Management Information Circular relating to that shareholders meeting to
its shareholders.
On December 31, 2001, following earlier written requests on December 17 and
December 11, 2001, Newmont wrote to Normandy requesting certain financial
information that Newmont was required to include in its Registration Statement
on Form S-4, pursuant to Rule 409 under the Securities Act of 1933, as amended.
In particular, Newmont requested a reconciliation of Normandy's financial
statements with US GAAP as well as the consent of Normandy's independent
accountants. On January 2, 2002, Normandy declined in writing to provide this
information, as it had done previously in a letter dated December 19, 2001. See
Section 3.1 "Risk factors--Risks related to the Offer--Although Normandy has
recommended the Newmont offer, it has declined to provide Newmont with
financial information that Newmont has requested for inclusion in this
document" and "--We have not verified the reliability of the Normandy
information included in, or which may have been omitted from, this offer
document" on page 27.
On January 2, 2002, Newmont announced that it was increasing the cash
consideration of its offer for Normandy by A$0.10 per share to A$0.50 per
share. On the same date, the Normandy board of directors, subject to its
fiduciary duties, re-affirmed its recommendation of the Newmont offer, as
revised, and its recommendation
46
that Normandy shareholders reject the AngloGold offer. In a Normandy press
release announcing the board's recommendation of the revised offer, Mr.
Champion de Crespigny noted that "the Newmont bid provides a significantly
larger cash component" and concluded that:
Considering the values of the two bids, as well as other factors such as
trading liquidity and the long-term potential and value creation associated
with Newmont and AngloGold implementing their plans after completion of the
transactions including, in Newmont's case, the acquisition of Franco-Nevada,
the revised Newmont bid continues to be superior to the offer by AngloGold
and has the full support of Normandy's board.
In continuing to recommend Newmont's revised offer, the Normandy board of
directors took into account the fact that on January 2, 2002, the implied value
of the Newmont offer exceeded the implied value of the AngloGold offer by a
"substantial margin" of 12 cents per share; that the implied value of the
revised Newmont offer had exceeded the implied value of the AngloGold offer
throughout the last 12 months; that the revised Newmont offer includes 67% more
cash per share than the AngloGold offer; and that Newmont has announced
positive progress toward obtaining the regulatory and shareholder approvals on
which its offer is conditioned.
Although the board of directors of Normandy agreed to recommend, subject to
its fiduciary duties, that Normandy shareholders accept Newmont's revised
offer, Normandy, despite repeated requests from Newmont, which were received in
late December, has declined to supply certain information to Newmont that would
generally be required to be included in this offer document under rules
promulgated by the SEC. See Section 3.1 "Risk factors--Risks related to the
Offer--Although Normandy has recommended the Newmont offer, it has declined to
provide Newmont with financial information that Newmont has requested for
inclusion in this document" and "--We have not verified the reliability of the
Normandy information included in, or which may have been omitted from, this
offer document" on page 27.
In connection with Newmont's bid for Normandy, AngloGold has made a number
of applications to the Australia Takeovers Panel, none of which have prevailed
to date.
47
5 TERMS OF THE OFFER
5.1 OUR OFFER
(a) We offer, upon the terms and subject to the conditions of the offer,
to acquire all of your ordinary shares of Normandy (including shares
represented by Normandy ADSs).
The consideration offered is 3.85 shares of our common stock for every
100 ordinary shares of Normandy (including shares represented by Normandy
ADSs). In addition, we will pay in cash an additional A$0.50 for each of
your ordinary shares of Normandy (including shares represented by Normandy
ADSs), or the U.S. dollar equivalent thereof for holders outside Australia.
(b) If you have a registered address in the Normandy shareholder register
in the United States or Canada, you will receive your share consideration in
the form of our common stock (to be traded primarily on the NYSE). If you
have a registered address in the Normandy shareholder register outside the
United States and Canada, you will be offered your share consideration in
the form of Newmont CDIs (to be traded on the ASX). We anticipate that ten
Newmont CDIs will represent one share of Newmont common stock.
If you have a registered address in the Normandy shareholder register
outside Australia and its external territories, and Newmont has not
determined that the making or accepting of the offer would be in compliance
with the laws of that jurisdiction, you will not receive or be entitled to
receive Newmont CDIs. Instead, you are offered and you will receive the cash
proceeds of a sale, on Newmont's behalf, on the open market of Newmont CDIs
to which you otherwise would have been entitled.
Whatever form of share consideration you receive, it will be equivalent
to 3.85 shares of our common stock for every 100 of your ordinary shares of
Normandy (including shares represented by Normandy ADSs).
In addition, whatever form of share consideration you receive, you will
also receive in cash A$0.50 for each of your ordinary shares of Normandy
(including shares represented by Normandy ADSs), or the U.S. dollar
equivalent thereof for holders outside Australia.
If your registered address on the Normandy shareholder register or
Normandy ADS register maintained by Normandy's depositary is within
Australia, you will receive your cash consideration in Australian dollars.
If your registered address on the Normandy shareholder register or Normandy
ADS register maintained by Normandy's depositary is within any other
jurisdiction (including the United States and Canada), you will receive your
cash consideration in U.S. dollars. If you are to receive payment in U.S.
dollars, we will convert the Australian dollar sum into U.S. dollars using
the noon buying rate, as published by the Federal Reserve Bank of New York,
on the date payment is made to you.
Payment of the cash consideration will be made by check posted to you at
your risk by ordinary mail at the address provided on your Acceptance Form
or ADS Letter of Transmittal.
You may receive only one form of share consideration with respect to your
ordinary shares of Normandy (including shares represented by Normandy ADSs)
as to which the offer has been accepted.
Under no circumstances will interest be paid on your cash consideration,
regardless of any delay in remitting such consideration to you.
Further details about this can be found in section 5.11, "--Payment of
consideration" on page 61.
(c) If you hold ordinary shares of Normandy other than in multiples of
100 ordinary shares of Normandy (or the equivalent represented by Normandy
ADSs), you can still accept the offer and you will be
48
entitled to (1) a pro rata entitlement to Newmont shares (in the form of
shares of our common stock or Newmont CDIs) based on the ratio of 3.85
shares of our common stock for every 100 of your ordinary shares of Normandy
(or the equivalent represented by Normandy ADSs) and (2) cash of A$0.50 for
each of your ordinary shares of Normandy (including shares represented by
Normandy ADSs), or the U.S. dollar equivalent thereof for holders outside
Australia. In either case, you will be subject to section 5.1(d) below with
respect to the treatment of fractional shares of our common stock or
fractional Newmont CDIs.
(d) We will not issue fractional shares of our common stock or fractional
Newmont CDIs to you, regardless of the form of consideration you receive. If
under the offer you become entitled to a fraction of a share of our common
stock or a fraction of a Newmont CDI, (after aggregating all of your
holdings of ordinary shares of Normandy, or ordinary shares of Normandy
represented by Normandy ADSs) your entitlement to that fraction will be
aggregated with the fractional shares of our common stock or fractional
Newmont CDIs, as the case may be, of other persons (so as to obtain whole
shares of our common stock or whole Newmont CDIs, as the case may be) and
sold on the open market in accordance with section 5.11, and you will
receive your proportionate share of the net sale proceeds of your fractional
shares of our common stock or fractional Newmont CDIs, as the case may be.
Further details about this sale and cash payment can be found in section
5.11, "--Payment of consideration" on page 61.
(e) The offer extends to all ordinary shares of Normandy which may be
issued before the end of the offer period pursuant to the exercise of
options to subscribe for ordinary shares of Normandy issued by Normandy
under its employee share bonus plan and executive share incentive plan.
(f) The offer document is dated January . , 2002.
5.2 OFFER PERIOD
(a) Unless the offer period is extended or the offer is withdrawn, in
either case in accordance with the requirements of the Corporations Act, the
offer will remain open for acceptance by you during the period commencing on
the date of the offer and ending at 7:00 p.m., Sydney time, 3:00 a.m., New
York City time, on February 15, 2002.
(b) Subject to the Corporations Act, we may extend the offer period.
(c) In addition, if, within the last seven days of the offer period:
. the offer is varied (i.e., amended) to increase the consideration
offered, or
. our voting power in Normandy increases to more than 50.1%,
then, in accordance with the Corporations Act and U.S. federal securities
laws, the offer period will be mandatorily extended so that it ends 14 days
after this event.
In addition, to the extent the offer period is not extended pursuant to
the previous paragraph, in accordance with U.S. federal securities laws, we
will extend the offer period if we vary the offer to decrease the
consideration offered, within 10 business days of the then scheduled
expiration of the offer period, so that the offer period ends 10 business
days after the publication of this event. However, in accordance with the
Corporations Act, we will not decrease the consideration offered.
In the event that the offer period is extended, we will be obliged under
the Corporations Act to give Normandy and every Normandy shareholder
(including every Normandy ADS holder) written notice of such extension, so
long as the extension is not an extension of the offer period subsequent to
the offer being
49
declared unconditional in all respects, in which case such notice will only
be given to Normandy shareholders (including Normandy ADS holders) who have
not previously accepted the offer.
5.3 OFFEREES
(a) The offer is being made:
(1) to all the Normandy shareholders (including Normandy ADS holders)
who have a registered address, as shown in Normandy's register of
members, either in the United States or Canada and are registered as
such at 7:00 a.m., Sydney time, on December 20, 2001 (which corresponds
to 3:00 p.m., New York City time, on the previous day), and
(2) to any person who becomes registered or entitled to be registered
as the holder of any ordinary shares of Normandy by virtue of an
allotment of ordinary shares of Normandy under Normandy's employee share
bonus plan or executive share incentive plan during the offer period.
(b) If you are a holder of options to subscribe for ordinary shares of
Normandy issued by Normandy under its employee share bonus plan or executive
share incentive plan, you may accept the offer for the ordinary shares of
Normandy underlying such options if you exercise your options prior to the
expiration of the offer in accordance with their terms. You may then accept
the offer in relation to ordinary shares of Normandy issued upon exercise of
your Normandy options during the offer period before the holding statement
for those ordinary shares of Normandy is received by you, provided that:
(1) you have validly exercised your Normandy options,
(2) you have completed the payments required upon the exercise of
your Normandy options, and
(3) in all other respects you comply with section 5.4 of this offer
document and the instructions on the Acceptance Form;
and, if this section applies to you, you must deliver the relevant holding
statements to us at one of the addresses set forth in section 5.4 of this
offer document as soon as possible after they are received by you and, in
any event, prior to the expiration of the offer.
5.4 HOW TO ACCEPT THE OFFER IF YOU HOLD ORDINARY SHARES OF NORMANDY
(a) You may accept the offer at any time during the offer period.
(b) ORDINARY SHARES OF NORMANDY HELD IN YOUR NAME ON NORMANDY'S
ISSUER-SPONSORED SUBREGISTER
To accept the offer for ordinary shares of Normandy held in your name on
Normandy's issuer-sponsored subregister, you must:
(1) complete and sign the accompanying Acceptance Form (which forms
part of this offer document) in accordance with the terms of the offer
and the instructions on the Acceptance Form; and
(2) ensure that the Acceptance Form and any documents required by the
terms of the offer and the instructions on the Acceptance Form are
received before 7:00 p.m., Sydney time, 3:00 a.m., New York City time,
on February 15, 2002 (or any later date to which the period of the offer
is extended), at the following address or facsimile number:
Newmont Mining Corporation
c/o Computershare Investor Services Pty Limited
GPO Box 1486
Sydney NSW 1005
Australia
50
Facsimile number: + 61-2-8234-5180
or, if by hand delivery, delivered to the following address:
Newmont Mining Corporation
c/o Computershare Investor Services Pty Limited
Level 2
60 Carrington Street
Sydney NSW 2000
Australia
If your Acceptance Form (including any documents required by the terms of
the offer and the instructions on the Acceptance Form) is returned by
facsimile, it will be deemed to be received in time if the facsimile
transmission is received (evidenced by a confirmation of successful
transmission) before 7:00 p.m., Sydney time, 3:00 a.m., New York City time,
on February 15, 2002 (or any later date to which the period of the offer is
extended), but you will not be entitled to receive the consideration under
this offer to which you are entitled until your original Acceptance Form
(including any documents required by the terms of the offer and the
instructions on the Acceptance Form) is received at an address specified
above.
(c) ORDINARY SHARES OF NORMANDY HELD IN A CHESS HOLDING
To accept the offer for ordinary shares of Normandy held in a CHESS
Holding (as defined in the Securities Clearing House Business Rules), you
must:
(1) instruct your broker or controlling participant (for
non-institutional Normandy shareholders, this is normally the
stockbroker either through whom you bought your ordinary shares of
Normandy or through whom you ordinarily acquire ordinary shares of
Normandy on the ASX) to initiate acceptance of the offer in accordance
with Rule 16.3 of the Securities Clearing House Business Rules before
7:00 p.m., Sydney time, 3:00 a.m., New York City time, on February 15,
2002 (or any later date to which the period of the offer is extended); or
(2) if you are a CHESS participant who is not a broker (such as an
institution, custodian, trustee and the like), initiate acceptance of
the offer in accordance with Rule 16.3 of the Securities Clearing House
Business Rules before 7:00 p.m., Sydney time, 3:00 a.m., New York City
time, on February 15, 2002 (or any later date to which the period of the
offer is extended).
Although you are not required to, you may also sign and complete the
accompanying Acceptance Form in accordance with the terms of the offer and
the instructions on the Acceptance Form relating to shares in a CHESS
Holding and ensure that it (including any documents required by the terms of
the offer and the instructions on the Acceptance Form) is received by 7:00
p.m., Sydney time, 3:00 a.m., New York City time, on February 15, 2002 (or
any later date to which the period of the offer is extended), at an address
or facsimile number specified in section 5.4(b) of this offer document.
(d) To accept the offer in respect of ordinary shares of Normandy in
respect of which, at the time of acceptance, you are entitled to be
registered but are not registered you must complete and sign the Acceptance
Form enclosed with the offer in accordance with the instructions on it and
return it together with all other documents required by those instructions
to one of the addresses referred to in section 5.4(b) so that it is received
not later than the end of the offer period.
(e) An acceptance of the offer under section 5.4(b) and section 5.4(d)
shall not be complete until the Acceptance Form, completed and signed in
accordance with the instructions on it and all other documents required by
those instructions have been received (including receipt by facsimile
transmission in accordance with section 2.4(b)) at one of the addresses set
out in section 5.4(b). Notwithstanding the foregoing
51
provisions of this paragraph, we may, in our absolute discretion, waive at
any time prior to the end of the offer period all or any of the requirements
specified in the Acceptance Form but payment of the consideration in
accordance with the offer will not be made until any irregularity has been
resolved and such other documents as may be necessary to procure
registration of the shares have been lodged with us.
(f) If you hold Normandy options on the date of the offer and if you are
entitled to and wish to exercise Normandy options during the offer period
and accept the offer, you may also return the completed Acceptance Form
together with your option certificates, a signed notice of exercise of your
Normandy options and a bank check in the sum of the exercise price for your
Normandy options made payable to "Normandy Mining Limited."
(g) Your acceptance of the offer must be in respect of all the ordinary
shares of Normandy registered in your name.
5.5 HOW TO ACCEPT THE OFFER IF YOU HOLD NORMANDY ADSS
(a) You may accept the offer at any time during the offer period, but
only in respect of all of your Normandy ADSs.
(b) HOLDERS OF NORMANDY ADRS EVIDENCING NORMANDY ADSS
If you hold Normandy ADRs evidencing Normandy ADSs and wish to accept the
offer, you may accept the offer by delivering, prior to the expiration of
the offer, the following materials together, and at the same time, to the
ADS exchange agent at one of its addresses set forth below:
. your Normandy ADRs,
. a properly completed and duly executed ADS Letter of Transmittal, and
. any other documents required by the ADS Letter of Transmittal.
The addresses for the ADS exchange agent are:
BY MAIL: BY COURIER: BY HAND:
-------- ----------- --------
Computershare Trust Computershare Trust Computershare Trust
Company of New York Company of New York Company of New York
Wall Street Station Wall Street Plaza Wall Street Plaza
P.O. Box 1010 88 Pine Street, 19th Floor 88 Pine Street, 19th Floor
New York, NY 10268-1010 New York, NY 10005 New York, NY 10005
(c) HOLDERS OF NORMANDY ADSS IN BOOK-ENTRY FORM
If you hold Normandy ADSs in book-entry form with a bank, broker or other
nominee and wish to accept the offer, you may accept the offer by following
the procedure for book-entry transfer described below. To accept the offer,
you must deliver, prior to the expiration of the offer, the following
materials to the ADS exchange agent at any of the addresses set forth in
section 5.5(b):
. a timely confirmation of a book-entry transfer of your Normandy ADSs
into the ADS exchange agent's account at DTC,
. an agent's message (instead of an ADS Letter of Transmittal), and
. any other documents required by the ADS Letter of Transmittal.
52
In this discussion, the term "agent's message" means a message that is
transmitted by DTC to and received by the ADS exchange agent and that forms
a part of a book-entry confirmation. This message must state that:
. DTC has received an express acknowledgment from a participant in DTC's
system that the participant is accepting the offer with respect to
Normandy ADSs that are the subject of a confirmation of a book-entry
transfer,
. the participant has received and agrees to be bound by the ADS Letter
of Transmittal, and
. either we or the ADS exchange agent may enforce the agreement against
the participant.
In this discussion, the term "book-entry confirmation" means the
confirmation of a book-entry transfer of Normandy ADSs into the ADS exchange
agent's account at DTC.
Any financial institution that is a participant in the book-entry
transfer facility of DTC may make book-entry delivery of Normandy ADSs by
causing DTC to transfer the ADSs into the ADS exchange agent's account at
DTC. This must be done in accordance with DTC's procedures for the transfer.
If you hold your Normandy ADSs in book-entry form other than through a
broker or other DTC participant, you must first have your Normandy ADSs
transferred to an account at DTC, after which time you may follow the
procedure for book-entry transfer described above.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE ADS EXCHANGE AGENT.
(d) BENEFICIAL OWNERS OF NORMANDY ADSS REGISTERED IN THE NAME OF
FINANCIAL INSTITUTIONS
If you are a beneficial owner of Normandy ADSs that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee
and wish to accept the offer, you must contact this institution promptly and
instruct it to accept the offer on your behalf before the expiration of the
offer.
If you are a beneficial owner of Normandy ADSs and you wish to accept the
offer directly and not through an institution, you must either make
appropriate arrangements to register ownership of your Normandy ADSs in your
name or obtain a properly completed stock power from the registered holder.
This transfer of registered ownership may take considerable time, which you
should keep in mind in deciding when to accept the offer.
(e) Guaranteed delivery procedures cannot be used to accept the offer.
(f) Your signature on the ADS Letter of Transmittal with respect to
Normandy ADSs must be guaranteed by an eligible institution, as defined
below, unless:
. you are the registered holder of the Normandy ADSs; or
. you are accepting the offer with respect to Normandy ADSs for the account
of an eligible institution.
The term "eligible institution" means a financial institution that is a
participant in the Security Transfer Agents Medallion Program or the Stock
Exchange Medallion Program. Eligible institutions include commercial banks,
savings and loan associations and brokerage houses.
(g) Under the U.S. federal income tax laws, the ADS exchange agent may be
required to withhold 30% of any payments made to certain Normandy ADS
holders. In general, to prevent backup U.S. federal income tax withholding
with respect to any such payments made pursuant to the offer, if you hold
Normandy ADSs, you must provide the ADS exchange agent with your correct
taxpayer identification number and certify
53
whether you are subject to backup withholding of U.S. federal income tax by
completing the substitute form W-9 included in the ADS Letter of
Transmittal. Some Normandy ADS holders (including, among others, all
corporations and some non-U.S. individuals) are not subject to these backup
withholding and reporting requirements.
5.6 VALIDITY OF ACCEPTANCES
(a) Your acceptance will not be valid unless it is made in accordance
with the procedures set forth in section 5.4 or section 5.5 of this offer
document and the instructions on the Acceptance Form or the ADS Letter of
Transmittal, as appropriate.
(b) You must choose the method of delivery you will use to deliver your
Acceptance Form and/or your Normandy ADRs evidencing Normandy ADSs and your
ADS Letter of Transmittal and all other required documents as set forth in
sections 5.4 and 5.5. That delivery is at your risk. For Normandy
shareholders, we recommend that you use the postage pre-paid envelope
included with this offer document. For Normandy ADS holders, we recommend
that you use overnight or hand delivery service, properly insured, instead
of mail, and if delivery is by mail, we recommend that you use registered
mail, with return receipt requested, properly insured. IN ALL CASES ADS
HOLDERS SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE ADS EXCHANGE
AGENT. Persons holding Normandy securities through brokers, dealers,
commercial banks, trust companies or nominees may request these persons to
effect the above deliveries on their behalf.
(c) We will determine, in our sole discretion, all questions as to the
form of documents, including the validity, eligibility, including time of
receipt, and acceptance of your ordinary shares of Normandy and Normandy
ADSs. Our determination will be final and binding on all parties.
(d) We may, in our sole discretion, at any time deem any Acceptance Form
or ADS Letter of Transmittal we receive to be a valid acceptance in respect
of your ordinary shares of Normandy or Normandy ADSs, as appropriate, even
if a requirement for acceptance has not been complied with.
(e) If any ordinary shares of Normandy or Normandy ADSs delivered by you
are not exchanged for any reason pursuant to the terms and conditions of the
offer, they will be returned with no cost to you at your risk promptly
following the expiration or termination of the offer. In such case, we will
dispatch at your risk your Acceptance Form or ADS Letter of Transmittal, as
appropriate, together with all other documents forwarded by you to your
address as shown on the Acceptance Form or ADS Letter of Transmittal, as
appropriate, or such other address as you may notify us in writing by
prepaid post.
5.7 ENTITLEMENT TO OFFER
(a) If at the time the offer is made to you, or at any time during the
offer period and before you accept the offer, another person is, or is
entitled to be, registered as the holder of, or is able to give good title
to, some or all of your ordinary shares of Normandy (such shares in this
paragraph being called "Transferred Shares") then, in accordance with
section 653B(1)(a) of the Corporations Act:
(1) a corresponding offer shall be deemed to have been made at that
time to that other person relating to the Transferred Shares;
(2) a corresponding offer shall be deemed to have been made at that
time to you relating to your ordinary shares of Normandy other than the
Transferred Shares; and
(3) the offer shall be deemed immediately after that time to have
been withdrawn.
(b) If at any time during the offer period and before the offer is
accepted you hold ordinary shares of Normandy on trust for, as nominee for
or on account of another person or persons, then a separate offer shall be
deemed, in accordance with Section 653B of the Corporations Act, to have
been made to you in relation
54
to each parcel of ordinary shares of Normandy within your holding of
ordinary shares of Normandy. An acceptance by you of the offer in respect of
any such distinct portion of your ordinary shares of Normandy will be
ineffective unless you have given us notice stating that your ordinary
shares of Normandy consist of separate parcels and your acceptance specifies
the number of ordinary shares of Normandy in the distinct portions to which
the acceptance relates. If your ordinary shares of Normandy are in a CHESS
Holding, such notice may be transmitted in an electronic form approved by
the Securities Clearing House Business Rules. Otherwise, such notice must be
given to us in writing.
5.8 THE EFFECT OF ACCEPTANCE
(a) Once you have accepted the offer, you will be unable to revoke your
acceptance, the contract resulting from your acceptance will be binding on
you and you will be unable to withdraw the ordinary shares of Normandy or
Normandy ADSs with respect to which your acceptance was made, except as
follows:
(1) if the offer remains conditional at the expiration of the time
that it may be freed of the conditions under section 5.10(b), the offer
will automatically terminate and your ordinary shares of Normandy or
Normandy ADSs will be returned to you; or
(2) if the offer period is extended for more than one month and, at
the time, the offer is subject to a defeating condition (which means
that a condition to the offer has not been satisfied or waived at that
time), you will be able to withdraw your acceptance and your ordinary
shares of Normandy or Normandy ADSs, as appropriate. A notice will be
sent to you at the time explaining your rights in this regard.
(b) By completing, signing and returning the Acceptance Form, the ADS
Letter of Transmittal or otherwise accepting the offer pursuant to section
5.4 or 5.5, you will be deemed to have:
(1) accepted the offer, subject to section 5.7, (and any variation of
it) in respect of all of your ordinary shares of Normandy;
(2) subject to the offer being declared free of the conditions in
section 5.10(a) and 5.10(c) or such conditions being fulfilled, agreed
to transfer to us all the ordinary shares of Normandy registered in your
name, regardless of the number of ordinary shares of Normandy specified
in the Acceptance Form;
(3) represented and warranted to us, as a fundamental condition going
to the root of the contract resulting from your acceptance of the offer,
that all your ordinary shares of Normandy or Normandy ADSs are and will
upon registration in our name be fully paid up and free from all
mortgages, charges, liens and other adverse interests and encumbrances
of any kind and restrictions on transfer of any kind, and that you have
full power and capacity to accept the offer and to sell and transfer the
legal and beneficial ownership in those ordinary shares of Normandy or
Normandy ADSs, as appropriate, to us, and that you have paid to Normandy
all amounts which at the time of acceptance have fallen due for payment
to Normandy in respect of those ordinary shares of Normandy or Normandy
ADSs;
(4) if you accepted the offer pursuant to section 5.4(b), irrevocably
authorized us (by any of our authorized officers), if necessary, to
complete on the Acceptance Form correct details of your ordinary shares
of Normandy, fill in any blanks remaining on the form and rectify any
errors or omissions from the form as may be necessary to make the form
an effective acceptance of the offer;
(5) appointed us and our authorized officers from time to time
jointly and each of them severally as your true and lawful attorney,
with effect from the date that any contract resulting from the
acceptance of the offer is declared free from all its conditions or
those conditions are satisfied, with power to exercise all powers and
rights which you could lawfully exercise as the registered holder of
such shares including, without limitation, requesting Normandy to
register your ordinary shares of Normandy in our name, attending and
voting at any meeting of Normandy, demanding a poll for any
55
vote taken at or proposing or seconding any resolutions to be considered
at any meeting of Normandy, requisitioning any meeting of Normandy,
signing any forms, notices or instruments relating to your ordinary
shares of Normandy and doing all things incidental and ancillary to any
of the foregoing and it is acknowledged and agreed that in exercising
such powers the attorney may act in our interests as the intended
registered holder of those shares;
(6) subject to the offer being declared free of the conditions in
section 5.10(a) and 5.10(c) or such conditions being fulfilled,
irrevocably authorized and directed Normandy to pay to us or to account
to us for all rights in respect of ordinary shares of Normandy
(including shares represented by Normandy ADSs) including without
limitation all rights to receive dividends, to subscribe for shares,
notes, options or other securities and all other distributions or
entitlements declared, paid, made or issued by Normandy in respect of
ordinary shares of Normandy (including shares represented by ADSs after
November 14, 2001 ("Rights"), subject however to any such Rights
received by us being accounted to you in the event the offer is
withdrawn or the contract resulting from your acceptance of the offer
being avoided;
(7) except where Rights have been paid or accounted for under section
5.8(b)(6), irrevocably authorized us to deduct from the consideration
payable in respect of your ordinary shares of Normandy, the cash amount
of any Rights paid to you or, where the Rights take a non-cash form, an
amount equal to the value of the Rights as reasonably assessed by the
Chairman of ASX or his or her nominee;
(8) if at the time of acceptance of the offer, your ordinary shares
of Normandy are in CHESS holding, have, with effect from the date that
either the offer or any contract resulting from the acceptance of the
offer is declared free from all its conditions or those conditions are
satisfied, authorized us to cause a message to be transmitted to
Securities Clearing House in accordance with Securities Clearing House
Business Rule 16.6.1 so as to transfer your ordinary shares of Normandy
to our Takeover Transferee Holding. We shall be so authorized even
though, at the time of such transfer, we have not paid the consideration
due to you under the offer;
(9) irrevocably authorized us to apply for the issue to your account
of that number of shares of our common stock in the form of our shares
of common stock or Newmont CDIs corresponding to your entitlement under
the offer at the date of application;
(10) agreed to accept Newmont shares (in the form of our common stock
or Newmont CDIs) to which you become entitled by acceptance of the
offer, subject to the terms of the offer, our charter and by-laws and
the provisions relating to the holding of shares of our common stock in
the form of Newmont CDIs, and authorized appropriate entries to be
placed in the relevant register of holders (including CDN being entered
in the depository register and our share register in relation to those
shares of our common stock);
(11) agreed to indemnify us in respect of any claim or action against
us or any loss, damage or liability whatsoever incurred by us as a
result of you not producing your holder identification number or in
consequence of the transfer of your ordinary shares of Normandy being
registered by Normandy without production of your holder identification
number for your ordinary shares of Normandy;
(12) represented and warranted to us that unless you have notified us
in accordance with section 5.7(b), your ordinary shares of Normandy do
not consist of several parcels of ordinary shares of Normandy; and
(13) agreed to execute all such documents, transfers and assurances
that may be necessary or desirable to convey your ordinary shares of
Normandy and any Rights to us, subject to the offer being declared free
of the conditions in section 5.10(a) and 5.10(c) or such conditions
being fulfilled.
The representations and warranties referred to in this section 5.8(b)
shall survive completion of the contract resulting from acceptance of
the offer.
56
(c) If your ordinary shares of Normandy are in a CHESS Holding and you
complete, sign and return the Acceptance Form in accordance with section
5.4(c) (which you are not bound, but are requested, to do) you will be
deemed to have irrevocably authorized us and any of our authorized officers:
(A) to instruct your controlling participant to initiate acceptance
of the offer in respect of those ordinary shares of Normandy which are
in a CHESS Holding in accordance with the Securities Clearing House
Business Rules (if you have not already done so), and
(B) to give any other instructions in relation to such ordinary
shares of Normandy to your controlling participant on your behalf under
the sponsorship agreement between you and the controlling participant;
(d) The undertakings and authorities referred to in section 5.8(b) will
remain in force after you receive the consideration for your ordinary shares
of Normandy (including shares represented by Normandy ADSs) acquired by us
and after we become registered as the holder of them.
5.9 DIVIDENDS AND OTHER ENTITLEMENTS
(a) We will be entitled to all Rights which arise or accrue after
November 14, 2001 in respect of the ordinary shares of Normandy (including
shares represented by Normandy ADSs) which we acquire pursuant to the offer.
(b) If any Rights are declared, paid or made or arise or accrue in cash
after November 14, 2001 in respect of the ordinary shares of Normandy
(including shares represented by Normandy ADSs), we will (provided the same
has not been paid to us) be entitled to reduce the consideration specified
in section 5.1 and payable by us to accepting holders of ordinary shares of
Normandy by an amount equal to the cash amount of such Rights.
(c) If any non-cash Rights are issued or made or arise or accrue after
November 14, 2001 in respect of the ordinary shares of Normandy (including
shares represented by Normandy ADSs), then we will (provided the same has
not been transferred to us) be entitled to reduce the consideration
specified in section 5.1 and payable by us to accepting holders of ordinary
shares of Normandy by an amount equal to the value (as reasonably assessed
by the Chairman of ASX or his or her nominee) of such non-cash Rights.
5.10 CONDITIONS OF THIS OFFER
(a) Subject to section 5.10(b), this offer and any contract resulting
from your acceptance of the offer, and each other offer and each contract
resulting from the acceptance thereof, are subject to the satisfaction or
waiver by us of the following conditions:
(1) AUSTRALIAN FOREIGN INVESTMENT REVIEW BOARD
The Treasurer of the Commonwealth of Australia advises us in writing,
before the expiration date of the offer that there is no objection under
the Australian Federal Government's foreign investment policy or under
the Foreign Acquisitions and Takeovers Act 1975 (Cth) of Australia to
the acquisition of ordinary shares of Normandy (including shares
represented by Normandy ADSs) by us, such an acquisition otherwise not
being in breach of that legislation or the Treasurer ceases to be
entitled to make an order under Part II of that legislation regarding
the acquisition of such ordinary shares by us;
(2) MINIMUM ACCEPTANCE CONDITION
Before the end of the offer period, we and our associates have
relevant interests in at least 50.1% of the ordinary shares of Normandy
(including shares represented by Normandy ADSs), calculated on a fully
diluted basis;
57
(3) NEWMONT STOCKHOLDER APPROVAL
Before the end of the offer period, our stockholders shall have taken
all actions necessary to approve the issuance of the shares of Newmont
common stock under the offer;
(4) NO PRESCRIBED OCCURRENCES
None of the following prescribed occurrences happen after November
14, 2001 and before the expiration of the offer:
(A) Normandy converting all or any of its shares into a larger or
smaller number of shares under section 254H of the Corporations Act;
(B) Normandy or a subsidiary of Normandy resolving to reduce its
share capital in any way;
(C) Normandy or a subsidiary of Normandy entering into a buyback
agreement or resolving to approve the terms of a buyback agreement
under sections 257C(1) or 257D(1) of the Corporations Act;
(D) Normandy or a subsidiary of Normandy making an issue of its
shares (other than ordinary shares of Normandy issued as a result of
the exercise of options issued under Normandy's employee share bonus
plan or executive share incentive plan or the issue of shares by
Normandy NFM Limited, a subsidiary of Normandy, as consideration for
the takeover bid for Otter Gold Mines Limited) or granting an option
over its shares or agreeing to make such an issue or grant such an
option;
(E) Normandy or a subsidiary of Normandy issuing, or agreeing to
issue, convertible notes;
(F) Normandy or a subsidiary of Normandy disposing, or agreeing to
dispose, of the whole, or a substantial part, of its business or
property;
(G) Normandy or a subsidiary of Normandy charging, or agreeing to
charge, the whole, or a substantial part, of its business or property;
(H) Normandy or a subsidiary of Normandy resolving that it be
wound up;
(I) the appointment of a liquidator or provisional liquidator of
Normandy or of a subsidiary of Normandy;
(J) the making of an order by a court for the winding up of
Normandy or of a subsidiary of Normandy;
(K) an administrator of Normandy or of a subsidiary of Normandy
being appointed under section 436A, 436B or 436C of the Corporations
Act;
(L) Normandy or a subsidiary of Normandy executing a deed of
company arrangement; or
(M) the appointment of a receiver, receiver and manager, other
controller (as defined in the Corporations Act) or similar official
in relation to the whole, or a substantial part, of the property of
Normandy or of a subsidiary of Normandy;
(5) NO MATERIAL ADVERSE CHANGE
Before the end of the offer period, no material adverse change occurs
or is announced in the business, financial or trading position or
condition, assets or liabilities, profitability or prospects of Normandy
and its subsidiaries taken as a whole;
(6) MISLEADING ANNOUNCEMENT
Before the end of the offer period, Normandy does not disclose any
untrue statement of, or omission to state, a fact that was required to
be stated, or necessary so as to make a statement not
58
misleading, in any document filed by or on behalf of Normandy with ASX
or ASIC since January 1, 2001, where the untrue statement or omission of
fact results in a material adverse effect in relation to the business,
financial or trading position or condition, assets or liabilities,
profitability or prospects of Normandy and its subsidiaries taken as a
whole;
(7) NO PUBLIC AUTHORITY INTERFERENCE
During the period from November 14, 2001 to the expiration of the
offer:
(A) there is not in effect any preliminary or final decision,
order or decree issued by any government or governmental,
semi-governmental, statutory or judicial entity or authority, whether
in Australia or elsewhere, including without limitation any
self-regulatory organization established under statute or any stock
exchange (a ''Public Authority''), or
(B) no application is made to any Public Authority (other than by
us), or commenced by a Public Authority against either Newmont,
Normandy or Delta Acquisition LLC, in consequence or in connection
with the offer, which restrains or prohibits or otherwise materially
adversely impacts upon, the making of the offer or the completion of
any transaction contemplated by the offer or the deeds of undertaking
entered into by us and Normandy or the rights of us or our associates
in respect of Normandy and the ordinary shares of Normandy to be
acquired under the offer or otherwise;
(8) DEEDS OF UNDERTAKING
Before the end of the offer period, no breach of any covenant,
warranty or representation made by Normandy or in the deeds of
undertaking entered into by us and Normandy occurs or is announced which
has a material adverse effect on the business, financial or trading
position or condition, assets or liabilities, profitability or prospects
of Normandy and its subsidiaries taken as a whole;
(9) OTHER GOVERNMENTAL OR REGULATORY APPROVALS
All necessary governmental or regulatory filings (including under the
U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and other competition and foreign investment approval filings or
notifications) having been made, all applicable waiting periods with
respect to any governmental or regulatory filings having expired or
having been terminated, no action having been taken to restrain the
offer by any governmental authority, and all necessary governmental or
regulatory approvals having been obtained to ensure that:
(A) we can vote and acquire all ordinary shares of Normandy
(including shares represented by Normandy ADSs) under the offer; and
(B) our shares of common stock and Newmont CDIs can be issued
under the offer and traded without restriction, including, without
limitation, under the U.S. Securities Act of 1933, as amended;
(10) AUSTRALIAN MAGNESIUM CORPORATION LIMITED COMMITMENTS
(A) neither Normandy nor any subsidiary of Normandy is a party to
any agreement with Australian Magnesium Corporation Limited or is
subject to any other obligation in respect of Australian Magnesium
Corporation Limited for an amount greater than A$20 million other
than:
(i) those agreements and obligations disclosed in the
Australian Magnesium Corporation Limited prospectus dated October
15, 2001; or
(ii) an obligation by Normandy to subscribe for Australian
Magnesium Corporation Limited shares in the manner and subject to
the conditions contained in the Australian Magnesium Corporation
Limited prospectus dated October 15, 2001; and
(B) before the end of the offer period, there is no waiver of any
condition precedent to the commitment of either Normandy, any
subsidiary of Normandy, the syndicate of banks, the
59
Australian Federal Government or the State Government of Queensland
to provide funds to Australian Magnesium Corporation Limited being
conditions precedent to commitments disclosed or referred to in the
Australian Magnesium Corporation Limited prospectus dated October 15,
2001.
(b) It is a term of the offer that we may, subject to section 650F of the
Corporations Act, declare the offer and all other offers and all contracts
resulting from the acceptance of offers to be free from the conditions (or
any one or more of them or any part thereof) set out in section 5.10(a). Any
declaration made under this section 5.10(b) shall be made by us by notice in
writing to Normandy.
(c) In accordance with section 625(3) of the Corporations Act, the offer
and all other offers and all contracts that result from the acceptance of
offers are subject to the condition that:
(1) an application for admission to quotation of Newmont on ASX and
of the shares of Newmont common stock on the NYSE will be made within
seven days after the date when the bidder's statement is given to
Normandy; and
(2) permission for admission to quotation of Newmont CDIs on ASX and
for quotation of the shares of Newmont common stock on the NYSE will be
granted no later than seven days after the end of the offer period.
We will apply for the necessary quotations as soon as practicable in
order to satisfy this condition. The offer may not be declared free of
this condition.
(d) The condition in section 5.10(a)(1) above is a condition precedent to
our acquisition of an interest (within the meaning of those terms in the
Foreign Acquisitions and Takeovers Act) in your ordinary shares of Normandy
(including shares represented by Normandy ADSs). The other conditions in
section 5.10(a) are conditions subsequent. The non-fulfillment of any
condition subsequent does not prevent a contract to sell your ordinary
shares of Normandy (including shares represented by Normandy ADSs) resulting
from your acceptance of the offer, but entitles us by written notice to you,
to rescind the contract resulting from your acceptance of the offer.
(e) Subject to the provisions of the Corporations Act, we alone have the
benefit of the conditions in section 5.10(a) above and any breach or
non-fulfillment of any such conditions may be relied on only by us.
(f) The date specified for giving the notice referred to in section
630(3) of the Corporations Act is February 7, 2002, subject to extension in
accordance with section 630(2) of the Corporations Act if the offer period
is extended in accordance with the Corporations Act.
(g) If at the end of the offer period in respect of the conditions
specified in section 5.10(a) above:
(1) we have not declared the offer and all other offers made by us
and all contracts resulting from the acceptance of offers to be free
from the conditions; and
(2) the conditions have not been fulfilled,
then all contracts resulting from the acceptance of offers and all offers
that have been accepted and from whose acceptance binding contracts have not
yet resulted are void. In that event, we will, if you have accepted the
offer:
(1) return at your risk your Acceptance Form together with all
documents forwarded by you with that form to your address as shown in
the Acceptance Form; or
(2) if your ordinary shares of Normandy are in a CHESS Holding,
notify Securities Clearing House under the Securities Clearing House
Business Rules that the contract resulting from your acceptance of the
offer is avoided.
60
5.11 PAYMENT OF CONSIDERATION
(a) Subject to this section 5.11 and the Corporations Act, we will
provide the consideration for your ordinary shares of Normandy (including
shares represented by Normandy ADSs) as follows:
(i) within five business days after the date of your acceptance of
the offer if the offer is unconditional at that time, or
(ii) if the offer is conditional when you accept it, within five
business days after the date upon which all the conditions (including
the condition in section 5.10(c)) are satisfied or waived.
Under no circumstance will interest be paid on the consideration payable
to you under the offer, regardless of any delay in making the exchange or
any extension of the offer.
(b) Where the Acceptance Form requires an additional document to be given
with your acceptance (such as a power of attorney):
(1) if that document is delivered with your acceptance, we will
provide the consideration in accordance with section 5.11(a);
(2) if that document is delivered after acceptance and before the end
of the offer period while the offer is subject to a condition, we will
provide the consideration within 5 business days after the offer becomes
unconditional.
(3) if that document is delivered after your acceptance and before
the end of the offer period while the offer is not subject to any
condition, we will provide the consideration within 5 business days
after the document is delivered; or
(4) if that document is delivered after the end of the offer period,
we will provide the consideration within 5 business days after that
document is delivered.
(c) If you are resident in any place specified by the Reserve Bank of
Australia as being a place for which a resident is not entitled to receive
the cash component of the consideration specified above, in the absence of
any necessary authority of the Reserve Bank of Australia and the Australian
Taxation Office, acceptance of the offer will not create or transfer to you
any right (contractual or contingent) to receive the consideration specified
in the offer unless and until any necessary authority of the Reserve Bank of
Australia and the Australian Taxation Office has been obtained. Such
authority is currently required only in respect of Libya, Iraq, the Taliban
(Islamic Emirate of Afghanistan) and any undertaking owned or controlled by
the Taliban, certain persons associated with the former government and
governmental authorities of the Federal Republic of Yugoslavia (Serbia and
Montenegro) and the National Union for the Total Independence of Angola
(UNITA), including its senior officials and their immediate families AND IN
RESPECT OF ANY PERSON OR ENTITY NAMED IN AN ANNEX TO THE INSTRUMENTS OF
OCTOBER 3 OR 17 AND NOVEMBER 19, 2001 ISSUED UNDER THE AUSTRALIAN BANKING
(FOREIGN EXCHANGE) REGULATIONS.
(d) If you accept the offer and are entitled to payment of a cash amount
instead of shares of our common stock or Newmont CDIs under section 5.1(b)
or (d), we will:
(1) arrange for the allotment to a nominee approved by ASIC of the
number of shares or fractional entitlements of our common stock or
Newmont CDIs to which you and all other shareholders would have been
entitled but for this paragraph (d),
(2) cause those shares of our common stock or Newmont CDIs issued to
the nominee to be offered for sale within 5 business days after the end
of the offer period in such manner, at such price and on such other
terms and conditions as are determined by the nominee, and
(3) pay to you the amount ascertained in accordance with the formula:
Net Proceeds of Sale x Newmont Shares
-------------------------------------
TSA
61
where:
"Net Proceeds of Sale" means the amount (if any) remaining after
deducting the expenses of the sale from the proceeds of the sale of
shares of our common stock (including shares underlying Newmont CDIs) on
the open market,
"Newmont Shares" means the number of shares of our common stock
(including the fractional number of a share of our common stock
underlying Newmont CDIs) which would but for section 5.1(d) otherwise
have been allotted to you, and
"TSA" means the total number of shares of our common stock (including
shares underlying Newmont CDIs) allotted to the nominee under section
5.1(b) or (d) in respect of the shares of our common stock (including
shares underlying Newmont CDIs) held by shareholders and ADS holders
affected by these sections.
If your registered address on the Normandy shareholder register or
Normandy ADS register maintained by Normandy's depositary is within
Australia, you will receive your share of the proceeds of this sale in
Australian dollars. If your registered address on the Normandy shareholder
register or Normandy ADS register maintained by Normandy's depositary is
within any other jurisdiction (including the United States and Canada), you
will receive your share of the proceeds of this sale in U.S. dollars. If you
are to receive payment in U.S. dollars, we will convert the Australian
dollar sum into U.S. dollars using the noon buying rate on the date of the
sale by the nominee, as published by the Federal Reserve Bank of New York.
Payment will be made by check posted to you at your risk by ordinary mail at
the address provided on your Acceptance Form or ADS Letter of Transmittal.
Under no circumstances will interest be paid on your share of the
proceeds of this sale, regardless of any delay in remitting these proceeds
to you.
(e) Where the ADS Letter of Transmittal requires an additional document
to be delivered with your ADS Letter of Transmittal (such as your Normandy
ADRs), such document must be delivered with, and at the same time as, your
ADS Letter of Transmittal.
5.12 WITHDRAWAL OR TERMINATION OF THIS OFFER
We may withdraw the offer at any time with the written consent of ASIC,
which consent may be given subject to such conditions (if any) as are specified
in the consent. Notice of any withdrawal will be given to ASX, Normandy and to
each person to whom an offer has been made.
5.13 VARIATION OF THIS OFFER
We may at any time, and from time to time, vary the offer in accordance with
the Corporations Act.
In the event that we vary the offer, we are obliged under the Corporations
Act to notify Normandy, the ASX and every Normandy shareholder (including
Normandy ADS holders) of such variation, so long as the variation is not an
extension of the offer period subsequent to the offer being declared
unconditional in all respects, in which case such notice will only go to
Normandy shareholders (including Normandy ADS holders) who have not previously
accepted the offer.
Under Australian law, all Normandy shareholders and Normandy ADS holders who
accept the offer will be entitled to the benefit of any variation of the offer
which improves the consideration offered, even if that occurs after the
Normandy shareholder's or Normandy ADS holder's acceptance is received. Under
the Corporations Act, we are not permitted to vary the offer to decrease the
number of ordinary shares of Normandy (including in the form of Normandy ADSs)
that are being sought in the offer.
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5.14 STAMP DUTY AND BROKERAGE FEES
If your ordinary shares of Normandy or Normandy ADSs are registered in your
name and you deliver them directly to us or the ADS exchange agent, as
appropriate, you will not incur any brokerage or other transaction fees in
connection with your acceptance of the offer. If you hold your ordinary shares
of Normandy or Normandy ADSs through a bank, broker or other nominee, you
should ask your bank, broker or other nominee whether it will charge any
transaction fees or service charges in connection with your acceptance of this
offer.
Any stamp duty payable in respect of transfers of ordinary shares of
Normandy and Normandy ADSs to us pursuant to the offer will be paid by us.
5.15 COSTS AND TAXES
All costs and expenses of the preparation of this offer document and of the
preparation and circulation of the offer will be paid by us.
No Australian goods and services tax is payable as a consequence of the
offer.
5.16 NOTICES
(a) Any notices to be given by us to Normandy may be given to Normandy by
leaving them at, or sending them by prepaid ordinary post to, the registered
office of Normandy or by sending them by facsimile transmission to Normandy
at its registered office.
(b) Any notices to be given to us by you or by Normandy under the bid may
be given to us by leaving them at or sending them by prepaid ordinary post
to us at one of the addresses referred to in section 5.4(b).
(c) Any notices to be given by us to you may be given to you by leaving
them at or sending them by prepaid ordinary post or if your address is
outside Australia, by airmail, to your address as shown in the register of
members of Normandy.
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6 REGULATORY AND OTHER APPROVALS
6.1 AUSTRALIAN FOREIGN INVESTMENT REVIEW BOARD
The Foreign Acquisitions and Takeover Act 1975 (Cth) of Australia regulates
the acquisition of shares in certain Australian companies where the acquisition
results in a foreign entity controlling the corporation or a change in the
identity of the foreign controllers of the corporation. Accordingly, as the
acquisition of ordinary shares of Normandy (including shares represented by
Normandy ADSs) under the offer may result in us, a foreign entity, controlling
Normandy, the offer is conditional upon the Treasurer of the Commonwealth of
Australia stating prior to the expiration of the offer that he has no objection
under the Australian Federal Government's foreign investment policy or under
the Foreign Acquisitions and Takeovers Act 1975 (Cth) of Australia to the
acquisition of ordinary shares of Normandy (including shares represented by
Normandy ADSs) by us or such an acquisition being not otherwise in breach of
that legislation. See section 5.10, "Terms of the offer--Conditions of this
offer" on page 57. We lodged an application with the FIRB on December 7, 2001
and do not believe that there are any issues that will prevent the Treasurer
from approving our application. However, we cannot give any assurance as to the
outcome of our application to FIRB. On January 7, 2002 FIRB made an interim
order in relation to our proposal. Although the interim order allows for a
further period of 90 days for FIRB to examine our proposal, FIRB has stated
that it has all the information which it requires to consider our proposal and
anticipates that a recommendation to the Treasurer will be made much sooner.
6.2 NEWMONT STOCKHOLDER APPROVAL
The issuance of shares of our common stock in connection with our
acquisition of Normandy and Franco-Nevada and the merger to be effected
pursuant to the reorganization of our company as described in section 1.1 above
are subject to the approval of our stockholders. We have convened a special
meeting of our stockholders to be held on February . , 2002 to vote on these
matters. There can be no assurance that this approval will be granted. If our
stockholders approve the merger, which is described in section 1.1 above, and
the issuance of common shares of Holdco (or, in the event the reorganization
does not occur, Newmont), no further Newmont stockholder approval will be
required in relation to the issue of our common stock.
6.3 GOVERNMENTAL AND REGULATORY APPROVALS
The offer is subject to the following governmental and regulatory approvals:
(a) U.S. ANTITRUST
Pursuant to the HSR Act, on November 28, 2001, we filed a Premerger
Notification and Report Form in connection with the offer with the Antitrust
Division and the FTC. Under the applicable provisions of the HSR Act, the offer
cannot be consummated until after the expiration or early termination of a 30
calendar-day waiting period following the filing by us. On December 21, 2001,
the applicable waiting period was terminated early by the FTC.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the offer. At any time before or
after delivery of Newmont shares (in the form of shares of our common stock or
Newmont CDIs) under the offer, the Antitrust Division or the FTC could take
whatever action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the delivery of Newmont shares
(in the form of our common stock or Newmont CDIs) pursuant to the offer,
seeking the divestiture of Normandy shares (including Normandy shares
represented by Normandy ADSs) acquired by us pursuant to the offer or seeking
the divestiture of substantial assets of us and Normandy. Private parties and
state attorneys general may also bring legal action under federal or state
antitrust laws under some circumstances. Based upon an examination of
information available relating to the businesses in which we and Normandy and
each of our respective subsidiaries are engaged, it is not believed that the
offer will violate U.S. antitrust laws. Nevertheless, there can be no assurance
that a challenge to the offer on antitrust grounds will not be made or, if a
challenge is made, what the result would be.
64
(b) OTHER REGULATORY PROCEDURES
We and Normandy conduct operations or have holdings in a number of other
jurisdictions where antitrust filings or other regulatory approvals or
clearances may be required in connection with the offer. We have made or will
make an antitrust filing with the relevant authorities in Brazil and Canada and
anticipate making appropriate antitrust filings in Germany. Notification has
been made with the applicable Brazilian regulatory agency, and as a result, no
waiting periods or approvals are required prior to completion of the offer. In
Canada, until a waiver of the filing obligation is obtained from the applicable
Canadian regulatory authority or, if not received, until all applicable waiting
periods in Canada have expired without the applicable Canadian authority having
taken action to enjoin the completion of the offer, we may not acquire more
than 20% of the ordinary shares of Normandy (including shares represented by
Normandy ADSs). The applicable waiting period in Canada is 14 days from filing
with the applicable Canadian regulatory authority, based on a "short form"
pre-merger notification filing. However, on December 14, we filed a request for
an advance ruling certificate ("ARC") with the applicable Canadian regulatory
authority. We received an ARC from the Canadian Competition Bureau with respect
to both acquisitions on December 27, 2001. The ARC will eliminate the entire
Canadian waiting period and the need to file a pre-merger notification filing.
We are also currently in the process of reviewing whether any other filings
will be required or advisable in other jurisdictions, and intend to make the
appropriate regulatory filings if we determine that these filings are required
or advisable.
There is no assurance that any additional approvals or clearances, if any,
will be obtained or that there will not be any adverse consequences to us or
Normandy's business resulting from the failure to obtain these approvals or
clearances or from conditions that could be imposed in connection with
obtaining these approvals or clearances (including divestitures and other
operating conditions upon our and Normandy's businesses).
In addition, antitrust enforcement and other regulatory agencies frequently
scrutinize transactions such as the offer. At any time before or after we
acquire ordinary shares of Normandy (including shares represented by Normandy
ADSs), any antitrust or other regulatory enforcement agency in a jurisdiction
where we have not filed could take whatever action under the applicable law of
the jurisdiction as it deems necessary or desirable in the public interest,
including seeking to enjoin our acquisition of ordinary shares of Normandy
(including shares represented by Normandy ADSs) pursuant to the offer or our
ability to vote or otherwise exercise rights of ownership over the ordinary
shares of Normandy (including shares represented by Normandy ADSs) that we
acquire under the offer, seeking divestiture of ordinary shares of Normandy
(including shares represented by Normandy ADSs) acquired by us or divestiture
of assets of us or Normandy, or seeking to impose conditions on the operation
of our or Normandy's businesses. Private parties may also bring legal action
under the antitrust laws under some circumstances.
65
7 INFORMATION ABOUT NEW NEWMONT
7.1 GENERAL DESCRIPTION OF NEW NEWMONT'S OPERATIONS
INTRODUCTION
New Newmont, to be formed from the combination of Newmont, Normandy and,
subject to completion of the Plan of Arrangement, Franco-Nevada, will be the
world's leading gold company with gold reserves in excess of 97 million ounces
and annual production of more than 8 million ounces at an expected cash cost of
approximately US$175 per ounce. New Newmont will be a truly global enterprise,
with an aggregate land position of approximately the same size as the United
Kingdom at 244,000 square kilometers (94,000 square miles) and operations in
North America, South America, Australia, New Zealand, Indonesia, Uzbekistan and
Turkey. New Newmont will obtain more than 70% of its production from the
politically and economically stable locations of the United States, Canada and
Australia. New Newmont will, among other activities, also produce copper
concentrates from locations in Indonesia and zinc and copper concentrates from
locations in Australia.
The information provided in this section is designed to give shareholders an
understanding of the assets, liabilities, operations and prospects of New
Newmont, the entity which will be formed by the merger of Newmont (described in
section 8), Normandy (described in section 9) and Franco-Nevada (described in
section 10).
This description of New Newmont assumes that the merger with Franco-Nevada
takes place, although the offer for Normandy is not conditional on the merger
with Franco-Nevada taking place. If that merger is not successful, the business
of New Newmont will not include the bulk of the Royalty Business, which covers
gold, platinum, oil and gas interests, or Investments which are set out below.
Normandy shareholders should consider this possibility when assessing the
prospects of New Newmont.
The following information is based upon Newmont successfully acquiring all
of the shares of both Normandy and Franco-Nevada. These acquisitions are
subject to a number of conditions, described in sections 5.10 and 6.4.
[MAP] Greyscale Map
66
PRO FORMA NEW NEWMONT HIGHLIGHTS
FRANCO- PRO FORMA
TWELVE MONTHS ENDED SEPTEMBER 30, 2001 NEWMONT NORMANDY NEVADA NEW NEWMONT
-------------------------------------- ------- -------- ------- -----------
Proven & probable reserves (mm oz)/(1)/ 66.3 26.4 4.4 97.1
Production (mm oz)/(2)/................ 5.8 2.4 0.3 8.6
Total cash costs per equity ounce/(3)/. $ 179 $ 160 $228 $ 175
Total costs per equity ounce/(4)/...... $ 209 $ 224 $291 $ 217
--------
(1) Based on latest public filings
(2) Reflects proportional 49.5% of Franco-Nevada's ownership of Echo Bay (see
section 7.1, "Information about New Newmont--Investments" on page 81
regarding Franco-Nevada's acquisition of an equity interest in Echo Bay)
(3) Dollars in US dollars, with average exchange rates of US$0.523 and US$0.653
for Australia and Canada, respectively
(4) Prior to purchase allocation and U.S. GAAP adjustments
On a pro forma basis for the twelve months ended September 30, 2001,
approximately 71% of New Newmont's gold production, as of the latest public
filings, came from North America and Australia, and approximately 29% from
other locations, with 12% of that total attributable to Minera Yanacocha in
Peru and 8% of that total in Indonesia. For this same period, approximately 61%
of New Newmont's gold reserves, as of the latest public filings, came from
North America and Australia and approximately 39% from other locations, with
19% of that total attributable to Minera Yanacocha in Peru and 7% of that total
in Indonesia.
BOARD OF DIRECTORS AND MANAGEMENT
Wayne W. Murdy, our current Chairman, President and Chief Executive Officer,
will serve as Chairman and Chief Executive Officer of Newmont. Pierre Lassonde,
currently President and Co-Chief Executive Officer of Franco-Nevada, will serve
as President of New Newmont.
The New Newmont board of directors will consist of 17 members, including the
current 12 directors of Newmont, the two Co-Chief Executive Officers of
Franco-Nevada (Messrs. Seymour Schulich and Pierre Lassonde), one additional
nominee from the board of Franco-Nevada and two nominees from the board of
Normandy. Mr. Champion de Crespigny will be invited to fill one of the Normandy
positions.
If the Normandy transaction is completed but the Franco-Nevada transaction
is not, New Newmont's board of directors will consist of 14 members, including
the current 12 directors of Newmont and two nominees from the board of
Normandy. Mr. Champion de Crespigny will be invited to fill one of the Normandy
positions. Mr. Murdy will serve as Chairman, President and Chief Executive
Officer of a combined Newmont/Normandy.
OVERVIEW OF NEW NEWMONT
New Newmont will continue the historic businesses of Newmont and Normandy in
the production of, and exploration for, gold, copper and zinc. New Newmont will
also continue Franco-Nevada's primary business, which is the acquisition of (i)
direct interests in mineral properties and, when appropriate, developing those
properties, (ii) royalty interests in producing precious metals, mines and
precious metals properties in the development or advanced exploration stage,
(iii) direct interests in mineral properties for the purpose of exploration
and, when appropriate, selling, leasing or joint venturing those properties to
established mine operators and retaining royalty interests and (iv) indirect
interests in mineral deposits through equity interests in companies that own
interests in mineral deposits.
PRODUCTS
GOLD
Gold has two main categories of use--product fabrication and bullion
investment. Fabricated gold has a variety of end uses, including jewelry,
electronics, dentistry, industrial and decorative uses, medals, medallions
67
and official coins. Gold investors buy gold bullion, official coins and
high-karat jewelry. Most of New Newmont's revenue will come from the sale of
refined gold in the international market. The end product at each of New
Newmont's gold operations, however, will be dore bars. Because dore is an alloy
consisting mostly of gold but also containing silver, copper and other metals,
dore bars are sent to refiners to produce bullion that meets the required
market standard of 99.95% pure gold. Under the terms of refining agreements,
the dore bars will be refined for a fee, and New Newmont's share of the refined
gold and the separately recovered silver will be credited to the company's
account or delivered to buyers, except in the case of the dore produced from
New Newmont's operation in Uzbekistan. Dore from that operation will be refined
locally and physically returned to New Newmont for sale in international
markets. New Newmont does not believe that the loss of any of its refiners
would have an adverse effect on its business due to the availability of
alternative refiners able to supply the necessary services. Additionally,
through Normandy, New Newmont will have a 50% interest in an Australian
refinery.
The worldwide supply of gold consists of a combination of new production
from mining and existing stocks of bullion and fabricated gold held by
governments, financial institutions, industrial organizations and private
individuals. In recent years, mine production has accounted for 60% to 65% of
the total annual supply of gold. The price of gold is affected by numerous
factors that are beyond our control. See section 3.2, "Risk factors--Risks
related to the gold mining industry generally" on page 29. The following table
presents the annual high, low and average afternoon fixing prices over the past
five years, expressed in U.S. dollars, for gold per ounce on the London Bullion
Market:
YEAR HIGH LOW AVERAGE
---- ---- --- -------
US$ US$ US$
1996.................... 415 367 388
1997.................... 367 283 331
1998.................... 313 273 294
1999.................... 326 253 279
2000.................... 313 264 279
2001/(1)/............... 293 256 271
2002 (through January 4) 279 278 279
On January 4, 2002, the afternoon fixing price of gold on the London Bullion
Market was US$278 per ounce.
New Newmont's gold sales will generally be made at the average price
prevailing during the month in which the gold is delivered to the customer plus
a "contango," which is essentially an interest factor, from the beginning of
the month until the date of delivery. Revenue from a sale is recognized when
gold is delivered from the refiner or other depository to the customer.
COPPER
The Batu Hijau mine in Indonesia, in which New Newmont will hold a 56.25%
economic interest (a 45% equity interest), produced copper/gold concentrates
containing 519.7 million pounds of copper and 451,400 ounces of gold in the
first nine months ended September 30, 2001. The concentrates, which have the
consistency of fine sand, contain about 30% copper and about 0.42 ounce per ton
of gold. In addition, the 100% owned Golden Grove Operation in Western
Australia produced zinc, lead and copper concentrates containing 242.5 million
pounds of copper for the 12 months ended June 30, 2001. New Newmont will
deliver and sell the concentrates to smelters in Japan, Korea, Australia and
Europe. The majority of New Newmont's production will be sold under long-term
contracts, and the balance on the spot market.
Refined copper, the final product from the treatment of concentrates, is
incorporated into wire and cable products for use in the construction, electric
utility, communication and transportation industries. Copper is also
68
used in industrial equipment and machinery, consumer products and a variety of
other electrical and electronic applications and is used to make brass.
Materials that compete with copper include aluminum, plastics, stainless steel
and fiber optics.
Refined, or cathode, copper is also an internationally traded commodity. The
price of copper is quoted on the London Metal Exchange in terms of dollars per
metric ton of high grade copper and on the New York Commodity Exchange (Comex)
in terms of dollars per pound of high grade copper. Copper prices tend to be
more cyclical than gold prices and are more directly affected by the worldwide
balance of supply and demand. The volatility of the copper market is
illustrated by the following table, which shows the high, low and average
price, in U.S. dollars per pound, of high grade copper on the London Metal
Exchange in each of the last five years:
YEAR HIGH LOW AVERAGE
---- ---- ---- -------
US$ US$ US$
1996.................... 1.29 0.83 1.04
1997.................... 1.23 0.77 1.03
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 (through January 4) 0.66 0.65 0.65
--------
Source of Data: Metal Bulletin
On January 4, 2002, the closing spot price of high grade copper on the
London Metal Exchange was equivalent to $0.66 per pound.
ZINC
New Newmont will produce zinc, lead and copper concentrates at its Golden
Grove operations in Western Australia. Golden Grove produced 182,655 tonnes of
zinc concentrate containing 82,391 tonnes of payable zinc during the period
July 1, 2000 to June 30, 2001. Golden Grove markets its zinc concentrates under
"evergreen" contracts to major zinc smelters in Japan and Korea. The majority
of zinc concentrate is sold under long term contract arrangements. Pricing
terms are negotiated annually.
HEDGING ACTIVITIES
New Newmont generally intends to sell its production at spot market prices
and expects to continue Newmont's "no hedging" philosophy. While there is no
current intention to enter into any gold hedging positions, New Newmont will
monitor the market on an ongoing basis and may periodically elect to enter into
selective hedging transactions, if required to achieve its strategic
objectives. The hedging policy authorized by Newmont's board of directors
limits total hedging activity to 16 million ounces.
Newmont utilized forward sales contracts for a portion of the gold
production from the Minahasa mine in Indonesia and from Nevada operations.
Newmont sales of gold under forward sales contracts represented 3%, 6% and 18%
of Newmont's total equity production in 2000, 1999 and 1998, respectively. No
costs were incurred for forward sales contracts and there were no margin
requirements related to these contracts. The use of forward sales contracts has
protected Newmont against declining gold prices over the past three years, with
respect to the covered ounces.
Normandy's policy has been to hedge a minimum of 60% of recoverable
reserves. Recoverable reserves are generally between 80% and 95% of total
reserves. Normandy has not entered into contracts that require margin calls and
has no outstanding long-dated sold call options. Normandy has utilized forward
sales contracts with fixed and floating gold lease rates. New Newmont will look
to opportunistically unwind or deliver into Normandy's hedge book over time.
69
The following table summarizes the hedge books of Normandy and its
subsidiaries at September 30, 2001, as reported in Normandy's quarterly reports:
MT. LEYSHON
NORMANDY AND NORMANDY TVX NORMANDY
WHOLLY-OWNED NFM AMERICAS
------------ ------------ -------------
000/OZ A$/OZ 000/OZ A$/OZ 000/OZ US$/OZ
Forward Sales.......................... 5,854 557 1,526 575 4 321
Put Options Purchased.................. 1,366 520 -- -- 697 296
Convertible Options Purchased.......... 1,673 543 -- -- -- --
----- ----- ---
Total............................... 8,893 549 1,526 575 701 296
===== ===== ===
The following table sets forth the marked-to-market value of Normandy's
hedge books as at September 30, 2001:
A$M (I)
100%
-------
Normandy (ii)......................................... $(802)
Mt. Leyshon (iii)..................................... (1)
Normandy NFM (iii).................................... (65)
-----
Total.............................................. $(868)
=====
(i) Spot price at 30 September 2001, $590/oz.
(ii) Wholly-owned, including TVX Normandy Americas.
(iii) 100% of subsidiaries.
PROPERTIES AND OPERATIONS
GENERAL DESCRIPTION OF GOLD PROCESSING FACILITIES
Gold is extracted from naturally-oxidized ores by either heap leaching or
milling, depending on the amount of gold contained in the ore and the
amenability of the gold ore to the treatment. Gold contained in ores that are
not naturally oxidized can be directly milled and leached if the gold is
accessable to the chemical, generally known as free milling ores. Ores that
will not leach efficiently, 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 with air and oxygen to a high temperature and burn off
the carbon and sulfide minerals that encase the gold or that prevent efficient
leaching. Autoclaves use heat, oxygen and pressure to oxidize sulfide minerals
in the ore. Some gold bearing 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 in air bubbles to the
top of the tank where they can be separated from waste particles that sink to
the bottom. The sulfides are removed from the cell and formed into a
concentrate that can then be processed in an autoclave or roaster to fully
recover the gold from the smaller concentrate mass. Bio-milling incorporates
patented technology referred to as bio-oxidation technology that involves
inoculation of suitable crushed ore on a leach pad with naturally occurring and
patented bacteria strains that oxidize the sulfides encasing the gold over a
period of time. The ore is then processed through a mill and leach system.
Free milling and some oxide ores are processed through mills where the ore
is ground into a fine powder and mixed with water in slurry, which then passes
through a cyanide leaching circuit where gold is extracted and collected on
carbon followed by extraction from the carbon and electrowinning. Amenable ores
are processed using heap leaching. The ore is crushed and stacked on
impermeable pads, where weak cyanide solution is applied to the the top surface
of the heaps to dissolve the gold. The gold-bearing solution is collected and
pumped to facilities to remove the gold by collection on carbon or zinc
precipitation directly from leach solutions.
70
NORTH AMERICA
NEVADA
PRODUCTION
New Newmont's Nevada operations including the Midas Mine (formerly the Ken
Snyder Mine) will include Carlin, located west of Elko on the geological
feature known as the Carlin Trend and the Winnemucca Region. The Carlin Trend
is the largest gold district discovered in North America in the last 50 years.
The Winnemucca region includes (i) the Twin Creeks mine located near
Winnemucca, (ii) the Lone Tree Complex located near Battle Mountain and (iii)
the Battle Mountain Complex, near Battle Mountain, where there are no currently
active mining operations but where studies are ongoing with respect to the
feasibility of developing a large gold/copper deposit.
Gold production in Nevada totaled approximately 2.1 million equity ounces at
a cash cost of US$217 per ounce for the first nine months ended September 30,
2001.
In 2000, ore was mined from nine open-pit deposits and five underground
mines. Although the Deep Post open pit was mined out at the end of 2000,
production from stockpiled ore continued into 2001, and production from the
Deep Post underground mine, which is accessed through a decline near the bottom
of the pit, commenced in March 2001.
PROCESSING FACILITIES
New Newmont's operations in Nevada have a number of different ore types and
processing techniques. Newmont has developed a linear programming model to
determine the best mix of ore types for each processing facility in order to
obtain the maximum ounces of gold at the lowest cost from the ores.
Approximately 71% of Nevada's 2000 year-end proven and probable gold reserves
were refractory and the balance were oxide. Nevada's production has
increasingly come from higher-cost refractory ores from both deep open pits and
underground mines as lower-cost, near-surface oxide ores have been depleted.
Refractory ore treatment facilities are expected to generate approximately 65%
of Nevada's gold production in 2001, compared with 67% in 2000.
Higher-grade oxide ores are processed at one oxide mill at Carlin, two at
Twin Creeks and one at Lone Tree. New Newmont will consider whether to continue
operating the Midas mill or close it and process the ore at one of the oxide
mills at Twin Creeks. Lower-grade oxide ores are processed using heap leaching.
Higher-grade refractory ores are processed through either a roaster at Carlin
or through autoclaves at Twin Creeks or Lone Tree.
Gold-bearing activated carbon from Carlin's milling and leaching facilities
is processed on site at a central carbon processing plant and adjacent smelting
facilities. Separate carbon processing facilities are located in the North and
South Areas at Twin Creeks with one smelter in the North Area. Lone Tree has
two carbon processing facilities. Material from the Lone Tree carbon processing
facilities is smelted at Carlin.
OTHER FACILITIES
Analytical laboratories, maintenance facilities and administration offices
are located at Carlin, Twin Creeks and the Lone Tree Complex. We will also have
an advanced metallurgical research laboratory in Denver, Colorado.
Electrical power and natural gas for New Newmont's Nevada operations will be
provided by public utilities. Oxygen for the roaster will be provided on a
contract basis from an oxygen plant constructed by the supplier on land leased
from Newmont. New Newmont will be the sole customer of the oxygen produced.
Oxygen plants used in conjunction with the autoclaves at Twin Creeks and Lone
Tree will be owned by Newmont and operated and maintained by a third party.
71
MINERAL RIGHTS
New Newmont will 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 Carlin and Winnemucca Region mining operations areas.
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, New Newmont will own a 10% undivided interest in the mineral rights and
lease the remaining 90%, on which New Newmont will pay a royalty equivalent to
18% of the mineral production. The remainder of the Gold Quarry mineral rights
will be wholly owned or controlled by New Newmont, in some cases subject to
additional royalties. With respect to certain smaller deposits in the
Winnemucca Region, New Newmont will be obligated to pay royalties on production
to third parties that vary from 3% to 5% of production.
CANADA
GOLDEN GIANT AND HOLLOWAY
New Newmont will have two underground mines in Canada. The Golden Giant mine
(100% owned) is located approximately 25 miles east of Marathon in Ontario,
Canada and has been in production since 1985. The Holloway mine is located
approximately 35 miles east of Matheson in Ontario, and about 400 miles
northeast of Golden Giant. The mine is owned by a joint venture in which New
Newmont will have an 84.65% interest. The remaining 15.35% interest is held by
Teddy Bear Valley Mines.
Gold sales from the Golden Giant and Holloway for the nine months ended
September 30, 2001 were 196,200 and 64,400 ounces, respectively, with total
cash costs of US$193 and US$226 per ounce, respectively.
See also "TVX Normandy" for a description of other mines in Canada in which
New Newmont will have interests.
OTHER NORTH AMERICAN PROPERTIES
New Newmont will have one mine in Southern California, Mesquite. Mining
operations ceased in the second quarter of 2001, with the depletion of the main
ore body. Mesquite operations are transitioning to temporary shut-down and
reclamation, and declining amounts of gold will be recovered from the inventory
of ores on the heap leach pads.
In Mexico, New Newmont will have a 44% interest in La Herradura, which is
located in northwest Sonora, Mexico, and operated by Industriales Penoles S.A.
de C.V. group, Mexico's largest silver producer.
SOUTH AMERICA
PERU
The properties of Minera Yanacocha S.R.L. are located approximately 375
miles north of Lima and 28 miles north of the city of Cajamarca. Since the
discovery of gold ores in 1986, the area has become the largest gold district
in South America. Minera Yanacocha began production in 1993. New Newmont will
hold a 51.35% interest in Minera Yanacocha. The remaining interest is held by
Compania de Minas Buenaventura, S.A.A. (43.65%) and the International Finance
Corporation (5%).
Minera Yanacocha has mining rights with respect to a large land position
that includes multiple deposits as well as other prospects. Such mining rights
were acquired through assignments of concessions granted by the Peruvian
government to a related entity. The assignments have a term of 20 years,
beginning in the early 1990s, renewable at the option of Minera Yanacocha for
another 20 years. In October 2000, Newmont and Compania de Minas Buenaventura
unitized their land holdings in northern Peru, folding them into Minera
Yanacocha. The unitization increased Yanacocha's land position increased from
100 to 535 square miles.
72
Five open-pit mines and four leach pads are in operation at Yanacocha. Gold
sales for the nine months ended September 30, 2001 totalled 1.4 million ounces
of gold (719,500 equity ounces) at a total cash cost of US$117 per ounce.
At the newly developed La Quinua deposit at Yanacocha, testing of the
agglomeration facility and ore placements on the leach pad were completed in
the third quarter of 2001 and gold production commenced in the fourth quarter.
By 2003, production from La Quinua is expected to reach one million ounces per
year at an average total cash cost of approximately US$125 per ounce. At La
Quinua, the ore is crushed, agglomerated and leached, which increases cash
costs slightly.
BOLIVIA
The Kori Kollo open pit mine is on the high plain in northwestern Bolivia
near Oruro on government mining concessions issued to a Bolivian corporation,
Empresa Minera Inti Raymi S.A., which owns and operates the mine. New Newmont
will own 88% of Inti Raymi. The remaining 12% is owned by Zeland Mines, S.A. In
the nine months ended September 30, 2001, the mine sold 201,100 equity ounces
of gold at a total cash cost of US$164 per ounce.
OTHER
New Newmont will also have interests in two operating mines in Brazil and
one in Chile. See "TVX Normandy."
AUSTRALASIA
AUSTRALIA
New Newmont's Australian operations will consist of a 50% interest in the
Super Pit and Mt. Charlotte mines, a 44% interest in the Boddington expansion
project, 100% ownership of the Normandy Yandal operations, which consists of
the Bronzewing, Jundee and Wiluna mines, an 87.5% interest in Normandy NFM,
which owns the Tanami operations and a 100% interest in the Pajingo mine. New
Newmont's Australian operations would have contributed approximately 1.97
million ounces of New Newmont's total attributable gold production in the
twelve months ended June 30, 2001.
KALGOORLIE
The Kalgoorlie operations comprise the Fimiston Open Pit (commonly referred
to as the Super Pit) and Mt. Charlotte underground mine at Kalgoorlie-Boulder,
600 km east of Perth in the Eastern Goldfields. The mines are managed and run
by Kalgoorlie Consolidated Gold Mines Pty Ltd ("KCGM") for the Joint Venture
owners, New Newmont and Homestake Gold of Australia Limited, which will each
hold 50%.
The Super Pit is Australia's largest gold mine, in terms of both gold
production and total annual mining volumes.
For the period July 1, 2000 to June 30, 2001, the Super Pit produced 360,683
equity ounces of gold at a total cash cost for Normandy of A$322 per ounce.
Life of mine plans for the Super Pit estimate a 15-17 year life for the
operation.
Mt. Charlotte is a large underground gold mine that has yielded about 25
million tonnes of ore and over 3 million ounces of gold. During the period July
1, 2000 to June 30, 2001, the mine produced 107,396 ounces of gold from the
treatment of 1.2 million tonnes of ore at a cash cost of A$365 per ounce. The
operation is scheduled to close in December 2001.
73
BODDINGTON
Boddington, a large-scale open pit mining operation, is operated by Worsley
Alumina Pty Ltd on behalf of the joint venture owners, which will be New
Newmont (44.4%), AngloGold (33.3%) and Newcrest Mining Limited (22.2%).
Reserves were exhausted in November 2001, and facilities are being placed on
care and maintenance where those facilities are required for the proposed
expansion. From July 1, 2000 to June 30, 2001, 8.5 million tons of ore were
treated, producing 228,405 ounces of gold (100%) at a total cash cost for
Normandy of A$381 per ounce. The Boddington expansion project has been delayed,
with restructuring of current management arrangements a prerequisite to
development.
NORMANDY YANDAL
New Newmont will have a 100% interest in Yandal, which consists of the
Bronzewing, Jundee and Wiluna mines situated in the Yandal Goldfields in
Western Australia. The three operations collectively produced 787,457 ounces of
gold from July 1, 2000 to June 30, 2001 at an average total cash cost of A$288
per ounce.
TANAMI
The Tanami operations comprise the Granites treatment plant and associated
mining operations, which are located approximately 550 kilometers northwest of
Alice Springs adjacent to the Tanami highway, and the Dead Bullock Soak mining
operations, some 40 kilometers west of the Granites. The major mine is the
underground Callie operation at Dead Bullock Soak. The Tanami operations will
be owned by Normandy NFM, a publicly listed, 87.5% owned subsidiary of New
Newmont.
The operation is now predominantly focused on the Callie underground mine
with mill feed supplemented by production from the Dead Bullock Ridge open pit
and the Bunkers and Quorn pits at the Granites.
For the period July 1, 2000 to June 30, 2001, Tanami operations produced
420,836 ounces of gold (368,021 equity ounces) at a total cash cost of A$279
per ounce.
The Tanami operations also include the Groundrush deposit at which mining
commenced in mid-September 2001. Gold production commenced in November 2001.
PAJINGO
The Pajingo gold mine is an underground mine located approximately 150 km
southwest of Townsville, Queensland and 72 kilometers south of the local
township of Charters Towers. The Pajingo gold mine will be 100% owned by New
Newmont.
Royalties are paid to the Queensland government at 4.0-5.9% of revenues
depending on the gold price. Royalties are also paid to traditional land owners
consisting of 0.2% of revenues and a fixed payment upon exploration success.
For the period July 1, 2000 to June 30, 2001, Pajingo produced 229,788 total
ounces of gold at a total cash cost of A$177 per ounce.
MT. LEYSHON
The Mt. Leyshon gold mine, near Charters Towers, Queensland is owned by Mt.
Leyshon Resources Ltd, which is a publicly listed company of which Normandy
owns 13.7%. Mining ceased at the large scale open pit at Mt. Leyshon in
February 2001. The operation is currently producing gold by treating existing
low-grade stockpiles of 5 million tonnes at 0.8 grams per tonne of gold.
Treatment of stockpiles is expected to be completed in January-February 2002
with operations expected to be closed by the middle of 2002.
74
A comprehensive mine closure and rehabilitation plan covering remaining
operations, closure, rehabilitation, decommissioning and post-closure
monitoring has been implemented. Mine closure and rehabilitation costs are
expected to be approximately A$8 million. As part of a restructure of Mt.
Leyshon Ltd, New Newmont will assume responsibility for mine closure and
rehabilitation costs, as well as ongoing environmental obligations.
NEW ZEALAND
MARTHA
The Martha gold mine is located within the town of Waihi, approximately 110
km southeast of Auckland, New Zealand. It will be a joint venture between New
Newmont and Otter Gold Mines Limited ("Otter"). New Newmont will have a 67.06%
interest and manage the operation. Normandy NFM Limited, a subsidiary of
Normandy, has made a takeover bid for Otter. See section 9.2, "Information
about Normandy--General description of Normandy's operations--Recent
developments" on page 109, discussing Normandy NFM's bid for Otter.
In 1998, additional resources were identified, which has allowed the life of
the mine to be extended a further six years to 2007.
The operation produced 95,070 ounces of gold for the period July 1, 2000 to
June 30, 2001 at a total cash cost of A$344 per ounce.
The Martha mine does not currently pay royalties. Under new royalty
arrangements, the Martha mine will be required to pay a royalty on new
discoveries such as Favona. The royalty rate is the greater of 1% of gross
revenues from silver and gold sales or 5% of accounting profit. New Newmont
will receive a management fee of 2% of gross revenues from Otter.
The open pit's location immediately adjacent to the town also means that it
is unlikely that the pit will be expanded or that underground mining will be
pursued below the bottom of the Martha pit. Accordingly, there do not currently
appear to be any prospects of extending the current reserves within the Martha
deposit. At current production rates, reserves are sufficient to support a mine
life of around six years. The longer term future for the Martha operation is
based on the recently discovered Favona vein. The full extent of the
mineralization will only be tested once underground access is available.
However, drilling to date suggests that the Favona system is likely to support
an underground mining operation.
INDONESIA
New Newmont will have two operating properties in Indonesia: Minahasa, a
gold operation, and Batu Hijau, which produces copper/gold concentrates. New
Newmont will own 80% of Minahasa. The remaining 20% interest is a carried
interest held by P.T. Tanjung Serapung, an Indonesian company. New Newmont will
have a 45% equity interest in Batu Hijau through a partnership with an
affiliate of Sumitomo Corporation, which will hold a 35% interest. The
remaining 20% is a carried interest held by P.T. Pukuafu Indah, an Indonesian
company. New Newmont will account for its investment in Batu Hijau as an equity
investment due to each partner's significant participating rights in the
business. New Newmont will be entitled to 56.25% of the concentrate production
until New Newmont recovers the bulk of Newmont's investment, including interest.
In Indonesia, rights are granted to private parties to explore for and to
develop mineral resources within defined areas through Contracts of Work
entered into with the Indonesian government. In 1986, Newmont entered into
separate fourth generation Contracts of Work with the government covering
Minahasa and Batu Hijau, under which Newmont was granted the exclusive right to
explore the contract area, construct any required facilities, extract and
process the mineralized materials and sell and export the minerals produced
subject to
75
certain Indonesian government approvals and payment of royalties to the
government. New Newmont will have the right to continue operating the projects
for 30 years, or longer, if approved by the Indonesian government. Under New
Newmont's Contracts of Work, beginning in the sixth year after mining
operations commenced (and continuing through the tenth year), a portion of each
project not already owned by Indonesian nationals must be offered for sale to
the Indonesian government or to Indonesian nationals, thereby potentially
reducing Newmont's (and, in the case of Batu Hijau, Newmont's and Sumitomo's)
ownership in each project to 49% by the end of the tenth year. The price at
which such interest would be offered for sale to the Indonesian parties would
be the highest of (i) the then current replacement cost, (ii) the price at
which shares of the project company would be accepted for listing on the
Jakarta Stock Exchange or (iii) the fair market value of such interest as a
going concern.
MINAHASA
Newmont's first project in Indonesia, Minahasa, on the island of Sulawesi,
approximately 1,500 miles northeast of Jakarta, was a Newmont discovery and
consisted of a multi-deposit operation. Production began in 1996 and ore was
processed from the open pit Mesel deposit and a number of smaller peripheral
deposits. These deposits contained both oxidized and refractory gold
mineralization.
Minahasa sold 275,400 equity ounces of gold in the nine months ended
September 30, 2001 with total cash costs of US$135 per ounce. Mining operations
will cease by the end of 2001; however, it is expected that processing from
this mine will continue through 2003.
BATU HIJAU
New Newmont's second project in Indonesia, Batu Hijau, is located on the
island of Sumbawa, approximately 950 miles east of Jakarta. Batu Hijau is a
large porphyry copper/gold deposit, which Newmont discovered in 1990.
In July 1997, agreements for US$1 billion in financing for the Batu Hijau
project were signed. Project completion tests were met in October 2000 and, as
a result, the financing is now non-recourse to New Newmont and Sumitomo.
Development and construction activities began in 1997 and start-up took
place in late 1999. The mine produced 519.7 million pounds of copper and
451,400 ounces of gold in the nine months ended September 30, 2001, 56.25% of
which is attributable to Newmont's economic interest. After gold credits the
cash cost was US$0.36 for the nine months ended September 30, 2001.
ASIA AND EUROPE
UZBEKISTAN
New Newmont will have a 50% interest in Zarafshan-Newmont. The remaining 50%
interest is divided between the State Committee for Geology and Mineral
Resources ("State Committee") and Navoi Mining and Metallurgical Combine
("Navoi"), each a state entity of Uzbekistan. The joint venture produces gold
by crushing and leaching ore from existing stockpiles of low-grade oxide ore
from the nearby government-owned Muruntau mine. The gold produced by
Zarafshan-Newmont is sold in international markets for U.S. dollars. Newmont
provides technical and managerial support to Zarafshan-Newmont. The State
Committee and Navoi guaranteed to furnish Zarafshan-Newmont with 242 million
tons of ore with an average grade of 0.036 ounces of gold per ton, containing
approximately 8.6 million ounces of gold. In late 2000, the ore supply
agreement was amended to add an additional 220 million tons of ore with an
average grade of 0.05 ounces of gold per ton. To handle the additional ore, the
joint venture has arranged for construction of a leach pad extension and an
expansion of the ore supply conveyor system. The amended agreement extends the
life of the operation to at least 2013. Ore placement on the heap leach pad
expansion project is scheduled for the beginning of 2002.
76
For the nine months ended September 30, 2001, total sales were 325,200
ounces (162,600 equity ounces) at a total cash cost of US$136 per ounce.
TURKEY
The Ovacik gold mine is located on the western Aegean coast of Turkey. New
Newmont will own 100% of the mine. The first gold was produced in May 2001. The
mine is the subject of regulatory action which could result in its closure.
AFRICA
COTE D'IVOIRE
The Ity gold mine is located in Cote d'Ivoire, West Africa. Normandy has
disclosed that Normandy La Source has accepted an offer for the sale of its
interest in the Ity gold mine.
TVX NORMANDY
TVX Normandy was formed in June 1999 as a strategic alliance between
Normandy and TVX Gold. TVX Normandy will be 49.9% owned by New Newmont and
50.1% owned by TVX Gold. The principal assets of TVX Normandy are interests in
the following operating gold mines in South America and Canada:
Paracatu (51% Rio Tinto Limited; 49% TVX Normandy). Rio Tinto is the
operator of the mine. For the twelve months ended June 30, 2001, Paracatu
produced 207,718 ounces of gold (100%) at a total cash cost of A$350 per ounce.
Crixas (50% AngloGold; 50% TVX Normandy). AngloGold is the operator of the
mine. For the twelve months ended June 30, 2001, Crixas produced 192,985 ounces
of gold (100%) at total cash costs of A$212 per ounce.
La Coipa (50% Placer Dome; 50% TVX Normandy). Placer Dome is the operator of
the mine. For the twelve months ended June 30, 2001, La Coipa's gold equivalent
production was 137,138 ounces at total cash costs of A$225 per ounce.
Musselwhite (68.1% Placer Dome; 31.9% TVX Normandy). Placer Dome is the
operator of the mine. For the twelve months ended June 30, 2001, Musselwhite
produced 236,604 ounces of gold (100%) at total cash costs of A$318 per ounce.
New Britannia (50% High River Gold; 50% TVX Normandy). TVX Normandy is the
operator of the mine. For the twelve months ended June 30, 2001, New Britannia
produced 105,849 ounces of gold (100%) at total cash costs of A$375 per ounce.
DEVELOPMENT PROJECTS
New Newmont will also have a several advanced gold projects in its portfolio
of assets. New Newmont will have the flexibility to optimize the development of
these projects based on project economics, political risk and free cash flow
profiles.
77
The following table sets forth certain information with respect to New
Newmont's principal development projects:
% ESTIMATED EQUITY RESERVES
PROJECT LOCATION OWNERSHIP (MM OZ)
------- ------------- --------- -------------------------
Leeville........................... Nevada, USA 100 3.0
Twin Creeks South.................. Nevada, USA 100 1.9
Gold Quarry South.................. Nevada, USA 100 3.0
Phoenix............................ Nevada, USA 100 6.1
Boddington Expansion............... Australia 44.4 4.9
Yamfo-Sefwi........................ Ghana, Africa 90 3.3
Yanacocha Sulfides & covered oxides Peru, S.A. 51.35 (a)
Martabe............................ Indonesia 90 (a)
Akim............................... Ghana, Africa 80 (a)
--------
(a) Not included in Proven and Probable Reserves.
EXPLORATION
New Newmont expects to have a 2002 exploration and research budget of
approximately US$75 million. It is expected that approximately 70% would be
applied to near-mine and regional exploration in existing districts, plus work
on advanced exploration and development projects in Indonesia and West Africa,
and approximately 30% on the worldwide search for new reserve opportunities
outside current operating districts, acceleration of select programs having
positive results,and on metallurgical research, operational optimization
studies and project evaluation.
NON-GOLD ASSETS
The following table sets forth certain information with respect to New
Newmont's non-gold operations:
ASSET/PROJECT DEVELOPED MINERAL LOCATION INTEREST
----------------------- --------- ----------------- --------
Golden Grove.............. Zinc Western Australia 100%
Australian Magnesium Corp. Magnesium Queensland 22.8%
Kasese.................... Cobalt Uganda 53.9%
GOLDEN GROVE
New Newmont will own 100% of the Golden Grove operation in Western
Australia. Golden Grove has two underground mines at the Scuddles and Gossan
Hill deposits with a combined mining rate of 1.2 million tonnes per year. The
principal product is zinc concentrate. A high precious metal ("HPM") lead
concentrate and low precious metal ("LPM") copper concentrate are also produced.
Zinc production declined to 182,655 tonnes of concentrate (containing 82,391
tonnes of payable zinc metal) for the twelve months ended June 30, 2001. The
decline in zinc production was a direct result of separating zinc (895,164
tonnes) and copper ores (272,122 tonnes). The decline in zinc metal production
was directly offset by an increase in copper production to 11,008 tonnes of
payable copper metal.
Current reserves at Scuddles and Gossan Hill are sufficient to support
approximately 4.5 years production at current production rates. However, the
Catalpa, Hougoumount and Amity deposits are expected to provide sufficient
additional ore to substantially extend the mine life. A pre-feasibility study
for the Amity deposit was completed in early 2001 and development commenced in
May 2001.
78
AUSTRALIAN MAGNESIUM CORPORATION
New Newmont will have a 22.8% voting interest in Australia Magnesium
Corporation, which has developed a proprietary process known as the AM Process,
a chemical and dehydration process for producing anhydrous magnesium chloride
suitable as feed for an electrolytic cell to produce molten magnesium metal.
Australia Magnesium has recently undertaken a A$525 million equity raising to
support the financing of the A$1.3 billion development of the Stanwell
magnesium project. Normandy has an obligation to contribute A$100 million in
equity between October 31, 2002 and January 31, 2003.
KASESE
New Newmont will hold an 86% interest in Banff Resources Ltd ("Banff"),
which in turn holds a 63% interest in the Kasese cobalt project (New Newmont
effective interest 54%) and an option to earn a 65% interest in the nearby
Kilembe mine and tailings. The Kasese cobalt project is located in western
Uganda. In June 2001, Normandy wrote down the carrying value of its interest in
the project to zero.
ROYALTY BUSINESS
New Newmont will continue to build upon the Franco-Nevada royalty and
merchant banking business as a newly formed unit of Newmont. In addition to its
own exploration programs (see "Exploration"), New Newmont will be active in
assembling and improving exploration land packages with the objective of
vending the properties to other operators in return for a royalty. New Newmont
benefits from any discoveries made by other operators on its royalty lands.
New Newmont's royalty interests will generally be in the form of a net
smelter return royalty ("NSR") that provides for the payment either in cash or
physical metal of a specified percentage of production, less certain specified
transportation and refining costs. In some cases, New Newmont will own a net
profit interest ("NPI") pursuant to which New Newmont is entitled to a
specified percentage of the net profits, as defined in each case, from a
particular mining operation.
Several royalties are held by Franco-Nevada on certain Newmont and Normandy
properties, including portions of Deep Star, Deep Post, Gold Quarry, certain
exploration properties and all of Midas. Upon the merger of Newmont and
Franco-Nevada and the acquisition of Normandy, these royalties will be
eliminated in the consolidated results of New Newmont and are not listed or
described herein.
The following is a description of New Newmont's principal gold royalties.
GOLDSTRIKE
New Newmont will hold various NSR and NPI royalties on the Goldstrike Mine
(Betze-Post and Meikle Mines) located in the Carlin Trend gold mining area of
northern Nevada. The Betze-Post and Meikle Mines are owned and operated by a
subsidiary of Barrick Gold Corporation ("Barrick"). The Betze-Post Mine is a
conventional open pit operation. The Betze-Post property consists of various
claim blocks and New Newmont's royalty interest in each claim block will be
different, ranging from 0% to 4% for the NSRs and 0% to 6% for the NPIs. On a
combined basis, New Newmont's NSRs and NPIs cover land containing 81.3% of the
Betze-Post Mine reserves and resources reported by Barrick as at December 31,
2000. The Meikle Mine is an underground operation comprising the Meikle, Rodeo
and Griffin deposits, located one mile north of the Betze-Post Mine that shares
the Goldstrike processing facilities with the Betze-Post Mine. New Newmont will
hold a 4% NSR and a 5% NPI over 1,280 acres of the claims that cover the
Meikle, Rodeo and Griffin deposits.
New Newmont is not obliged to fund any portion of the cost associated with
the Betze-Post Mine or the Meikle Mine. Barrick's mining sequence from various
claim groups will cause fluctuations in New Newmont's royalty receipts. The NSR
royalties are based upon gross production from the mine, reduced only by the
ancillary
79
costs of smelter charges and transportation of about US$2 per ounce. The
determinants of the revenue received from the NSRs covering the Betze-Post Mine
are the number of ounces of gold produced, New Newmont's selling price of the
gold, and the cost of shipping and smelting. The Post-Goldstrike NPI began
paying in October 1993, the month that the cumulative net profit from the Post
and Goldstrike claims exceeded capital invested in those claims. Net profits
are calculated as proceeds less costs. Proceeds equal the number of ounces of
gold produced from the Post and Goldstrike claims and the Meikle Mine,
multiplied by the spot price of gold on the date gold is credited to Barrick's
account at the refinery. Costs include operating and capital costs as incurred.
In its public filings for the year ended December 31, 2000, Barrick reported
production of 1,647,000 ounces from the Betze-Post Mine with an estimate of
production in 2001 of 1,612,000 ounces. Similarly, production from the Meikle
Mine in 2000 was 806,000 ounces with an expected 669,000 ounces to be produced
in 2001. Barrick estimated proven and probable reserves at December 31, 2000
using a gold price of US$300 per ounce. The Betze-Post Mine was estimated to
contain 116.4 million tons grading 0.155 ounces per ton for 18.0 million
contained reserve ounces. The Meikle Mine, including the Rodeo and Griffin
deposits, was estimated to contain 14.1 million tons grading 0.458 ounces per
ton for 6.5 million contained reserve ounces.
STILLWATER
New Newmont will hold a 5% net smelter return royalty on a portion of the
Stillwater Mine and all of the East Boulder Mine located near Nye, Montana. The
Stillwater Mine and East Boulder Mine project are owned and operated by
Stillwater Mining Company ("Stillwater"), a U.S. public company listed on the
New York Stock Exchange. Stillwater produces palladium, platinum, and
associated metals (platinum group metals or PGMs) from a geological formation
known as the J-M Reef. Stillwater is the only significant producer of PGMs
outside of South Africa and Russia. The J-M Reef is an extensive mineralized
zone containing PGMs, which has been traced over a strike length of
approximately 28 miles.
The following table sets forth Stillwater's publicly reported proven and
probable palladium and platinum ore reserves as of December 31, 2000 and 1999.
The reserves reflected below are based on a cut-off grade in 2000 and 1999 of
0.3 ounces of palladium plus platinum per ton, and assume prices for palladium
and platinum of US$225 and US$350 per ounce, respectively, in 2000 and 1999.
Proven and probable reserves give effect to an average mining dilution of 10%
at zero grade based on actual mining experience.
DECEMBER 31, 2000 DECEMBER 31, 1999
------------------------- -------------------------
CONTAINED CONTAINED
TONS AVERAGE OUNCES/(1)/ TONS AVERAGE OUNCES/(1)/
CATEGORY (000) GRADE (000) (000) GRADE (000)
-------- ------ ------- ---------- ------ ------- ----------
Proven........... 2,694 0.75 2,020 1,764 0.74 1,311
Probable Reserves 32,865 0.71 23,243 34,529 0.71 24,352
------ ------ ------ ------
Total............ 35,559 0.71 25,263 36,293 0.71 25,663
====== ====== ====== ======
--------
(1) Expressed as palladium plus platinum ounces per ton at a ratio of 3.3 parts
palladium to one part platinum, before processing losses of approximately
10%.
New Newmont's royalty covers more than 80% of the combined reserves and
resources of the deposit, but does not cover a portion of the deposit at the
Stillwater Mine. The majority of production to date has been from the
Stillwater Mine. For that reason, the percentage of ore mined from the royalty
lands has been lower than the 80% reserve percentage. For the years 1995
through 2000, the average annual percentage of production from the royalty
lands totalled 52.45%. The percentage of future production from the royalty
lands will vary from year to year. The royalty encompasses all of the reserves
at the East Boulder Mine, which is being developed approximately thirteen miles
to the west of the Stillwater Mine. Once the East Boulder Mine is producing,
the percentage of production from the royalty lands will increase. Ultimately,
the cumulative rate is expected to equal the percentage of reserves covered by
the royalty. During calendar 2000, Stillwater produced 430,000
80
ounces of PGMs. On November 8, 2001, Stillwater announced that in light of
sharply lower prices for palladium and platinum it was modifying mine plans for
both the Stillwater and East Boulder Mines.
OIL & GAS INTERESTS
New Newmont will also be active in the oil and gas royalty business. Its oil
and gas portfolio contains 1.8 million gross acres of producing and
non-producing lands located in western Canada and the Canadian Arctic. The
average royalty on these lands is 6%. The portfolio contains long-life
reserves, is comprised of working interests ("WI") and/or overriding royalty
interests ("ORR") which are based on oil and gas well revenue less possible
deductions for transportation or processing. The following table sets forth
certain information with respect to New Newmont's principal oil and gas royalty
interests.
PROPERTY, LOCATION OPERATOR INTEREST
------------------ ------------- -----------
Royalties:
Weyburn Unit, Saskatchewan........ PanCanadian 1.6% WI/ORR
Midale Unit, Saskatchewan......... Apache 2.6% WI/ORR
Tidewater, Saskatchewan........... Various 1.4% ORR
Edson, Alberta.................... Rio Alto 15% ORR
Medicine Hat, Alberta............. Petro-Canada 2.3% ORR
Other Interests:
Heavy Crude, Alberta.............. Non-producing 100% WI
Arctic Gas, Northwest Territories. Petro-Canada 10% WI
The following table sets forth certain information relating to reserves as
at March 31 based on constant cost and price assumptions and before deduction
of royalties owned by others:
OIL & GAS RESERVES
2001 2000
----------- -----------
Established (barrels of oil equivalent ("boe"))(1)(2) 6,600,000 4,900,000
Proved, probable and possible (boe).................. 10,300,000 8,600,000
Heavy crude (boe)(3)................................. 465,000,000 294,000,000
Arctic gas (boe)..................................... 114,000,000 114,000,000
--------
(1) 100% Proven plus 50% Probable
(2) Based upon $36.13 Cdn/boe and $23.39 Cdn/boe respectively.
(3) Estimate based on 60% recovery factor
INVESTMENTS
ABER DIAMOND CORPORATION
New Newmont will own 14.1% (7,717,000 shares) of the outstanding common
shares of Aber Diamond Corporation ("Aber"). Aber is a Toronto based public
company listed on the TSE the principal asset of which is a 40% interest in the
Diavik Diamonds Project (the "Diavik Project") in the Northwest Territories,
Canada. Rio Tinto PLC is the 60% owner and is manager of the C$1.3 billion
development currently in progress.
On November 2, 2001 Aber reported that it had accepted an underwritten
commitment from a lead group of five banks for a project loan facility of
US$230 million. The facility is sufficient to fund Aber's share of budgeted
expenditures to complete the Diavik Project and additional corporate
requirements. Aber also reported that construction of the Diavik Project is 60%
complete and is on budget and on schedule. Diamond sales are expected to
commence in the second quarter of 2003.
81
ECHO BAY MINES LIMITED
New Newmont will own approximately US$72.4 million principal amount of the
11% capital securities due April 2027 of Echo Bay Mines Ltd., a public company
trading on AMEX and the TSE. Echo Bay is a substantial gold company producing
695,000 ounces in calendar 2000 from four mines in the United States and
Canada. Echo Bay operates the Round Mountain and McCoy-Cove mines in Nevada.
At September 30, 2001, the principal plus accrued interest on the Echo Bay
capital securities to be owned by New Newmont amounted to US$115.3 million. It
is New Newmont's intention to convert all its Echo Bay capital securities into
Echo Bay common shares and to maintain an initial approximate 49.5% equity
interest in Echo Bay. The conversion is subject to the approval of Echo Bay
shareholders and is conditional on regulatory approvals. Proxy materials are
currently under review with regulatory authorities. The conversion of the Echo
Bay capital securities into common shares will likely occur prior to the
creation of New Newmont.
PROVEN AND PROBABLE RESERVES
New Newmont's equity in proven and probable gold reserves was 92.7 million
ounces using combined publicly reported reserves for Newmont Mining Corporation
as at December 31, 2000, and Normandy Mining Ltd. as at June 30, 2001. To the
extent of production since these reporting dates, such reserves have been
depleted and are thus lower than stated. Reserves are published once each year
and will be recalculated as of December 31, 2001, and June 30, 2002 for Newmont
and Normandy, respectively, taking into account such depletion as well as any
additions to reserves based on results of exploration and development work
performed during 2001/2002. Of these reserves, approximately 483,333 ounces
have been committed under prepaid forward sales contracts. In addition, the
company's equity in proven and probable copper and zinc reserves was 7.1
billion and 454 million pounds, respectively, using the same reporting dates as
for gold.
Proven and probable reserves were determined by the use of mapping,
drilling, sampling, assaying and evaluation methods generally applied in the
mining industry. Calculations with respect to the estimates of proven and
probable gold reserves were based on a gold price of US$300 per ounce for
Newmont's reserve share, whereas Normandy's reserve share was based on a range
of A$450 to $500 per ounce at all properties except the TVX-Americas (Canada,
South America) reserves which were based on a gold price of US$300 per ounce.
Newmont estimated that if its reserve estimates had been based on a gold price
of $275 per ounce, 2000 year-end proven and probable gold reserves could have
decreased by approximately 8%.
The proven and probable reserves figures presented herein are estimates, and
no assurance can be given that the indicated levels of recovery of gold,
copper, and zinc will be realized. Ounces of gold or pounds of copper or zinc
in our proven and probable reserves are prior to any losses during
metallurgical treatment. Reserve estimates may require revision based on actual
production experience. Market price fluctuations of gold, copper, and zinc, as
well as increased production costs or reduced recovery rates, could render our
proven and probable reserves containing relatively lower grades of
mineralization uneconomic to exploit and might result in a reduction of
reserves.
82
GOLD PROVEN AND PROBABLE RESERVES, AND MATERIAL NOT IN RESERVE--U.S. UNITS(1)(2)
GOLD MATERIAL NOT
GOLD PROVEN AND PROBABLE RESERVES IN RESERVE(3)
----------------------------------------------------------- -------------------
(100%) (100%)
- ----------------------------- EQUITY -------------------
CONTAINED CONTAINED METALLURGICAL
EQUITY TONNAGE(4) GRADE OUNCES(5) OUNCES(5) RECOVERY TONNAGE GRADE
DEPOSITS/DISTRICTS (%) (000 TONS) (OZ/TON) (000) (000) (%) (000 TONS) (OZ/TON)
------------------ ------ ---------- -------- --------- --------- ------------- ---------- --------
NEWMONT MINING CORPORATION (DECEMBER 31, 2000, INCLUDES BATTLE MTN.)
North American
Nevada
Nevada Open Pit.................
Carlin Trend.................... 100.0% 122,479 0.050 6,172 6,172 70.1% 34,200 0.048
Twin Creeks..................... 100.0% 75,199 0.086 6,436 6,436 85.4% 74,950 0.054
Lone Tree Complex............... 100.0% 40,847 0.060 2,464 2,464 75.5% 7,429 0.050
Phoenix Project................. 100.0% 175,185 0.034 6,031 6,031 82.0% 72,220 0.026
--------- ------ ------ ---------
Total Nevada Open Pit........... 413,710 0.051 21,103 21,103 188,799 0.042
--------- ------ ------ ---------
Nevada Underground
Carlin Trend.................... 100.0% 11,632 0.574 6,679 6,679 92.9% 2,527 0.499
Rosebud......................... 50.0% -- -- -- 236 0.330
--------- ------ ------ ---------
Total Nevada Underground......... 11,632 0.574 6,679 6,679 2,763 0.484
--------- ------ ------ ---------
Nevada Stockpiles and In-Process. 100.0% 91,494 0.049 4,478 4,478 74.9% 46,017 0.044
--------- ------ ------ ---------
Total Nevada....................... 516,836 0.062 32,260 32,260 237,579 0.048
--------- ------ ------ ---------
Mesquite, California............ 100.0% 13,689 0.019 263 263 60.5% 51,522 0.019
Golden Giant, Ontario........... 100.0% 4,779 0.286 1,369 1,369 96.0% --
Holloway, Ontario............... 88.3% 4,389 0.195 858 758 95.0% 1,434 0.195
La Herradura, Mexico............ 44.0% 49,754 0.026 1,306 575 71.0% 16,649 0.032
Mezcala, Mexico................. 44.0% 69,464 0.026
--------- ------ ------ ---------
Total Other North America....... 72,611 0.052 3,796 2,965 139,069 0.026
--------- ------ ------ ---------
TOTAL--NORTH AMERICA............. 589,447 0.069 36,056 35,225 376,648 0.040
========= ====== ====== =========
South America
Minera Yanacocha, Peru........... 51.35%
Oxide Gold Leach Deposits....... 51.35% 1,335,518 0.027 36,553 18,769 70.0% 173,795 0.022
Sulfide Copper Gold Deposits.... 51.35% -- -- -- 707,028 0.023
--------- ------ ------ ---------
Total Minera Yanacocha........... 1,335,518 0.027 36,553 18,769 880,823 0.023
--------- ------ ------ ---------
Kori Kollo, Bolivia............. 88.0% 30,348 0.038 1,148 1,010 62.0% 16,685 0.039
Gurupi, Brazil.................. 50.0% -- -- -- 66,563 0.041
--------- ------ ------ ---------
TOTAL--SOUTH AMERICA............... 1,365,866 0.028 37,701 19,779 964,071 0.024
========= ====== ====== =========
Australasia(6)
Pajingo, Australia.............. 50.0% 2,126 0.451 959 480 97.2% 4,048 0.368
--------- ------ ------ ---------
TOTAL--AUSTRALASIA................. 2,126 0.451 959 480 4,048 0.368
========= ====== ====== =========
Asia and Europe
Minahasa, Indonesia (7).......... 95.92% 4,625 0.151 699 670 82.0% --
Batu Hijau, Indonesia (7)........ 56.25% 944,460 0.012 11,721 6,593 79.2% 572,674 0.005
Zarafshan, Uzbekistan (8)........ 50.0% 169,468 0.042 7,158 3,579 55.3% --
--------- ------ ------ ---------
TOTAL--ASIA AND EUROPE............. 1,118,553 0.018 19,578 10,842 572,674 0.005
========= ====== ====== =========
TOTAL NEWMONT WORLDWIDE............ 3,075,992 0.031 94,294 66,326 1,917,441 0.022
========= ====== ====== =========
NORMANDY MINING (JUNE 30, 2001)
North America
Midas, Nevada.................... 100.0% 3,295 0.646 2,130 2,130 97.0% 23,451 0.061
Musselwhite, Canada.............. 15.97% 15,648 0.163 2,550 407 96.0% 4,739 0.154
New Britania, Canada............. 24.95% 3,075 0.156 480 120 92.0% 3,504 0.111
--------- ------ ------ ---------
TOTAL NORTH AMERICA................ 22,018 0.234 5,160 2,657 31,694 0.080
========= ====== ====== =========
South America
Paracatu, Brazil................. 24.45% 287,622 0.012 3,560 870 76.0% 189,544 0.012
Crixas, Brazil................... 24.95% 4,562 0.237 1,080 269 94.0% 1,025 0.302
La Coipa, Chile.................. 24.95% 50,802 0.032 1,650 412 83.3% 21,158 0.032
Gurupi, Brazil................... 24.95% -- -- -- 66,561 0.041
--------- ------ ------ ---------
TOTAL SOUTH AMERICA................ 342,986 0.018 6,290 1,551 278,288 0.022
========= ====== ====== =========
83
GOLD PROVEN AND PROBABLE RESERVES, AND MATERIAL NOT IN RESERVE--U.S. UNITS(1)(2)
GOLD MATERIAL NOT
GOLD PROVEN AND PROBABLE RESERVES IN RESERVE/(3)/
-------------------------------------------------------------- -------------------
(100%) (100%)
------------------------------- EQUITY -------------------
CONTAINED CONTAINED METALLURGICAL
EQUITY TONNAGE/(4)/ GRADE OUNCES/(5)/ OUNCES/(5)/ RECOVERY TONNAGE GRADE
DEPOSITS/DISTRICTS (%) (000 TONS) (OZ/TON) (000) (000) (%) (000 TONS) (OZ/TON)
------------------ ------ ----------- -------- ---------- ---------- ------------- ---------- --------
NORMANDY MINING (JUNE 30, 2001)
Australasia
Pajingo, Queensland............ 50.0% 2,116 0.430 910 455 96.5% 3,548 0.372
Boddington, Western Australia.. 44.40% 432,844 0.026 11,040 4,902 89.0% 417,129 0.023
Gossan Hill, Western Australia. 100.0% -- -- -- 1,389 0.072
Kalgoorlie, Western Australia.. 50.0% 204,862 0.061 12,490 6,245 90.1% 223,596 0.084
Mt. Leyshon, Queensland........ 13.7% 3,934 0.020 80 61 77.2% --
Tanami, Northern Territories... 87.47% 19,891 0.144 2,870 2,510 95.8% 41,413 0.078
Yandal, Western
Australia..................... 100.0% 18,260 0.128 2,340 2,340 93.4% 50,780 0.096
Martha, New Zealand............ 67.06% 7,097 0.099 700 469 94.0% --
--------- ------- ------ ---------
TOTAL--AUSTRALASIA............... 689,004 0.044 30,430 16,982 737,855 0.051
========= ======= ====== =========
Asia and Europe..................
Mastra, Turkey................. 100.0% -- -- -- 1,091 0.357
Ovacik, Turkey................. 100.0% 1,327 0.392 520 520 91.0% 3,269 0.153
Perama, Greece................. 80.0% 12,122 0.108 1,310 1,048 90.0% 2,645 0.057
--------- ------- ------ ---------
TOTAL--ASIA AND EUROPE........... 13,449 0.136 1,830 1,568 7,005 0.148
========= ======= ====== =========
Africa...........................
Akim, Ghana.................... 80.0% -- -- -- 56,643 0.061
Ity, Cote d'Ivoire............. 51.0% 4,540 0.148 670 342 84.6% 804 0.162
Yamfo-Sefwi, Ghana............. 85.6% 53,006 0.073 3,890 3,330 90.6% 62,924 0.056
--------- ------- ------ ---------
TOTAL--AFRICA.................... 57,546 0.079 4,560 3,672 120,371 0.059
========= ======= ====== =========
TOTAL NORMANDY WORLDWIDE......... 1,125,003 0.043 48,270 26,430 1,175,213 0.047
========= ======= ====== =========
TOTAL NEWMONT AND NORMANDY
TOTAL--NORTH AMERICA............. 611,465 0.067 41,216 37,882 408,342 0.040
TOTAL--SOUTH AMERICA /(9)/....... 1,708,852 0.026 43,991 21,330 1,175,798 0.021
TOTAL--AUSTRALASIA /(10)/........ 689,003 0.044 30,430 17,462 737,855 0.051
TOTAL--ASIA AND EUROPE........... 1,132,002 0.019 21,408 12,410 579,679 0.007
TOTAL--AFRICA.................... 57,546 0.079 4,560 3,672 120,371 0.059
--------- ------- ------ ---------
TOTAL COMBINED
WORLDWIDE /(11)/................ 4,198,868 0.031 141,605 92,756 3,022,045 0.022
========= ======= ====== =========
84
BASE METAL PROVEN AND PROBABLE RESERVES, AND MATERIAL NOT IN RESERVE--U.S.
UNITS/(1)(2)/
COPPER MATERIAL
COPPER PROVEN AND PROBABLE RESERVE NOT IN RESERVE/(3)/
-------------------------------------------------------------- ------------------
(100%) (100%)
------------------------------ EQUITY ------------------
COPPER COPPER TONNAGE
EQUITY TONNAGE/(4)/ GRADE (MILLION (MILLION METALLURGICAL (000 GRADE
DEPOSITS/DISTRICTS (%) (000 TONS) (% CU) POUNDS)/(5)/ POUNDS)/(5)/ RECOVERY(%) TONS) (OZ/TON)
------------------ ------ ----------- ------ ----------- ----------- ------------- ---------- --------
NEWMONT MINING CORPORATION (DECEMBER 31, 2000, INCLUDES BATTLE MTN.)
Phoenix Project, Nevada. 100.0% 156,323 0.17% 515 515 85.3% 99,594 0.14%
Minera Yanacocha (Minas
Conga), Peru........... 51.35% -- -- -- 707,028 0.30%
Batu Hijau, Indonesia-
Copper(8).............. 56.3% 944,460 0.53% 9,964 5,605 91.6% 572,674 0.33%
--------- ------ ----- ---------
Total Newmont--Copper..... 1,100,783 0.48% 10,479 6,120 1,379,296 0.30%
========= ====== ===== =========
NORMANDY MINING (JUNE 30, 2001)
Boddington, Western
Australia.............. 44.4% 432,844 0.17% 1,428 635 76% 99,594 0.14%
Golden Grove, Western
Australia.............. 100.0% 4,276 4.1% 351 351 88% 11,813 3.6%
--------- ------ ----- ---------
Total Normandy--Copper.... 437,120 0.20% 1,779 986 111,407 0.50%
========= ====== ===== =========
TOTAL NEWMONT AND NORMANDY MINING
TOTAL COMBINED
WORLDWIDE................ 1,537,903 0.40% 12,258 7,106 1,490,703 0.31%
========= ====== ===== =========
ZINC MATERIAL
ZINC PROVEN AND PROBABLE RESERVE NOT IN RESERVE
-------------------------------------------------------------- ------------------
(100%) (100%)
------------------------------ EQUITY ------------------
ZINC ZINC METALLURGICAL
EQUITY TONNAGE GRADE (MILLION (MILLION RECOVERY TONNAGE GRADE
DEPOSITS/DISTRICTS (%) (000 TONS) (% CU) POUNDS)/(5)/ POUNDS)/(5)/ (%) (000 TONS) (OZ/TON)
------------------ ------ ----------- ------ ----------- ----------- ------------- ---------- --------
NEWMONT MINING CORPORATION (DECEMBER 31, 2000)
Total Newmont--Zinc....... -- -- -- --
========= ====== ===== =========
NORMANDY MINING (JUNE 30, 2001)
Golden Grove, Western
Australia.............. 100.0% 1,774 12.8% 454 454 90.5% 9,213 15.3%
--------- ------ ----- ---------
Total Normandy--Zinc...... 1,774 12.8% 454 454 9,213 15.3%
========= ====== ===== =========
TOTAL NEWMONT AND NORMANDY MINING
TOTAL COMBINED
WORLDWIDE................ 1,774 12.8% 454 454 9,213 15.3%
========= ====== ===== =========
(1) The term "reserve" means that part of a mineral deposit which 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, implies that
profitable extraction or production has been established or analytically
demonstrated 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, there should be a reasonable certainty based on applicable laws and
regulations that issuance of permits or resolution of legal issues can be
accomplished in a timely manner.
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 result 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.
85
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.
(2) Ore Reserves and Material Not in Reserve follow two reporting requirements.
For Newmont's share, reporting conforms to the reporting guidelines of the
"Society for Mining, Metallurgy, and Exploration (SME), Inc.", (SME
Guidelines) and the United States Security and Exchange Commission (U.S.
S.E.C.) reporting rules. For Normandy's share, reporting conforms to the
reporting requirements of the "Australasian Code for Reporting of
Identified Mineral Resources and Ore Reserves", (JORC Code) and the
Australian Stock Exchange Listing Rules. For both Newmont and Normandy,
results are compiled and reported by various "competent persons" as defined
by the SME Guidelines and JORC Code. In this table, proved and probable
reserves are contained.
(3) The Term "Material not in Reserve" represents combined, measured, indicated
and inferred "mineral resources" in the JORC Code and are here reported as
additional to the ore reserves. The use of the term "Mineral Resource" and
reporting its contained ounces is not allowed by the U.S. S.E.C.
(4) Tonnages are after allowances for losses resulting from mining methods.
(5) Contained ounces or pounds are estimates of metal contained in ore tonnages
and are before allowances for processing losses. Estimated losses from
processing are expressed as recovery rates and represent the estimated
amount of metal to be recovered through metallurgical extraction processes.
(6) The 9.74% interest in the Lihir Gold Mine was not reported as a reserve
asset by Newmont (the shares are currently held by Newmont as available for
sale marketable securities), but would represent approximately 1.2 million
ounces equity reserve if reported as such.
(7) Percentage reflects Newmont's economic interest.
(8) Material available to Zarafshan-Newmont for processing from designated
stockpiles or from other specified sources. Tonnage and gold content of
material available to Zarafshan-Newmont for processing from such designated
stockpiles or from other specified sources are guaranteed by state entities
of Uzbekistan.
(9) Gurupi counted only once on 100% tabulations.
(10)Pajingo counted only once on 100% tabulations.
(11)Reserve figures do not include reserves attributable to Franco-Nevada's
royalty interests, which would be the equivalent of approximately 2 million
ounces reserves net to Franco-Nevada, nor do they include its 42.5%
interest in Echo Bay Mining Company which would represent approximately 2.2
million ounces. Additionally, Franco-Nevada has equity positions in two
properties that contain "Mineral Resources" that may not meet Newmont's
criteria for "Material not in Reserve" and as such are not reported in this
table.
ENVIRONMENTAL MATTERS
U.S. OPERATIONS
New Newmont's gold mining and processing operations within the U.S. are
subject to extensive federal, state and local governmental regulations for the
protection of the environment, including those relating to the protection of
air and water quality, hazardous waste management and mine reclamation. New
Newmont will strive to set industry standards of excellence for its
environmental practices and does not believe that ongoing compliance with
current regulations will have a material adverse effect on its competitive
position. New Newmont does not expect any material impact on its future costs
of compliance based on existing environmental regulations. Since New Newmont
cannot pass on any increases in costs to its customers, new laws and
regulations resulting in higher compliance costs could have an adverse effect
on its future profitability.
Exclusive of Midas operations, New Newmont estimates that compliance with
federal, state and local regulations relating to the protection of the
environment required capital expenditures of approximately US$1.0 million in
2000 at New Newmont's domestic operations. New Newmont estimates that it will
require at least US$1.4 million of capital expenditures for environmental
compliance in the U.S. in 2001 and annually thereafter.
Each currently operating Newmont mine has a reclamation plan in place that
meets all currently enacted legal and regulatory requirements. Estimated future
costs for reclamation are accrued over the life of each mine and, at September
30, 2001, an aggregate US$120.3 million had been accrued for reclamation costs
relating to currently producing Newmont mineral properties. Normandy has
indicated that as of June 30, 2001, it had accrued US$1.6 million for
reclamation at its Midas mine.
86
RECLAMATION AND REMEDIATION OF INACTIVE SITES WITHIN THE UNITED STATES
New Newmont will have environmental remediation obligations arising from
past mining activities at four separate locations: Telluride/Ouray (Colorado),
Leadville (Colorado), San Luis (Colorado) and Washington State. At September
30, 2001, on a consolidated basis, Newmont had an aggregate US$58.6 million
accrued for remediation of these and other sites.
ENVIRONMENTAL LAWS OF AUSTRALIA
The Australian operations of New Newmont will be subject to Australian State
and Federal laws and regulations regarding environmental matters. These laws
and regulations set various standards regulating health and environmental
quality, provide for penalties and other liabilities for the violation of such
standards and establish, in certain circumstances, obligations to remediate
current and former facilities and locations where operations are or were
conducted. New Newmont will also be required to have, and comply with, permits
for its existing operations from the relevant environmental authorities.
Liability could be imposed on New Newmont for damages, clean-up costs or
penalties if it discharges pollution into the environment or does not comply
with environmental laws or regulations (including its permits). As at June 30,
2001, Normandy had made a provision of A$136.5 million for estimated
rehabilitation expenditure, mine decommissioning and closure costs.
Rehabilitation costs include regrading waste dumps, revegetation and erosion
and drainage control.
There may be sites of Aboriginal heritage or significance located on the
land on which New Newmont's operations are situated. This could impose
restrictions on New Newmont's ability to operate from that site.
Some of the sites operated by New Newmont may also be subject to native
title claims. If so, New Newmont may require consent from the traditional
owners of that land to carry out mining operations. Such consent may be given
on terms which are not acceptable to the company, or may otherwise increase the
cost of operations at such sites.
ENVIRONMENTAL PROTECTION IN OPERATIONS OUTSIDE THE UNITED STATES AND
AUSTRALIA
New Newmont's interests outside the United States and Australia will also be
subject to governmental regulations for the protection of the environment.
These regulations have not had, and are not expected to have, a material
adverse impact on New Newmont's operations or its competitive position.
New Newmont will be committed to adopting and adhering to standards that are
protective of human health and the environment. All of the international
projects managed by New Newmont will adopt and implement environmental policies
and procedures developed by Newmont.
LEGAL PROCEEDINGS
In December 1983, the State of Colorado filed a lawsuit in the U.S. District
Court for the District of Colorado under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("CERCLA"). This case, State of
Colorado v. ASARCO, Inc., et al. (Civil Action No. 83-C-2388), was subsequently
consolidated with another action, United States of America v. Apache Energy &
Minerals, et al. (Civil Action No. 86-C-1676), which was filed in August 1986.
Both cases involve allegations of environmental impairment in the vicinity of
Leadville, Colorado, including the area of the operations and property of the
Res-ASARCO Joint Venture, the Yak Tunnel, and adjacent property, and seek
remedial actions and damages from a number of defendants, including Newmont and
Resurrection Mining Company, which was a partner with ASARCO Incorporated in
the Res-ASARCO Joint Venture. In August 1994, the Court entered a Partial
Consent Decree between and among the U.S., Newmont, Resurrection and certain
other defendants. The Partial Consent
87
Decree obligates Resurrection to pay for and perform the cleanup of sources of
contamination in various areas, pursuant to the CERCLA administrative process.
During 1995 and 1996, Resurrection implemented and completed remedial action at
selected locations, and developed feasibility studies which were sent to the
EPA for approval in 1997. Remedial activities were conducted in 2000 and 2001.
The precise nature of the final remedial activities is subject to EPA and State
of Colorado review and selection and public comment. At this time, the precise
remedy and cost have not been fixed. The proposed settlement also requires
Resurrection to reimburse the EPA and the State of Colorado for their response
costs. The Partial Consent Decree does not resolve certain other potential
liabilities, including liability for any natural resource damages and any
groundwater or surface water contamination.
In June 2000, an independent trucking contractor spilled approximately 151
kilograms of mercury near the town of Choropampa, Peru which is located 53
miles southwest of the Minera Yanacocha mine. The mercury, a byproduct of gold
mining, was being transported from the mine to a buyer in Lima for use in
medical instrumentations and other industrial applications. A comprehensive
health and environmental remediation program was initiated by Minera Yanacocha
immediately following the accident and it also entered into agreements with
three of the communities impacted by the incident to provide a variety of
public works as compensation for the disruption and on September 10, 2001,
Newmont, various wholly owned subsidiaries and Minera Yanacocha S.R.L. (51.35%
owned by Newmont Second Capital Corporation) and other defendants were named in
a lawsuit filed by over 900 Peruvian citizens in Denver District Court for the
State of Colorado. This action seeks compensatory and punitive damages based on
claims associated with the mercury spill incident. The response to the
Complaint was filed in late October. Neither Newmont nor Minera Yanacocha can
reasonably predict the likelihood or amount of any additional expenditures
related to this matter.
Franco-Nevada received a Notice of Request for Information, dated September
23, 1997, from the EPA alleging that Franco Inc. may be a potentially
responsible party ("PRP") and seeking information about the Lava Cap Mine
Superfund Removal Site near Nevada City, California. Franco Inc. fully
responded to the request for information from the EPA and denied any liability
under any applicable law. Franco Inc. has not been named a PRP, and no further
actions have been taken by the EPA with respect to Franco Inc. DE MICROMUS
settlement discussions (through which Franco Inc. would settle for less than
$50,000) are being pursued, but there has been no response to date.
Franco-Nevada received a Notice of Request for Information, dated August 24,
1998, from the United States Forest Service ("USFS"), Uinta National Forest,
alleging that Franco Inc. may be a PRP and seeking information about allegedly
needed environmental clean-up at the Pacific Mine, Utah County, Utah. Franco
Inc. fully responded to the request for information from the USFS and denied
any liability under any applicable law. Franco Inc. has not been named a PRP,
and no further actions have been taken by the USFS with respect to Franco Inc.
A dispute exists between Thiess Contractors Pty Ltd ("Thiess") and Normandy
Golden Grove Operations Pty Ltd ("NGGO"), a wholly owned entity, in respect of
a claim for additional and unexpected costs arising from the development of the
Gossan Hill Project decline. Conciliation procedures have failed to resolve the
dispute. Thiess claimed approximately A$11 million in damages. NGGO have made a
counterclaim of A$0.9 million and made an offer of A$2.1 million. Thiess is
still to fully comply with an order by the court to reissue an amended
statement of claim. Litigation in the Supreme Court of Western Australia is
proceeding.
In a Federal Court action brought by ASIC against Yandal Gold Pty Ltd. the
judge found the defendants to have committed various breaches of the
Corporations Law and ordered payment by Edensor Nominees Pty Ltd ("Edensor") to
ASIC of A$28.5 million for distribution to former Normandy Yandal Operations
Limited shareholders. An appeal by Edensor to the Full Court of the Federal
Court, to which Normandy became a party on the application of ASIC, was allowed
on the basis that the Federal Court lacked jurisdiction to make the order. This
decision was appealed to the High Court, which decided that the Full Federal
Court was wrong. The High Court held that the Federal Court did have
jurisdiction to hear and determine the matter and make orders under
88
the Corporations law. The High Court has sent the matter back to the Full
Federal Court to determine Edensor's appeal on the merits. If that appeal is
unsuccessful then Edensor will be obligated to pay the A$28.5 million. The
consolidated entity has agreed to pay half of this amount.
Disputes exist between a controlled entity of Normandy, Banff Resources Ltd.
and a third party in respect of a claim for part-ownership in the Kilembe mine.
The third party has lodged a claim for specific performance and damages with
courts in Uganda and Canada. The disputes are currently awaiting hearing and
the controlled entity intends to defend the action.
Orica Australia Limited has commended proceedings against a former
controlled entity of Normandy, Normandy Industrial Minerals Limited ("NIML"),
in respect of the supply of sand used in the manufacture of paints. A
controlled entity has indemnified the purchaser of NIML in respect of this
claim.
Disputes exist between a controlled entity of Normandy and contractors in
respect of the Kasese Cobalt project. Claims have been lodged by contractors
for additional payment in respect of extensions of time and additional costs.
The claims are in the process of being evaluated.
7.2 PRO FORMA FINANCIAL INFORMATION FOR NEW NEWMONT
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information has been prepared to
assist you in your analysis of the financial effects of the acquisition of
Franco-Nevada Mining Corporation Limited ("Franco-Nevada") only (the
"Franco-Nevada Transaction"). This information was derived for each of the
respective companies as follows:
. Newmont information was derived from its unaudited financial statements as
of and for the nine-month period ended September 30, 2001 and its audited
financial statements as of and for the twelve-month period ended December
31, 2000. Newmont's historical information was prepared using accounting
principles generally accepted in the United States ("U.S. GAAP") and in
United States Dollars ("US$").
. Franco-Nevada's information was derived from its unaudited financial
statements as of September 30, 2001 by combining its results of operations
for the six-month period ended September 30, 2001 with the three month
period ended March 31, 2001 and from its audited financial statements for
the twelve-month period ended March 31, 2001. Franco-Nevada's historical
information was prepared using accounting principles generally accepted in
Canada ("Canadian GAAP") and Canadian Dollars ("C$").
. Exchange rates used to convert information as of September 30, 2001, and
for the nine-month period ended September 30, 2001 and the twelve-month
period ended March 31, 2001 were:
C$ TOUS$
---------------
As of September 30, 2001:............... C$1.579 to US$1
Average rate for the nine-month period
ended September 30, 2001 -............ C$1.538 to US$1
Average rate for the twelve-month period
ended March 31, 2001.................. C$1.503 to US$1
The information prepared is only a summary and should be read in conjunction
with the historical financial statements and related notes contained in the
annual reports and other information that Newmont and Franco-Nevada have filed
with the Securities and Exchange Commission and various securities commissions
and similar authorities in Canada, respectively. Certain of this information
has been included in exhibits to the Form S-4 in which the Unaudited Pro Forma
Combined Condensed Financial Information is included.
89
IT IS IMPORTANT TO NOTE THAT THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
INCLUDED IN THIS OFFER DOCUMENT DOES NOT INCLUDE ANY INFORMATION WITH RESPECT
TO NORMANDY ALTHOUGH THE FRANCO-NEVADA TRANSACTION IS CONDITIONAL UPON NEWMONT
OBTAINING AN INTEREST IN AT LEAST 50.1% OF THE ORDINARY SHARES OF NORMANDY.
UNDER U.S. SECURITIES LAWS, PRO FORMA FINANCIAL INFORMATION FOR NORMANDY WOULD
GENERALLY BE REQUIRED TO BE PROVIDED IN THIS OFFER DOCUMENT. HOWEVER, AS
DESCRIBED BELOW, NORMANDY HAS DECLINED TO ASSIST IN GATHERING THIS INFORMATION
AND HAS NOT PROVIDED NEWMONT ACCESS TO NORMANDY'S DETAILED ACCOUNTING RECORDS,
NOR HAS NORMANDY ASSISTED IN PREPARING RECONCILIATIONS TO US GAAP. THEREFORE NO
SUCH US GAAP RECONCILIATION IS PROVIDED NOR IS ANY PRO FORMA FINANCIAL
INFORMATION RELATED TO NORMANDY PROVIDED IN THIS OFFER DOCUMENT. SEE SECTION
3.1, "RISK FACTORS--RISKS RELATED TO THE OFFER--WE HAVE NOT VERIFIED THE
RELIABILITY OF THE NORMANDY INFORMATION INCLUDED IN, OR WHICH MAY HAVE BEEN
OMITTED FROM, THIS OFFER DOCUMENT" ON PAGE 27. We note that Normandy's
historical financial data is presented in this offer document in accordance
with Australian GAAP, which differs in certain significant respects from US
GAAP. See Section 9.3, "Information about Normandy--Presentation of Normandy
accounting information--Key Differences between Australian GAAP and US GAAP" on
page 112. These differences as they relate to Normandy cannot be quantified due
to the limited disclosures provided in Normandy's publicly available financial
information. Pursuant to Rule 409 promulgated under the Securities Act of 1933,
as amended, on December 17, 2001, we requested that Normandy and its
independent public accountants provide to us all material information required
to be included in our offer document or required to make statements made in the
document not misleading. On December 11, 2001, we requested that Normandy's
independent public accountants consent in a customary manner to the inclusion
of its audit reports with respect to the financial statements of Normandy
included in our offer document/prospectus. On December 14, 2001, Normandy's
independent public accountants responded in writing to our December 11, 2001
letter stating that they were reluctant to give consent for the inclusion of
its audit report where consent has not been given for the financial statements
themselves, and believed it was appropriate that its consent be given
concurrently with Normandy's consent. On December 19, 2001, Normandy, on its
own behalf and on behalf of its accountants, responded in writing to our
December 17, 2001 letter and stated that it was not appropriate for Normandy to
bear any burden as to what the offer document should contain and whether or not
that document was misleading. Normandy further stated that if there were
specifics which Newmont wished to refer to Normandy for review and comment,
Normandy would consider whether it could be of assistance and to what extent,
on a case by case basis. In addition, Normandy stated that its accountants were
not in a position to provide assistance to us, that work on US GAAP
reconciliation of its financial statements had not been completed to Normandy's
satisfaction and that Normandy had not yet determined whether it would allow US
GAAP reconciliation of its financial statements to be made public at this time.
On December 31, 2001, we reiterated our requests previously made to Normandy to
provide the information required for inclusion in our United States filings,
including the consent of Normandy's independent accountants and the information
necessary to permit Normandy's financial statements to be reconciled to US
GAAP. On January 2, 2002, Normandy responded to Newmont's reiterated request
stating that Normandy had carefully considered our requests and determined that
it must maintain Normandy's stance as expressed in Normandy's letter dated
December 19, 2001. Normandy stated that in its opinion it was not appropriate
that Normandy or its directors should have any legal responsibility for the
content of Newmont's registration statement. Normandy noted that the issue was
deliberately not covered in the pre-bid documentation because Normandy was not
prepared to take responsibility for the content of Newmont's offer document or
registration statement and that, in Normandy's opinion responsibility for the
content of the Newmont registration statement must remain with Newmont.
Normandy also noted that its own work on US GAAP reconciliation was still not
complete and, therefore, Normandy's directors were not prepared to permit the
publication of US GAAP reconciliations of Normandy's accounts. Normandy also
noted that it did not know whether its work on US GAAP reconciliation would
ever be completed, in view of the two competing bids and their announced
timeframes. See Section 4.3, "Reasons for and background to the
Transactions--Background to the transactions" on page 40.
Several factors should be considered when comparing the historical financial
information of Newmont and Franco-Nevada to the Unaudited Pro Forma Combined
Condensed Financial Information, including the following:
90
. The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to
the Franco-Nevada Transaction as if it had occurred on September 30, 2001.
The Unaudited Pro Forma Combined Condensed Statement of Operations for the
nine-month period ended September 30, 2001 and the twelve-month period
ended December 31, 2000 gives effect to the Franco-Nevada Transaction as
if it had occurred on January 1, 2000.
. Franco-Nevada's fiscal year end is on March 31. Newmont's fiscal year end
is on December 31. The combined company will utilize December 31 as its
fiscal year end. The financial information presented by Franco-Nevada for
the nine-month period ended September 30, 2001 has been compiled by the
management of Franco-Nevada, although there is no historic publicly
available information that portrays the results of operations for the
nine-month period ended September 30, 2001. Results of Franco-Nevada for
the three-month period ended March 31, 2001 are included in both the
nine-month and the twelve-month Unaudited Pro Forma Combined Condensed
Statements of Operations.
. The Unaudited Pro Forma Combined Condensed Financial Information has been
prepared to present both companies on a U.S. GAAP basis. The accounting
policies of Franco-Nevada are believed to be in line with those of Newmont
in all material respects, except for differences in each company's
respective generally accepted accounting principles basis. Newmont
management will continue to evaluate differences in accounting policies in
more detail prior to the completion of the Franco-Nevada Transaction.
. Certain line items presented, as reported by Franco-Nevada on its
historical statements of operations and balance sheets have been presented
to conform to the method of presentation utilized by Newmont.
. Expected annual savings resulting from operating synergies have not been
reflected as adjustments to the historical data. The cost savings are
expected to result from the consolidation of the corporate headquarters of
Newmont and Franco-Nevada, elimination of duplicate staff and expenses,
rationalization of exploration spending, operating savings, interest and
taxes, all of which are estimated to be $30 million to $35 million after
tax during the first full year of combined operations.
The Unaudited Pro Forma Combined Condensed Financial Information is for
illustrative purposes only. If the Franco-Nevada Transaction had occurred in
the past, the combined company's financial position and operating results
likely would have been different from that presented in the Unaudited Pro Forma
Combined Condensed Balance Sheet and the Unaudited Pro Forma Combined Condensed
Statement of Operations. DUE TO THE NATURE OF PRO FORMA INFORMATION, IT MAY NOT
GIVE A TRUE PICTURE OF THE COMBINED COMPANY'S FINANCIAL POSITION AND RESULTS OF
OPERATIONS. Newmont believes that the Unaudited Pro Forma Combined Condensed
Financial Information may not be indicative of the future financial performance
of the combined companies.
In addition, the purchase price allocation is preliminary and will be
finalized following the closing of the Franco-Nevada Transaction based on the
actual fair value of current assets, current liabilities, indebtedness,
reclamation and remediation liabilities, marketable securities, a more
extensive analysis of the fair value of mining and royalty interests acquired
and identifiable intangible assets, the final number of shares issued for
Franco-Nevada's outstanding shares and stock options and Franco-Nevada's
warrants that are outstanding at closing. We are continuing to evaluate all of
these items; accordingly, the final purchase price is expected to differ in
material respects from that presented in the Unaudited Pro Forma Combined
Condensed Balance Sheet. The Unaudited Pro Forma Combined Condensed Financial
Information should not be relied on as an indication of the financial position
or operating results that the combined company would have achieved if the
Franco-Nevada Transaction had occurred in the past. The Unaudited Pro Forma
Combined Condensed Financial Information should also not be relied on as an
indication of future results that Newmont will achieve after the Franco-Nevada
Transaction.
ACQUISITION OF FRANCO-NEVADA
The following pro forma financial statements are estimates of the Unaudited
Pro Forma Combined Condensed Financial Information of Newmont as of September
30, 2001, for the nine-month period ended September 30, 2001 and for the
twelve-month period ended December 31, 2000, assuming the purchase of
Franco-Nevada.
91
NEWMONT ACQUISITION OF FRANCO-NEVADA MINING CORPORATION LIMITED
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 2001
(IN MILLIONS OF US $, EXCEPT PER SHARE DATA OR OTHERWISE INDICATED)
FRANCO- FRANCO- NEWMONT
NEVADA NEVADA FRANCO- AND
NEWMONT C $ US $ NEVADA FRANCO-NEVADA FRANCO-
US $ CANADIAN CANADIAN US GAAP ACQUISITION NEVADA
US GAAP GAAP GAAP ADJUSTMENTS ADJUSTMENTS COMBINED
-------- -------- -------- ----------- ------------- --------
ASSETS:
Cash and short-term investments................... $ 97.8 $ 864.1 $ 547.2 $ -- $ -- $ 645.0
Accounts receivable............................... 26.4 22.3 14.1 -- -- 40.5
Inventories....................................... 327.8 44.2 28.0 -- -- 355.8
Other current assets.............................. 139.0 4.8 3.1 -- -- 142.1
-------- -------- -------- ------ --------- --------
Current assets................................... 591.0 935.4 592.4 -- -- 1,183.4
Property, plant and equipment, net................ 2,261.6 188.3 119.3 (9.5)(2c) 298.3 (3a) 2,669.7
Investments in marketable securities.............. -- 134.3 85.1 19.9 (2b) -- 105.0
Equity investments................................ 541.5 349.1 221.1 -- 67.4 (3e) 830.0
Goodwill.......................................... -- -- -- -- 1,290.2 (3a) 1,290.2
Other long-term assets............................ 583.1 -- -- -- -- 583.1
-------- -------- -------- ------ --------- --------
Total assets................................... $3,977.2 $1,607.1 $1,017.9 $ 10.4 $ 1,655.9 $6,661.4
======== ======== ======== ====== ========= ========
LIABILITIES:
Current portion of long-term debt................. $ 189.2 $ -- $ -- $ -- $-- $ 189.2
Accounts payable.................................. 72.4 3.0 1.9 -- 30.0(3a) 104.3
Other current liabilities......................... 194.5 -- -- -- -- 194.5
-------- -------- -------- ------ --------- --------
Current liabilities.............................. 456.1 3.0 1.9 -- 30.0 488.0
Long-term debt.................................... 1,092.3 -- -- -- -- 1,092.3
Deferred revenue and derivatives liability........ 191.0 -- -- -- -- 191.0
Other long-term liabilities....................... 547.7 82.5 52.2 (0.9)(2f) 128.1(3a) 727.1
-------- -------- -------- ------ --------- --------
Total liabilities.............................. 2,287.1 85.5 54.1 (0.9) 158.1 2,498.4
Minority interest in affiliates...................... 230.5 -- -- -- -- 230.5
STOCKHOLDERS' EQUITY:
Preferred stock................................... 11.5 -- -- -- -- 11.5
Common stock...................................... 313.8 1,026.1 759.5 1.9(2d) 1,711.5(3b) 2,786.7
Treasury stock.................................... (0.3) -- -- -- -- (0.3)
Additional paid-in capital........................ 1,460.6 -- -- -- -- 1,460.6
Retained earnings (deficit)....................... (311.5) 421.5 299.0 (12.8)(2i) (286.2)(3b) (311.5)
Accumulated other comprehensive income (loss)..... (14.5) 74.0 (94.7) 23.2 (2b) 72.5 (3b) (14.5)
(1.0)(2g)
-------- -------- -------- ------ --------- --------
Total stockholders' equity..................... 1,459.6 1,521.6 963.8 11.3 1,497.8 3,932.5
-------- -------- -------- ------ --------- --------
Total liabilities and stockholders' equity..... $3,977.2 $1,607.1 $1,017.9 $ 10.4 $ 1,655.9 $6,661.4
======== ======== ======== ====== ========= ========
92
NEWMONT ACQUISITION OF FRANCO-NEVADA MINING CORPORATION LIMITED
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND THE TWELVE MONTHS ENDED DECEMBER 31,
2000 (EXCEPT FRANCO-NEVADA, WHICH IS FOR THE TWELVE MONTHS ENDED MARCH 31,
2001)
(IN MILLIONS OF US $, EXCEPT PER SHARE DATA OR OTHERWISE INDICATED)
-----------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 2001
----------------------------------------------------------------
FRANCO- FRANCO- NEWMONT
NEVADA NEVADA FRANCO- FRANCO- AND
NEWMONT C $ US $ NEVADA NEVADA FRANCO-
US $ US CANADIAN CANADIAN US GAAP ACQUISITION NEVADA
GAAP GAAP GAAP ADJUSTMENTS ADJUSTMENTS COMBINED
-------- -------- -------- ----------- ----------- --------
Revenues........................................... $1,214.4 $127.0 $ 82.5 $ 7.9 (2h) $ (0.8)(3e) $1,304.0
Operating, administrative, exploration and write-
down of assets.................................... (905.2) (20.3) (13.2) (1.8)(2c) 0.8 (3e) (914.1)
5.3 (2c)
Depreciation, depletion and amortization........... (218.8) (7.8) (5.1) 0.2 (2e) (13.4)(3c) (237.1)
Interest, net of amounts capitalized............... (62.6) -- -- -- -- (62.6)
Merger expenses.................................... (60.5) -- -- -- -- (60.5)
Other.............................................. 1.8 -- -- -- -- 1.8
-------- ------ ------ ----- ------ --------
Profit (loss) before tax and minority interest.. (30.9) 98.9 64.2 11.6 (13.4) 31.5
Income tax benefit (provision)..................... 6.7 (36.4) (23.7) (4.3)(2j) 4.7 (3d) (16.6)
Minority interest in income of affiliates.......... (44.4) -- -- -- -- (44.4)
Equity income (loss) on impairments of affiliates.. 23.2 11.2 7.3 -- (2a) -- 30.5
-------- ------ ------ ----- ------ --------
Net income (loss)............................... $ (45.4) $ 73.7 $ 47.8 $ 7.3 $ (8.7) $ 1.0
======== ====== ====== ===== ====== ========
Preferred stock dividends.......................... (5.6) (5.6)
-------- --------
Net income (loss) applicable to common shares... $ (51.0) $ (4.6)
======== ========
Net income (loss) per common share, basic and
diluted........................................ $ (0.26) $ (0.01)
======== ========
Basic and diluted weighted average common
shares outstanding............................. 194.7 127.1(3b) 321.8
======== ====== ========
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TWELVE MONTHS ENDED DECEMBER 31, 2000 (EXCEPT FRANCO-NEVADA)
-------------------------------------------------------------------
FRANCO- FRANCO- NEWMONT
NEVADA NEVADA FRANCO- AND
NEWMONT C $ US $ NEVADA FRANCO-NEVADA FRANCO-
US $ US CANADIAN CANADIAN US GAAP ACQUISITION NEVADA
GAAP GAAP GAAP ADJUSTMENTS ADJUSTMENTS COMBINED
--------- -------- -------- ----------- ------------- ---------
Revenues........................................... $ 1,819.7 $177.6 $118.2 $(14.6)(2h) $ (1.2)(3e) $ 1,922.1
Operating, administrative, exploration and
write-down of assets.............................. (1,299.6) (40.0) (26.6) (2.4)(2c) 1.2(3e) (1,319.5)
7.9(2c)
Depreciation, depletion and amortization........... (359.5) (13.9) (9.2) 0.2(2e) (17.8)(3c) (386.3)
Interest, net of amounts capitalized............... (94.6) -- -- -- -- (94.6)
Merger expenses.................................... (49.1) -- -- -- -- (49.1)
Other.............................................. 2.9 -- -- -- -- 2.9
--------- ------ ------ ------ ------ ---------
Profit (loss) before tax and minority interest.. 19.8 123.7 82.4 (8.9) (17.8) 75.5
Income tax benefit (provision)..................... (1.2) (43.9) (29.2) 2.9(2j) 6.2(3d) (21.3)
Minority interest in income of affiliates.......... (91.2) -- -- -- -- (91.2)
Equity income (loss) on impairments of affiliates.. (9.9) -- -- -- (2a) -- (9.9)
--------- ------ ------ ------ ------ ---------
Net income (loss)............................... $ (82.5) $ 79.8 $ 53.2 $ (6.0) $(11.6) $ (46.9)
========= ====== ====== ====== ====== =========
Preferred stock dividends.......................... (7.5) (7.5)
--------- ---------
Net income (loss) applicable to common
shares......................................... $ (90.0) $ (54.4)
========= =========
Net income (loss) per common share, basic
and diluted.................................... $ (0.47) $ (0.17)
========= =========
Basic and diluted weighted average common
shares outstanding............................. 192.2 127.1(3b) 319.3
========= ====== =========
93
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
IT IS IMPORTANT TO NOTE THAT THE PRO FORMA PRESENTATION DOES NOT INCLUDE ANY
INFORMATION WITH RESPECT TO NORMANDY ALTHOUGH THE FRANCO-NEVADA TRANSACTION IS
CONDITIONAL UPON NEWMONT OBTAINING AN INTEREST IN AT LEAST 50.1% OF THE
ORDINARY SHARES OF NORMANDY. UNDER U.S. SECURITIES LAWS, PRO FORMA FINANCIAL
INFORMATION FOR NORMANDY WOULD GENERALLY BE REQUIRED TO BE PROVIDED IN THIS
OFFER DOCUMENT. HOWEVER, AS DESCRIBED PREVIOUSLY, NORMANDY HAS DECLINED TO
ASSIST IN GATHERING THIS INFORMATION AND HAS NOT PROVIDED NEWMONT ACCESS TO
NORMANDY'S DETAILED ACCOUNTING RECORDS, NOR HAS NORMANDY ASSISTED IN PREPARING
RECONCILIATIONS TO US GAAP. THEREFORE NO SUCH US GAAP RECONCILIATION IS
PROVIDED NOR IS ANY PRO FORMA FINANCIAL INFORMATION RELATED TO NORMANDY
PROVIDED IN THIS OFFER DOCUMENT. SEE SECTION 3.1, "RISK FACTORS--RISKS RELATED
TO THE OFFER--WE HAVE NOT VERIFIED THE RELIABILITY OF THE NORMANDY INFORMATION
INCLUDED IN, OR WHICH MAY HAVE BEEN OMITTED FROM, THIS OFFER DOCUMENT" ON PAGE
27.
The Pro Forma presentation reflects the acquisition of Franco-Nevada as a
purchase for accounting purposes. Newmont estimates that it will issue 127.14
million of its common shares to shareholders of Franco-Nevada. The exchange
ratio for the acquisition of Franco-Nevada is 0.8 common shares of Newmont's
common stock for every share of Franco-Nevada.
The accompanying Unaudited Pro Forma Combined Condensed Balance Sheet gives
effect to the acquisition of Franco-Nevada as of September 30, 2001. The
accompanying Unaudited Pro Forma Combined Condensed Statement of Operations for
the nine-month period ended September 30, 2001 includes historical revenues and
expenses of Newmont and Franco-Nevada for those nine months, adjusted to US
GAAP. The accompanying Unaudited Pro Forma Combined Condensed Statement of
Operations for the twelve-month period ended December 31, 2000 includes
historical revenues and expenses of Newmont for those twelve months and the
twelve-month period ended March 31, 2001 for Franco-Nevada, all adjusted to US
GAAP. The Unaudited Pro Forma Combined Condensed Statements of Operations have
been adjusted for the pro forma effect of the Franco-Nevada Transaction as if
it had occurred on January 1, 2000.
Results of Franco-Nevada for the three-month period ended March 31, 2001 are
included in both the nine-month and the twelve-month Unaudited Pro Forma
Combined Condensed Statements of Operations. Summary information for this
three-month period ended March 31, 2001 is as follows:
(IN MILLIONS OF C$ AND
CANADIAN GAAP)
----------------------
Revenues..................................... $ 52.7
Operating costs.............................. (16.8)
Depreciation, depletion and amortization..... (4.6)
------
Income before tax............................ 31.3
Tax expense.................................. (12.8)
------
Net income from continuing operations........ 18.5
======
Earnings per share from continuing operations $ 0.12
======
Franco-Nevada's fiscal year end is on March 31. Newmont's fiscal year end is
on December 31. The combined company will utilize December 31 as its fiscal
year end. The financial information presented by Franco-Nevada for the
nine-month period ended September 30, 2001 has been compiled by the management
of Franco-Nevada, although there is no historic publicly available information
that portrays the results of operations for the nine-month period ended
September 30, 2001.
The Unaudited Pro Forma Combined Condensed Balance Sheet and the Unaudited
Pro Forma Combined Condensed Statement of Operations do not include all
information and notes required by US GAAP for complete financial statements.
However, except as disclosed herein, there has been no material change in the
information
94
disclosed in the annual reports and other information that Newmont and
Franco-Nevada have filed with the Securities and Exchange Commission and
various securities commissions and similar authorities in Canada, respectively,
for the years ended December 31, 2000 and March 31, 2001, respectively. The
Franco-Nevada statement of operations included herein has been prepared to
reflect the disposition of a business segment. This disposition has been
presented on a comparable basis for all periods shown including Franco-Nevada's
restated statements filed as part of this document.
NOTE 2--US GAAP ADJUSTMENTS TO FRANCO-NEVADA
The following notes describe the basis and assumptions used to adjust the
Franco-Nevada Canadian GAAP financial statements to approximate US GAAP. In
addition, some balance sheet items have been combined to conform to the
presentation of Newmont. Canadian GAAP varies in certain significant respects
from the principles and practices of US GAAP. The effect of these principle
measurement differences on Franco-Nevada's consolidated financial statements
are quantified and described below.
(a) In April 2001, Franco-Nevada acquired 446,100,000 ordinary shares
(currently 19.79%, calculated on a fully-diluted basis) of Normandy's
outstanding common stock. For Canadian GAAP purposes Franco-Nevada has
accounted for their investment on an equity basis using the best information
available from Normandy in the public domain. As Normandy has declined to
provide a reconciliation of its results of operations in US GAAP for the
period owned by Franco-Nevada, there is no basis for recording an adjustment
to US GAAP. Consequently, this equity investment adjustment has been omitted
from the Franco-Nevada US GAAP reconciliation in the Unaudited Pro Forma
Condensed Combined Statement of Operations and is believed not to be
significant. The purchase accounting adjustments described in Note 3(a) to
record the merger with Franco-Nevada have adjusted to fair value the
446,100,000 ordinary share investment in Normandy held by Franco-Nevada.
(b) US GAAP requires that marketable securities classified as available
for sale be recorded at fair value with a corresponding entry to ACCUMULATED
OTHER COMPREHENSIVE INCOME, net of deferred tax. As of September 30, 2001 an
increase to MARKETABLE SECURITIES was recorded in the Unaudited Pro Forma
Balance Sheet.
(c) US GAAP requires that exploration costs be expensed as incurred
rather than capitalized, as allowed under Canadian GAAP. As a result
PROPERTY, PLANT AND EQUIPMENT, NET was reduced to remove costs previously
capitalized. In the nine-month period ended September 30, 2001 and
twelve-month period ended March 31, 2001, increases in exploration expense
were recorded to OPERATING COSTS. Additionally, in both the nine month
period ended September 30, 2001 and the twelve month period ended March 31,
2001, OPERATING COSTS were reduced to reflect the reversal of
Franco-Nevada's provision for impairment under Canadian GAAP of these
capitalized exploration costs because such costs would already have been
expensed under US GAAP.
(d) Canadian GAAP requires that merger costs incurred in a pooling
transaction be considered as capital costs and therefore netted against
capital stock, rather than expensed as required under US GAAP. As a result,
amounts previously expensed were restored to CAPITAL STOCK, with a decrease
to RETAINED EARNINGS in the Unaudited Pro Forma Combined Condensed Balance
Sheet as of September 30, 2001.
(e) Effect on DEPRECIATION, DEPLETION AND AMORTIZATION for the impact of
adjustments to the net carrying amount of assets adjusted above.
(f) These adjustments record the net deferred income tax effect of the US
GAAP adjustments to the balance sheet.
(g) An adjustment to ACCUMULATED OTHER COMPREHENSIVE INCOME was recorded
to account for differences in the application of US GAAP and Canadian GAAP
for the effect of currency translation.
(h) Relates to the reversals of loss and provision amounts recorded on
marketable securities under Canadian GAAP, which would have been recorded in
earlier periods under US GAAP.
95
(i) This amount represents the cumulative retained earnings adjustments.
(j) To account for the income tax expense related to the pro forma income
statement adjustments.
NOTE 3--PRO FORMA ADJUSTMENTS TO RECORD THE ACQUISITION OF 100% OF FRANCO-NEVADA
The Franco-Nevada acquisition is conditional upon the acquisition of 50.1%
of Normandy. The following adjustments have been made to the Unaudited Pro
Forma Combined Condensed Balance Sheet as of September 30, 2001 and the
Unaudited Pro Forma Combined Condensed Statement of Operations for the nine
month period ended September 30, 2001 and for the twelve month period ended
December 31, 2001, respectively.
(a) The purchase consideration is based on Newmont acquiring 100% of the
Franco-Nevada outstanding shares plus all options and warrants based on an
exchange ratio of 0.8 of a Newmont share for each Franco-Nevada share. The
final purchase price allocation will be determined shortly after closing
based on the actual fair value of current assets, current liabilities,
marketable securities, a more extensive analysis of the fair value of
royalty interests acquired and identifiable intangible assets and will
reflect the number of shares of Newmont common stock issued to acquire
Franco-Nevada's outstanding shares, stock options and warrants that were
outstanding at closing. Newmont is continuing to evaluate all of these
items; accordingly, the final purchase price may differ in material respects
from that presented in the Unaudited Pro Forma Combined Condensed Balance
Sheet. The purchase accounting entries are an estimate only and are subject
to change.
The following table reflects the estimated purchase accounting allocation
for the acquisition of 100% of Franco-Nevada:
(IN MILLIONS OF SHARES
OR US $'S EXCEPT
SHARE PRICE)
----------------------
Calculation of preliminary allocation of purchase price:
Shares of Newmont common stock to be issued in the merger of Franco-Nevada...... 127.14
Average Newmont stock price per share........................................... $ 19.01
--------
Fair value of Newmont common stock issued....................................... 2,416.7
Plus--Fair value of Franco-Nevada options to be assumed by Newmont (100% vested) 43.0
Plus--Fair value of Franco-Nevada warrants to be assumed by Newmont............. 13.2
Plus--Estimated direct merger costs to be incurred by Newmont................... 30.0
--------
Total purchase price............................................................ 2,502.9
Plus--Fair value of liabilities assumed by Newmont:
Current liabilities.......................................................... 1.9
Long-term liabilities........................................................ 179.4
Less--Fair value of non-mining assets to be acquired by Newmont:
Current assets............................................................... (592.4)
Investment in marketable securities (and equity investments)................. (393.5)
Less--Fair value of royalty interests in mineral properties..................... (408.1)
--------
Residual purchase price allocated to non-amortizable goodwill................... $1,290.2
========
The purchase price for accounting purposes has been determined by using the
average price of Newmont's common stock for the two days before and the two
days after the announcement of the terms of Newmont's revised bid for
Normandy on January 2, 2002, as the Franco-Nevada transaction is conditional
upon Newmont obtaining an interest in at least 50.1% of Normandy. Such
average price was US$19.01.
The entry to record the purchase transaction provides a deferred tax
liability at Newmont's 35% statutory rate based on the increase in the book
basis of the identifiable tangible and intangible net assets without a
96
corresponding increase in tax basis as this transaction has been structured
as a tax-free exchange. No deferred tax liability has been established for
the goodwill which is not deductible for tax purposes.
(b) These pro forma adjustments reflect the acquisition of Franco-Nevada
as well as eliminates the retained earnings, reserves or other items in the
equity of Franco-Nevada and records the fair value of common stock
consideration issued by Newmont. Newmont will issue approximately 127.14
million shares of its common stock to accomplish the acquisition, or 0.8 of
a share for each Franco-Nevada share outstanding. The pro forma combined
stockholders' equity of Newmont and Franco-Nevada following the
Franco-Nevada Transaction is as follows:
(IN MILLIONS OF US$)
--------------------
ACQUISITION OF
FRANCO-NEVADA
--------------------
Stockholders' equity of Newmont as September 30, 2001..................... $1,459.6
Fair value of common stock issued to merge with Franco-Nevada............. 2,416.7
Fair value of Franco-Nevada options to be assumed by Newmont (100% vested) 43.0
Fair value of Franco-Nevada warrants to be assumed by Newmont............. 13.2
--------
Pro forma stockholders' equity after the acquisition of Franco-Nevada..... 3,932.5
Minority interest of historical Newmont................................... 230.5
--------
Total stockholder's equity and minority interest.......................... $4,163.0
========
(c) Adjusts depreciation, depletion and amortization to account for the
merger as if the Franco-Nevada Transaction had occurred January 1, 2000 in a
manner consistent with the policies of depreciation, depletion and
amortization utilized by Newmont. This adjustment results in an increase to
depreciation, depletion and amortization expense in each of the periods
presented. The goodwill created in the purchase accounting transaction was
not amortized in accordance with US GAAP for business combinations that are
initiated subsequent to July 1, 2001.
(d) To account for the income tax expense of the pro forma adjustments
resulting from the impact of the purchase accounting adjustments using
Newmont's expected effective statutory tax rate of 35%.
(e) To eliminate royalties paid by Newmont to Franco-Nevada on certain
mining properties.
NOTE 4--COST SAVINGS AND EXPENSES OF THE MERGER
Expected annual cost savings have not been reflected as an adjustment to the
historical data because it is prospective information pertaining to what may
happen once the two companies are combined.
These savings have been estimated by Newmont and are expected to range from
US$30 to US$35 million after tax during the first full year of combined
operations. See Section 4.1, "Reasons for and background to the
transactions--Reasons for the transactions" on page 34.
Estimated costs of the Franco-Nevada Transaction total approximately US$30
million, consisting primarily of approximately US$5 million of severance and
separation pay for terminated Franco-Nevada employees and approximately US$25
million of investment banker, legal, accounting and other professional advisor
fees and fees related directly to the acquisition and merger. These costs will
be capitalized as direct costs associated with the Franco-Nevada Transaction.
97
NEWMONT SUPPLEMENTAL INFORMATION TO THE
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
NET INCOME (LOSS) BEFORE SELECTED ITEMS
(100% BASIS, IN MILLIONS, EXCEPT PER SHARE DATA)
The following information provides supplemental information regarding
selected elements of net income (loss). As described in Note 4, this
supplemental information does not take into account anticipated synergies that
have been estimated to range between US$30 million to US$35 million, after-tax,
in the first full year following the Franco-Nevada Transaction. The selected
items are net of Newmont's statutory tax rate of 35%:
NINE MONTHS ENDED SEPTEMBER 30, 2001
--------------------------------------------------
ACQUISITION COMBINED
NEWMONT FRANCO-NEVADA ADJUSTMENTS COMPANIES EPS
------- ------------- ----------- --------- ------
Net income (loss) applicable to common shares, in US
GAAP and US$...................................... $(51.0) $55.1 $(8.7) $ (4.6) $(0.01)
Noncash items:
--------------
Asset write-offs or write-downs..................... -- 2.6 -- 2.6 0.01
Impairment of investment in marketable securities... -- (5.1) -- (5.1) (0.02)
Gain on call option mark-to-market position......... (1.1) -- -- (1.1) --
Gain on sale of marketable securities/investments... -- (4.0) -- (4.0) (0.01)
Amortization of acquisition adjustments............. -- -- 8.7 8.7 0.02
Other items:
------------
Merger and restructuring expenses................... 43.7 -- -- 43.7 0.13
------ ----- ----- ------ ------
Net income (loss) before selected items............. $ (8.4) $48.6 $ -- $ 40.2 $ 0.12
====== ===== ===== ====== ======
Net income (loss) per share before selected items... $ 0.12
======
Basic and diluted weighted average common shares
outstanding (millions)............................ 321.8
======
TWELVE MONTHS ENDED DECEMBER 31, 2000
--------------------------------------------------
ACQUISITION COMBINED
NEWMONT FRANCO-NEVADA ADJUSTMENTS COMPANIES EPS
------- ------------- ----------- --------- ------
Net income (loss) applicable to common shares, in US
GAAP and US$...................................... $(90.0) $ 47.2 $(11.6) $(54.4) $(0.17)
Noncash items:
--------------
Asset write-offs or write-downs..................... 44.4 7.0 -- 51.4 0.16
Impairment of investment in marketable securities... 23.9 9.5 -- 33.4 0.10
Acquisition settlement (Yanacocha).................. 27.4 -- -- 27.4 0.08
Amortization of put options premiums................ 12.4 -- -- 12.4 0.04
Gain on call option mark-to-market position......... (17.4) -- -- (17.4) (0.05)
Gain on sale of marketable securities/investments... -- (10.5) -- (10.5) (0.03)
Amortization of acquisition adjustments............. -- -- 11.6 11.6 0.04
Other items:
------------
Merger and restructuring expenses................... 6.9 0.9 -- 7.8 0.02
------ ------ ------ ------ ------
Net income (loss) before selected items............. $ 7.6 $ 54.1 $ -- $ 61.7 $ 0.19
====== ====== ====== ====== ======
Net income (loss) per share before selected items... $ 0.19
======
Basic and diluted weighted average common shares
outstanding (millions)............................ 319.3
======
98
7.3 OUTLOOK INFORMATION ON NEW NEWMONT
The board of Newmont considers that the inclusion of forecast financial
information would be unduly speculative and potentially misleading for Normandy
shareholders. This is particularly so due to the effect that variations in the
price of gold and exchange rates may have on Newmont's future earnings
performance. In making this determination, the board has taken into account the
facts that Newmont shares have been listed on securities exchanges around the
world for some time and that international practice is not to give forecasts of
financial performance where there is uncertainty of outcome.
The statements made in this section regarding our outlook are
forward-looking statements. Our operations are subject to numerous risks. As a
result, our actual results may differ significantly from these estimates in
respect of timing, amount or nature and may never be achieved. For a more
detailed discussion of the risks involved in forward-looking statements, see
section 1.7, "Introduction--Disclosure regarding forward-looking statements" on
page 5. For a more detailed discussion of risks involved in our operations, see
section 3, "Risk factors" on page 25.
99
8 INFORMATION ABOUT NEWMONT
8.1 GENERAL DESCRIPTION OF NEWMONT'S OPERATIONS
ABOUT NEWMONT
Newmont was incorporated in 1965 under the laws of Delaware. Through its
predecessor companies, Newmont has been in the mining business since 1921. We
are engaged, directly or indirectly through our subsidiaries and affiliates, in
the production of gold, development of mining properties, exploration for gold
and the acquisition of mining properties world-wide. We are the second largest
gold producer in the world based on ounces of production. Our financial year
end is December 31.
In 2000, we produced gold from operations in Nevada and California and,
outside the United States, from operations in Canada, Peru, Bolivia, Indonesia,
Mexico, Uzbekistan and Australia. We also produce copper concentrates from a
copper/gold deposit at a second location in Indonesia.
Our average cash cost of gold production for 2000 was US$170 per ounce,
compared to a Western world average of US$186 per ounce.
We had revenues of US$1.81 billion in 2000 and US$1.63 billion in 1999. In
2000, we had a net loss applicable to common shares of US$102.3 million in 2000
and a net loss of US$102.0 million in 1999. The net loss in 2000 included
non-cash items totaling US$103.3 million, net of tax, primarily for asset
impairments and an acquisition settlement. In 1999, the net loss included
non-cash items totaling US$126.2 million, net of tax, primarily for asset
impairments and losses on written call options.
Including our subsidiaries, partnerships and joint ventures, we sold 5.7
million equity ounces of gold in 2000 and 4.9 million equity ounces in 1999. We
use the term "equity ounces" to mean that portion of gold produced, or included
in proven and probable reserves, which is attributable or proportionate to our
ownership interest.
PRODUCT
Most of our revenue comes from the sale of refined gold into the
international market. Our gold sales are generally made at the average price
prevailing during the month in which the gold is delivered to the customer,
plus an interest factor.
Refined copper is an internationally traded commodity and is produced from
the treatment of concentrates. We deliver and sell the concentrates produced by
Batu Hijau to smelters in Japan, Korea, Australia and Europe. In 2001,
approximately 85% of Batu Hijau's production will be sold under long-term
contracts, and the balance on the spot market.
STOCK EXCHANGES
Shares of Newmont common stock are listed or quoted on the NYSE and Euronext
Brussels under the symbol "NEM" and on the Swiss Exchange under the symbol
"NMM". We have filed an application to list Newmont common stock on the ASX as
CDIs. We have also filed an application with the TSE to list exchangeable
shares to be issued in respect of the Franco-Nevada acquisition.
Our $3.25 convertible preferred stock is also listed on the NYSE.
ADDRESS
Our principal executive offices are located at 1700 Lincoln Street, Denver,
Colorado 80203 (United States). Our telephone number is (303) 863-7414.
For more information on Newmont, see section 7.1, "Information about New
Newmont--General description of New Newmont's operations" on page 66.
100
8.2 SELECTED FINANCIAL INFORMATION FOR NEWMONT
The table below shows selected historical financial information for Newmont
as of and for the years ended December 31, 2000, 1999, 1998, 1997 and 1996 and
has been prepared using the audited consolidated financial statements of
Newmont. The information as of and for the nine months ended September 30, 2001
and 2000 has been prepared using the unaudited condensed consolidated financial
statements of Newmont. This information is only summary, and you should read it
in conjunction with Newmont's historical financial statements and related notes
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the annual reports, quarterly reports and other
information on file with the Securities and Exchange Commission. See section
8.3, "Information about Newmont--Where you can find more information on
Newmont" on page 101 for more information.
FOR THE NINE MONTHS FOR THE YEARS ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
----------------------- -----------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE)
2001 2000 2000 1999 1998 1997 1996
------------ ----------- -------- -------- -------- -------- --------
Sales...................................... $1,210.9 $1,283.7 $1,809.5 $1,627.1 $1,730.5 $1,917.7 $1,529.7
Income (loss) before cumulative effect of
changes in accounting principle applicable
to common shares.......................... $ (51.0) $ (56.3) $ (89.8) $ (102.0) $ (608.6) $ 55.2 $ 16.8
Net income (loss) applicable to common
shares.................................... $ (51.0) $ (68.8) $ (102.3) $ (102.0) $ (641.5) $ 51.5 $ 16.8
Income (loss) per common share:
Before cumulative effect of changes in
accounting principle per common share,
basic and diluted......................... $ (0.26) $ (0.29) $ (0.47) $ (0.53) $ (3.32) $ 0.31 $ 0.09
Net income (loss) per common share, basic
and diluted(1)(2)......................... $ (0.26) $ (0.36) $ (0.53) $ (0.53) $ (3.50) $ 0.29 $ 0.09
Dividends declared per common share........ $ 0.09 $ 0.09 $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.12
SEPTEMBER 30 DECEMBER 31
AT PERIOD END, ------------ -----------
Total assets............................... $3,977.3 $3,916.8 $3,916.8 $3,951.9 $4,022.0 $4,707.2 $4,319.0
Long-term debt, including current portion.. $1,281.5 $1,199.8 $1,199.8 $1,246.8 $1,489.8 $1,512.6 $1,211.9
Stockholders' equity....................... $1,459.6 $1,500.0 $1,500.0 $1,570.3 $1,687.3 $2,097.1 $2,101.1
--------
/(1)/ Net loss includes the cumulative effect of changing the accounting method
for start-up costs of $0.18 per share, net of tax, in 1998 and for revenue
recognition of $0.06 per share in 2000. Net loss also included noncash
items of US$0.23 for asset write-offs, US$0.12 for loss on LIhir
Securities, US$0.14 for an acquisition settlement and US$0.04 for merger
expenses.
/(2)/ Net loss included US$0.23, net of tax, for merger and restructuring
expenses associated with the acquisition of Battle Mountain Gold Company in
January 2001.
Historical financial information about Newmont is included in Annex A, which
contains the Form 8-K, filed on May 9, 2001 presenting the consolidated
financial statements for each of the years ended December 31, 2000, 1999 and
1998, which gives effect to the merger between Newmont and Battle Mountain Gold
Company, which occurred on January 10, 2001 and which was accounted for as a
pooling of interests, together with the report thereon of Arthur Andersen LLP
and the related Management's Discussion and Analysis of Consolidated Results of
Operations and Financial Condition. Under a pooling of interests, the
consolidated financial statements include Battle Mountain's financial data as
if Battle Mountain had always been part of Newmont. Additionally, Form 10-Q
filed on October 29, 2001 is included in Annex A, which contains the unaudited
consolidated financial statements for the periods ended September 30, 2001 and
2000 and the related Management's Discussion and Analysis of Consolidated
Results of Operations and Financial Position.
8.3 WHERE YOU CAN FIND MORE INFORMATION ON NEWMONT
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or
other information we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on
the
101
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Our SEC filings are also available to the public from commercial document
retrieval services and at the website maintained by the SEC at
http://www.sec.gov.
We filed a registration statement on Form S-4 to register with the SEC the
shares of our common stock to be issued under the offer in exchange for
ordinary shares of Normandy and Normandy ADSs. This offer document is part of
that registration statement and constitutes a prospectus of Newmont. As allowed
by the SEC rules, this offer document does not contain all the information you
can find in the registration statement or the exhibits to the registration
statement.
The SEC allows us to "incorporate by reference" information into this offer
document, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this offer
document, except for any information superseded by information in, or
incorporated by reference in, this offer document. This offer document
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about our
companies and their finances.
Newmont SEC Filings
(File No. 1-2516) Period or Description
------------------- -------------------------------------------------
Annual Report on Form 10-K Fiscal year ended December 31, 2000
Quarterly Reports on Form 10-Q Quarterly periods ended March 31, 2001, June 30,
2001 and September 30, 2001
Current Reports on Form 8-K Filed on January 22, 2001, May 9, 2001, May 14,
2001, November 14, 2001 (as amended by Form
8-K/A filed on November 16, 2001) and November
27, 2001
Proxy Statement on Schedule
14A Filed on March 30, 2001
Registration Statement on The description of Newmont common stock,
Form S-3, filed on July including any amendment or report filed with the
25,2001 SEC for the purpose of updating that description.
Registration Statement on
Form 8-A, filed on September Description of Newmont preferred share purchase
6, 2000 rights
We are also incorporating by reference additional documents that we file
with the SEC between the date of this offer document and completion of the
offer.
Any statement contained in this offer document, or in a document
incorporated herein by reference, shall be deemed to be modified or superseded
for purposes of this offer document to the extent it is modified or superseded
by a statement contained in any subsequently filed document incorporated by
reference. When that happens, the modified or superseded part of the original
statement is not a part of this offer document.
102
You can obtain documents incorporated by reference in this offer document
from the SEC. Documents incorporated by reference by us are available from us
without charge, excluding all exhibits unless we have specifically incorporated
by reference an exhibit in this offer document. You may obtain documents
incorporated by reference by us in this offer document by requesting them by
telephone from Innisfree M&A Incorporated, the information agent for the offer,
at the telephone numbers listed below:
[InnisFree Logo]
For Normandy shareholders and Normandy ADS holders
located in the United States and Canada:
Banks and brokers call collect:
(212) 750-5833
All others call toll-free in the United States and Canada:
(888) 750-5835
For Normandy shareholders and Normandy ADS holders located in Australia and
other jurisdictions (except the United States and Canada), please call
toll-free in Australia: (800) 507-507 or, if you are outside Australia,
+61-2-9278-9331.
To obtain timely delivery of any of these documents, you must request them
no later than five business days before the expiration of the offer period. You
should rely only on the information contained in this offer document or
incorporated by reference in this offer document or other documents distributed
by us to Normandy shareholders and Normandy ADS holders under the offer in
deciding whether to accept the offer. We have not authorized anyone to provide
information that conflicts with what is contained in this offer document. This
offer document is accurate as of its date. You should not assume that the
information contained in this offer document is accurate as of any date other
than that date, and neither the mailing of this offer document to you nor the
issuance of shares of our common stock or Newmont CDIs under the offer shall
create any implication to the contrary.
You may also find additional information regarding us on our website at
http://www.newmont.com.
8.4 NEWMONT'S BOARD OF DIRECTORS AND MANAGEMENT
Glen A. Barton Chairman and Chief Executive Officer of Caterpillar Inc., a director of Inco
Limited and Chairman of the Board of Trustees of Bradley University.
Vincent A. Calarco Chairman, President and Chief Executive Officer of Crompton Corporation, a
specialty chemical company, since May 1996. Trustee of Polytechnic University
of New York, Trustee of the National Foundation for the History of Chemistry
and Director of the American Chemistry Council.
Ronald C. Cambre Chairman of Newmont from January 1995 to December 31, 2001, President
from June 1994 to July 1999 and Chief Executive Officer from November 1993
to December 2000. Director of Cleveland-Cliffs Inc., McDermott, Inc. and W.R.
Grace & Co.
James T. Curry, Jr. Retired Chief Executive Officer of the Minerals Division and retired director of
Broken Hill Proprietary Company Ltd. Director of SRI International.
Joseph P. Flannery Chairman, President and Chief Executive Officer of Uniroyal Holding, Inc., a
holding company. Director of Arvin Meritor, Inc., Ingersoll-Rand Company,
K-Mart Corporation and The Scotts Company.
103
Leo I. Higdon, Jr. President of the College of Charleston since October 2001; formerly President of
Babson College from July 1997 to October 2001; formerly Dean and Charles C.
Abbott Professor of the Darden Graduate School of Business Administration at
the University of Virginia from October 1993 to June 1997. Director of
Crompton Corporation and Eaton Vance Corp.
Robert J. Miller Partner of Jones Vargas, a law firm, since January 1999; Governor of the State of
Nevada from 1989 to January 1999. Director of Zenith Insurance Company.
Wayne W. Murdy Chairman of Newmont since January 1, 2002, President since July 1999, Chief
Executive Officer since January 2001, Executive Vice President from July 1996
to July 1999, Chief Financial Officer from December 1992 to July 1999 and
Senior Vice President from December 1992 to July 1996. Director of Tom
Brown Inc. and Trustee of the Denver Art Museum.
Robin A. Plumbridge Retired Chairman of Gold Fields of South Africa Limited, a natural resources
company, Chief Executive Officer thereof from December 1980 to September
1995. Director of Liberty Group Limited, Liberty Holdings Limited and
Standard Bank Investment Corporation.
Moeen A. Qureshi Chairman of Emerging Markets Partnership, a private investment management
company. Director of AIG Global Trade and Political Risk Insurance Co.
Michael K. Reilly Retired Chairman of Zeigler Coal Holding Company, a coal producer.
James V. Taranik President Emeritus of Desert Research Institute, University and Community
College System of Nevada, an environmental research organization; Regents
Professor and Arthur Brant Chair of Geophysics at the University of Nevada.
Director of Earth Satellite Corporation and UNR Great Basin Center for
Geothermal Energy.
In addition to Mr. Murdy, who is Newmont's Chairman, President and Chief
Executive Officer, key members of Newmont's management team are:
John A. S. Dow Executive Vice President and Group Executive, Latin America
David H. Francisco Executive Vice President, Operations
Bruce D. Hansen Senior Vice President and Chief Financial Officer
Lawrence T. Kurlander Senior Vice President and Chief Administrative Officer
David A. Baker Vice President, Environmental, Health and Safety Affairs
Britt D. Banks Vice President, General Counsel and Secretary
D. Scott Barr Vice President and Chief Technical Officer
Robert J. Bush Vice President, Administration and Human Resources
Thomas M. Conway Vice President, Risk Management
Thomas L. Enos Vice President and Group Executive, Indonesia
W. Durand Eppler Vice President, Corporate Development
Greg V. Etter Vice President, External Affairs
Gary E. Farmar Vice President, Internal Audit
Jeffrey R. Huspeni Vice President, Exploration
Donald G. Karras Vice President, Taxes
Leland W. Krugerud Vice President, Business Affairs, North American Operations
Richard Perry Vice President, Nevada Operations
Carlos Santa Cruz Vice President, Peruvian Operations
Linda K. Wheeler Vice President and Controller
Thomas P. Mahoney Treasurer and Assistant Secretary
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9 INFORMATION ABOUT NORMANDY
9.1 DISCLAIMER INFORMATION IN RELATION TO NORMANDY
We conducted a due diligence review of limited information and documents
made available by Normandy to us before announcing our offer. Information
included in this offer document relating to Normandy and its business is based
on publicly available information about Normandy, including Normandy's 2001
annual report and quarterly activities report for the quarter ended September
30, 2001 and Normandy's target statement. Pursuant to Rule 409 promulgated
under the U.S. Securities Act of 1933, on December 17, 2001, we requested that
Normandy and its independent public accountants provide to us all material
information required to be included in this offer document or required to make
statements made herein not misleading. On December 11, 2001, we requested that
Normandy's independent public accountants consent in a customary manner to the
inclusion of its audit reports with respect to the financial statements of
Normandy included in this offer document. On December 14, 2001, Normandy's
independent public accountants responded in writing to our December 11, 2001
letter stating that they were reluctant to give consent for the inclusion of
its audit report where consent has not been given for the financial statements
themselves, and believed it was appropriate that its consent be given
concurrently with Normandy's consent. On December 19, 2001, Normandy, on its
own behalf and on behalf of its accountants, responded in writing to our
December 17, 2001 letter and stated that it was not appropriate for Normandy to
bear any burden as to what the offer document should contain and whether or not
such document was misleading. Normandy further stated that if there were
specifics which Newmont wished to refer to Normandy for review and comment,
Normandy would consider whether it could be of assistance and to what extent,
on a case by case basis. In addition, Normandy stated that its accountants were
not in a position to provide assistance to us, that work on U.S. GAAP
reconciliation of its financial statements had not been completed to Normandy's
satisfaction and that Normandy had not yet determined whether it would allow
U.S. GAAP reconciliation of its financial statements to be made public at this
time. On December 31, 2001, we reiterated our requests previously made to
Normandy to provide the information required for inclusion in our United States
filings, including the consent of Normandy's independent accountants and the
information necessary to permit Normandy's financial statements to be
reconciled to US GAAP. On January 2, 2002, Normandy responded to Newmont's
reiterated request stating that Normandy had carefully considered our requests
and determined that it must maintain Normandy's stance as expressed in
Normandy's letter dated December 19, 2001. Normandy stated that in its opinion
it was not appropriate that Normandy or its directors should have any legal
responsibility for the content of Newmont's registration statement. Normandy
noted that the issue was deliberately not covered in the pre-bid documentation
because Normandy was not prepared to take responsibility for the content of
Newmont's offer document or registration statement and that, in Normandy's
opinion, responsibility for the content of the Newmont registration statement
must remain with Newmont. Normandy also noted that its own work on US GAAP
reconciliation was still not complete and, therefore, Normandy's directors were
not prepared to permit the publication of US GAAP reconciliations of Normandy's
accounts. Normandy also noted that it did not know whether its work on US GAAP
reconciliation would ever be completed, in view of the two competing bids and
their announced timeframes. See Section 4.3 "Reasons for and background to the
transactions--Background to the transactions" on page 40. For further
information, see section 9.3, "--Presentation of Normandy accounting
information" on page 111. We will provide any and all information that we
receive from Normandy or its independent accountants prior to the expiration of
the offer that we deem material, reliable and appropriate in a subsequently
prepared amendment or supplement hereto.
While we have included information in this offer document concerning
Normandy that is known to us based on publicly available information, other
than as described above, we have not had access to material non-public
information regarding Normandy and could not use any such information for the
purpose of preparing this offer document. Although we have no knowledge that
would indicate that statements relating to Normandy contained in this offer
document are inaccurate or incomplete, we are not in a position to verify
information concerning Normandy. We and our respective directors and officers
are not aware of any errors in such information.
105
The due diligence was conducted pursuant to a Confidentiality Agreement, a
term of which is as follows:
"NORMANDY IS NOT AWARE OF ANY MATERIAL INFORMATION IN RELATION TO
NORMANDY WHICH HAS NOT BEEN PROVIDED OR OTHERWISE MADE AVAILABLE TO THE
INDEPENDENT EXPERT WHICH HAS BEEN RETAINED BY NORMANDY FOR THE PURPOSE OF
PROVIDING A REPORT TO BE INCLUDED IN NORMANDY'S TARGET STATEMENT, OR
OTHERWISE INCLUDED IN NORMANDY'S TARGET STATEMENT, WHICH WILL BE ISSUED IN
RESPONSE TO THE OFF-MARKET BID FOR ANGLOGOLD LIMITED IN RESPECT OF WHICH A
BIDDER'S STATEMENT DATED OCTOBER 17, 2001 WAS SERVED ON NORMANDY."
Subsequent to the completion of the due diligence, and prior to the
announcement of our bid, we and Normandy entered into the deeds of undertaking
described in section 14.1, "Certain relationships and transactions with respect
to Newmont, Normandy and Franco-Nevada--Deeds of undertaking" on page 151.
Normandy gave a number of warranties to us in the deed of undertaking,
including a warranty that:
"The Normandy Board and the Normandy Senior Management are not aware of
any information being information otherwise liable to be disclosed under ASX
listing rule 3.1 which has not been publicly disclosed by Normandy in
reliance on the carve out from disclosure which is contained in ASX listing
rule 3.1 which has not been provided to the expert for review in connection
with the preparation of the independent expert's report which is to
accompany the Normandy Target's Statement which will be given in response to
the AngloGold Bidder's Statement dated 16 October 2001 and AngloGold's F-4
Registration Statement dated 9 November 2001."
We are not aware of any non-public information of Normandy, of which we
became aware in the course of the due diligence referred to above, being
information which:
. is not set out or referred to in this offer document, in Normandy's
target statement or being information which has not otherwise been made
available publicly by Normandy; and
. is material to a decision by a Normandy shareholder whether or not to
accept our offer.
Subject to the foregoing and to the maximum extent permitted by law, we and
our respective directors and officers disclaim all liability for information
concerning Normandy included in this offer document. We are not able to verify
the information provided by Normandy.
Normandy shareholders and Normandy ADS holders should form their own views
concerning Normandy from the full range of public information available
concerning Normandy. In particular, Normandy shareholders and Normandy ADS
holders should carefully consider the disclosures made by Normandy and its
directors concerning Normandy in response to the offer.
9.2 GENERAL DESCRIPTION OF NORMANDY'S OPERATIONS
Normandy is a gold company with extensive production and exploration
interests. Normandy has operations in Australia, the United States, New
Zealand, Turkey, Chile, Brazil and Canada. Normandy is also a producer of zinc
concentrate (from Golden Grove), cobalt (from Kasese) and magnesium (from
Australian Magnesium Corporation Limited).
A detailed description of Normandy's operations and investments has been
included in section 7, "Information about New Newmont" on page 66.
GOLD OPERATIONS
During the financial year ended June 30, 2001, Normandy had attributable
gold production of 2.2 million ounces. In addition to its directly owned gold
assets, Normandy has major interests in two ASX listed gold companies, Normandy
NFM Limited (87.5%) and Normandy Mt. Leyshon Limited (13.7%).
106
In May 2001, Normandy acquired 100% ownership of the Midas gold mine and 105
square kilometers of highly prospective adjoining tenements. This transaction
positions Normandy in the Carlin Trend of northern Nevada, in the United
States. A strategic alliance with TVX Gold Inc. in May 1999 formed TVX Normandy
Americas (Normandy 49.9%), delivering attributable gold production to Normandy
of approximately 250,000 ounces from five mines in North and South America.
AUSTRALIA
KALGOORLIE OPERATIONS (50%). The Kalgoorlie operations comprise the Super
Pit and Mt. Charlotte underground mine at Kalgoorlie-Boulder, 600 km east of
Perth in the Eastern Goldfields.
BODDINGTON MINE (44.4%). Boddington, a large-scale open pit mining
operation, is located 120 km southeast of Perth.
YANDAL OPERATIONS (100%). Yandal operations comprise the Bronzewing, Jundee
and Wiluna mines, situated in the prospective Yandal Goldfield of Western
Australia.
TANAMI OPERATIONS (87.5%). The Tanami operations comprise The Granites,
located approximately 550 km by road northwest of Alice Springs, and Dead
Bullock Soak, about 40 km west of The Granites, and are owned by Normandy NFM
Limited, a publicly listed, 87.5% owned, subsidiary of Normandy. Dead Bullock
Soak operations comprise Callie underground and Villa, Triumph Hill and
Colliwobble open pits. The Tanami operations include the Goldrush deposit. Ore
from this deposit will be processed at the Tanami plant (owned by Otter Gold
Mining Limited and Newmont) under a lease arrangement. Mining of this deposit
commenced in mid-September 2001 and gold production will commence in
mid-December 2001.
MT. LEYSHON (13.7%). The Mt. Leyshon mine, 24 km south of Charters Towers,
Queensland, is owned by Normandy Mt. Leyshon Limited, a publicly listed company
13.7% owned by Normandy. This large-scale open pit ceased mining operations in
February 2001. A comprehensive mine closure and rehabilitation plan covering
remaining operations, closure, rehabilitation, decommissioning and post-closure
monitoring has been implemented.
PAJINGO OPERATIONS (50%). The Vera-Nancy mine, on the Pajingo Joint Venture
tenements, is located 50 km southeast of Charters Towers in North Queensland.
UNITED STATES OF AMERICA
MIDAS MINE (100%). The Midas mine is approximately 100 km northwest of the
regional center of Winnemucca in northern Nevada, United States. Normandy
acquired its 100% interest in the mine and 105 square kilometers of adjoining
tenements in May 2001.
NEW ZEALAND
MARTHA MINE (67.06%). The Martha gold mine is located within the town of
Waihi.
TURKEY
OVACIK (100%). Construction of the Ovacik gold mine in Turkey was completed
in December 1997. Commencement of production was delayed. Production has now
commenced with the first gold produced in May 2001. The mine, however, is the
subject of a regulatory action which could result in its closure.
107
TVX NORMANDY AMERICAS
Normandy formed a strategic alliance with Canadian-based TVX Gold Inc.,
creating a new company, TVX Normandy Americas (owned 49.9% by Normandy and
50.1% by TVX Gold Inc.). The principal assets of the company are five operating
gold mines in the Americas, as follows:
. Crixas (Brazil, 50%),
. Paracatu (Brazil, 49%),
. La Coipa (Chile, 50%),
. New Britannia (Canada, 50%), and
. Musselwhite (Canada, 32%).
ADDITIONAL GOLD PROJECTS
YAMFO-SEFWI (90%). Yamfo-Sefwi is a new gold belt in western Ghana, with
Normandy holding licenses covering 95 strike km.
PERAMA (80%). The Perama gold deposit is located 25 km northwest of
Alexandroupolis in northeastern Greece. Normandy and its joint venture partners
hold a strong tenement position covering about 450 square kilometers. The area
is considered prospective for the occurrence of gold deposits.
MASTRA (100%). The Mastra gold deposit is located in the Black Sea region of
northeastern Turkey.
NON-GOLD METALS OPERATIONS
Normandy is also a base metals producer. Production from the Golden Grove
operations in Western Australia for the financial year ended June 30, 2001
totaled 182,655 tonnes of zinc concentrate and 52,807 tonnes of copper
concentrate, plus significant lead and silver. Normandy also has an effective
53.9% interest in the Kasese cobalt project, located in western Uganda.
GOLDEN GROVE OPERATIONS (100%). Golden Grove operations are located in
Western Australia, 230 km east of the port of Geraldton and 50 km southeast of
Yalgoo, and comprise the Scuddles mine and treatment plant, the Gossan Hill
mine and exploration tenements covering the 35 kilometer-long host horizon, a
sequence of acid-volcanogenic rocks of Archaean age.
KASESE COBALT (BANFF RESOURCES 63%). Banff Resources Limited, a company
listed on the Canadian Venture Exchange, has a 63% interest in the Kasese
cobalt project in Uganda, Africa. Normandy presently holds a controlling 86%
interest in Banff Resources.
AUSTRALIAN MAGNESIUM CORPORATION LIMITED
Normandy currently has a 22.8% voting interest (and a 13.9% equity interest)
in Australian Magnesium Corporation Limited, one of the world's largest
integrated magnesia and magnesium companies. Major activities of Australian
Magnesium Corporation Limited are QMag, Enviromag and the development of a
A$1.6 billion Stanwell Magnesium Project.
Australian Magnesium Corporation Limited is an Australian publicly listed
company based in Brisbane which developed and is now seeking to commercialize
the Australian Magnesium process technology to produce magnesium metal. The AM
process is expected to produce magnesium metal at the lowest cost in the world.
This is done through a number of chemical processes. The process aims to
minimize all effluents and, where possible, recycle them for other purposes.
108
Following development of the technology of the AM process, Australian
Magnesium Corporation Limited entered into an agreement in January 1997 with
Ford Motor Company of America, Commonwealth Scientific and Industrial Research
Organisation and Fluor Daniel Pty Ltd to construct a 1,500 tpa demonstration
plant and to complete a full feasibility study. The viability of the AM process
was confirmed following successful production of magnesium metal ingots from
the operational demonstration plant in August 1999. In March 2000, Australian
Magnesium Corporation Limited announced a positive feasibility recommendation
for the proposed commercial plant, located at Stanwell, near Rockhampton in
Queensland. Australian Magnesium Corporation Limited has also committed to
selling 45,000 tpa of magnesium alloy to Ford under a long-term contract.
RESOURCE. In January 1997, Australian Magnesium Corporation Limited acquired
the freehold title to an area within the Kunwarara magnesite deposit to source
sufficient magnesite to run the commercial plant at its planned initial
capacity. The Kunwarara magnesite deposit which covers an area of 63 square
kilometers, is located 70 km and 160 km northwest of Rockhampton and Gladstone,
respectively.
QMAG. Australian Magnesium Corporation Limited produces a range of
dead-burned and electrofused magnesia products sold to the world's refractory
industry as a raw material for high-quality basic refractory bricks
RECENT DEVELOPMENTS
In May 2001, Normandy acquired 100% ownership in the Midas gold mine and 105
square kilometers of highly prospective adjoining tenements. This transaction
positions Normandy in the prolific gold-producing Carlin Trend of northern
Nevada in the United States.
On June 5, 2001, Australian Magnesium Corporation Limited announced the
finalization of a A$932 million underwritten debt financing for the development
of its Stanwell Magnesium Project.
On July 20, 2001, Australian Magnesium Corporation Limited announced that it
had withdrawn the A$680 million equity offering to complete funding development
for its Stanwell Magnesium Project.
On August 14, 2001, Normandy Mt Leyshon Limited announced that, due to the
scheduled closure of the Mt Leyshon mine in February 2002, the directors of
Normandy Mt Leyshon Limited had proposed a cash distribution of A$0.33 per
share and a restructuring of the company as an alternative to orderly
liquidation. The new company would have a specific strategic focus on
exploration and would hold tenements in the Mt Leyshon district as well as a
portfolio of exploration properties, including tenements in the Musgrave region
of Western Australia and in the Kidston, Agate Creek and Cloncurry regions of
Queensland, Australia. As part of the transfer of the tenement package,
Normandy would be issued with shares representing 12% of the new company. In
the announcement of August 14, 2001, Normandy Mt. Leyshon Limited stated that
if these proposals are not approved by its shareholders, Normandy Mt Leyshon
Limited intends to make an interim distribution of A$0.25 per share with the
prospect of a final distribution of between A$0.10 and A$0.15 per share.
On September 5, 2001, AngloGold announced its intention to offer to acquire
all the outstanding shares of Normandy for 2.15 AngloGold shares in exchange
for every 100 ordinary shares of Normandy. On that same day, Normandy responded
to AngloGold's offer by announcing that it had appointed Macquarie Bank to
assist Normandy's board of directors in assessing AngloGold's offer and in
preparing a formal recommendation to Normandy shareholders and Normandy ADS
holders with respect to AngloGold's offer.
On September 27, 2001, Australian Magnesium Corporation Limited announced
that, due to unstable conditions in equity and capital markets, it is reviewing
the timing of its equity raising to fund the development of the Stanwell
Magnesium Project.
109
On September 28, 2001, Normandy published its annual shareholder report
including audited consolidated financial statements for the financial year
ended June 30, 2001. Excerpts from the annual shareholder report are included
under Annex B to this offer document.
On October 11, 2001, Normandy NFM Limited announced its intention to launch
an offer for Otter Gold Mines Limited, whereby 1.9 Normandy NFM Limited shares
will be offered for every 100 Otter shares. Normandy NFM Limited also agreed on
that date to purchase 7,798,000 Otter shares (9.9% of the outstanding Otter
shares) from the Guiness Peat Group at the same exchange ratio being offered to
other Otter shareholders. Otter's primary assets are a 60% interest in the
Tanami Joint Venture (the other 40% is held by AngloGold), owner of the Tanami
mill, significant exploration properties held 100% in the Tanami region of
Central Australia and a 33% interest in the Waihi Operations in New Zealand,
held through Martha Hill and Union Hill joint ventures, the remaining 67%
interest in which is held by Normandy. According to publicly available
information published by Normandy NFM Limited, as at October 9, 2001, Normandy
is the largest shareholder of Normandy NFM Limited with an 87.45% interest.
On October 15, 2001, Australian Magnesium Corporation Limited announced
revised arrangements for a capital raising of up to A$525 million for the
development of the Stanwell Magnesium Project. On the same date, Normandy
announced that, as part of and conditional on these capital raising plans, it
has agreed to subscribe for A$100 million of shares in Australian Magnesium
Corporation Limited between October 31, 2002 and January 31, 2003 and that it
has increased its loan facilities available to Australian Magnesium Corporation
Limited by A$10.6 million to fund expenses of the Stanwell Magnesium Project
until completion of the capital raising.
On October 25, 2001, Normandy published its first quarter report to
shareholders including unaudited condensed financial information for the three
months ended September 30, 2001. Excerpts from the first quarter report to
shareholders are included under Annex B to this offer document.
On November 14, 2000, Normandy, Newmont and Franco-Nevada announced that
Newmont intended to make a recommended offer of 0.0385 shares of Newmont common
stock for each Normandy share. In addition, Newmont offered to pay A$0.05 per
Normandy share in cash if the Newmont offer was accepted by holders of at least
90% of the Normandy shares. Newmont also agreed to acquire Franco-Nevada in a
stock-for-stock transaction, in which Franco-Nevada common shareholders will
receive 0.8 a share of Newmont common stock (or exchangeable shares,
exchangeable for Newmont common stock) for each share of Franco-Nevada common
stock pursuant to a Canadian plan of arrangement.
On November 19, 2001, Normandy published its response document in which the
Normandy board of directors recommended that holders of Normandy shares and
Normandy ADSs not accept AngloGold's previous offer to acquire all of the
outstanding Normandy shares for 2.15 AngloGold shares in exchange for every 100
Normandy shares. The board of directors of Normandy has not yet made a
recommendation to the Normandy shareholders and Normandy ADS holders regarding
the revised terms of the AngloGold offer.
On November 19, 2001, Australian Magnesium Corporation Limited announced
that it had closed its previously announced A$500 million public offer capital
raising and would accept $25 million in oversubscriptions.
On November 22, 2001, Normandy Mt. Leyshon Limited announced that the
restructure of the company had been completed. The company changed its name to
Leyshon Resources Limited and will operate with a new board and management and
with an initial focus on exploration of tenements acquired from Normandy.
On November 23, 2001, Australian Magnesium Corporation Limited confirmed
that it had completed the allotment of 660,258,713 Distribution Entitled
Securities on November 22, 2001.
On November 28, 2001, AngloGold raised its offer for ordinary shares of
Normandy to 2.15 AngloGold shares for every 100 ordinary shares of Normandy,
plus A$0.20 per share.
110
On December 6, 2001, Normandy NFM Limited announced that it had lodged its
offer document regarding the Otter Gold Mines takeover offer with the NZSE and
ASX.
On December 6, 2001, AngloGold withdrew arrangements to pay higher fees to
brokers who solicit acceptances to its offer in light of Newmont's application
for a restraining order.
On December 9, 2001, Newmont increased the cash component of its November
14, 2001 offer to A$0.40 per ordinary share of Normandy and removed the
condition that Newmont pay the cash component only if its offer was accepted by
holders of at least 90% of the Normandy shares.
On December 12, 2001, the Australian Takeovers Panel refused AngloGold's
application to block this offer.
On December 13, 2001 AngloGold announced that it would appeal a ruling by
Australia's Takeovers Panel. On December 20, 2001, the Takeovers Panel declined
AngloGold's appeal.
On December 27, 2001, AngloGold announced that it had increased its offer
for Normandy by and additional A$0.10 in cash per Normandy share following
discussions regarding "possible patterns of cooperation" with Barrick. See
Section 4.3 "Reasons for and background to the transactions--Background to the
transactions" on page 40.
On January 2, 2002, Newmont announced that it was increasing the cash
consideration of its offer for Normandy by A$0.10 to A$0.50 per share. On the
same date, the Normandy board of directors, subject to its fiduciary duties,
re-affirmed its recommendation of the Newmont offer, as revised, and its
recommendation that Normandy shareholders reject the AngloGold offer. See
Section 4.3 "Reasons for and background to the transactions--Background to the
transactions" on page 40.
Normandy La Source has accepted an offer of US$10.7 million plus a royalty
for its interest in the Ity goldmine, as disclosed in Normandy's supplementary
target statement.
9.3 PRESENTATION OF NORMANDY ACCOUNTING INFORMATION
Normandy prepares and publishes its consolidated financial statements in
accordance with Australian GAAP. Except where expressly stated otherwise, all
financial information relating to Normandy presented in this offer document has
been prepared in accordance with Australian GAAP.
Normandy's financial data is presented in accordance with Australian GAAP,
which differs in certain significant respects from U.S. GAAP. These differences
as they relate to Normandy cannot be fully quantified due to the limited
disclosure provided in publicly available financial information. Pursuant to
Rule 409 promulgated under the U.S. Securities Act of 1933, on December 17,
2001, we requested that Normandy and its independent public accountants provide
to us all material information required to be included in this offer document
or required to make statements made herein not misleading. On December 11,
2001, we requested that Normandy's independent public accountants consent in a
customary manner to the inclusion of its audit reports with respect to the
financial statements of Normandy included in this offer document. On December
14, 2001, Normandy's independent public accountants responded in writing to our
December 11, 2001 letter stating that they were reluctant to give consent for
the inclusion of its audit report where consent has not been given for the
financial statements themselves, and believed it was appropriate that its
consent be given concurrently with Normandy's consent. On December 19, 2001,
Normandy, on its own behalf and on behalf of its accountants, responded in
writing to our December 17, 2001 letter and stated that it was not appropriate
for Normandy to bear any burden as to what the offer document should contain
and whether or not such document was misleading. Normandy further stated that
if there were specifics which Newmont wished to refer to Normandy for review
and comment, Normandy would consider whether it could be of assistance and to
what extent, on a case by case basis. In addition, Normandy stated that its
accountants were not in a position to provide assistance to us, that
111
work on U.S. GAAP reconciliation of its financial statements had not been
completed to Normandy's satisfaction and that Normandy had not yet determined
whether it would allow U.S. GAAP reconciliation of its financial statements to
be made public at this time. On December 31, 2001, we reiterated our requests
previously made to Normandy to provide the information required for inclusion
in our United States filings, including the consent of Normandy's independent
accountants and the information necessary to permit Normandy's financial
statements to be reconciled to US GAAP. On January 2, 2002, Normandy responded
to Newmont's reiterated request stating that Normandy had carefully considered
our requests and determined that it must maintain Normandy's stance as
expressed in Normandy's letter dated December 19, 2001. Normandy stated that in
its opinion it was not appropriate that Normandy or its directors should have
any legal responsibility for the content of Newmont's registration statement.
Normandy noted that the issue was deliberately not covered in the pre-bid
documentation because Normandy was not prepared to take responsibility for the
content of Newmont's offer document or registration statement and that, in
Normandy's opinion responsibility for the content of the Newmont registration
statement must remain with Newmont. Normandy also noted that its own work on US
GAAP reconciliation was still not complete and, therefore, Normandy's directors
were not prepared to permit the publication of US GAAP reconciliations of
Normandy's accounts. Normandy also noted that it did not know whether its work
on US GAAP reconciliation would ever be completed, in view of the two competing
bids and their announced timeframes. See Section 4.3 "Reasons for and
background to the transactions--Background to the transactions" on page 40. As
a result, we have had to rely on our best estimates in presenting
reconciliation to U.S. GAAP of figures prepared in accordance with Australian
GAAP. However, errors in such estimates may be material.
KEY DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP
Certain historical financial information for Normandy is included in this
offer document and Annex B to this offer document. This historical information
for Normandy is presented in accordance with accounting principles generally
accepted in Australia ("Australian GAAP"), which differs in certain significant
respects from US GAAP. These differences as they relate to Normandy cannot be
quantified due to the limited disclosures provided in publicly available
financial information. See Section 3.1, "Risk factors--Risks related to the
Offer--We have not verified the reliability of the Normandy information
included in, or which may have been omitted from, this document" on page 27.
The key differences between Australian GAAP and US GAAP are as follows:
. EXPLORATION COSTS. US GAAP requires that all costs associated with ongoing
exploration efforts be expensed until development of an ore-body commences
or a bankable feasibility study on proven and probable reserves exists.
Australian GAAP allows for the capitalization of exploration costs
provided the rights to the exploration area are current and provided that
at least one of the following conditions are met:
. Such costs are expected to be recouped through successful development
and exploitation or alternatively by sale of the area of interest, or
. Exploration activities in the area of interest have not reached a stage
at the balance sheet date which permits a reasonable assessment of the
existence or otherwise of economically recoverable reserves.
. REVENUE RECOGNITION. US GAAP requires that specific criteria be met
including final delivery to the purchaser having occurred. Australian GAAP
requires that revenue be recognized when control passes to the purchaser,
which is determined by a combination of factors, one of which would
include delivery.
. INVENTORY. US GAAP requires inventory to be recorded at the lower of net
realizable value or cost. Australian GAAP allows gold bullion in its final
saleable form to be recorded at specific hedge contract amounts.
. CAPITALIZED INTEREST. US GAAP requires interest to be capitalized for all
assets in construction to the extent outstanding borrowings exist.
Australian GAAP does not specifically address the issue of capitalized
interest but in practice interest tends only to be capitalized on specific
project related indebtedness.
112
. DERIVATIVE INSTRUMENTS. US GAAP requires all derivatives to be recorded at
fair value. Qualifying derivatives may qualify for special hedge
accounting allowing for the deferral of recognition of the change in the
effective portion of the derivative instrument. Australian GAAP does not
require derivatives to be recorded at fair value and hedge accounting may
be applied in specified circumstances. Disclosure of fair value is
required.
. GOODWILL. US GAAP does not allow for amortization of goodwill. Australian
GAAP limits the amortization period to 20 years, subject to recoverability
tests.
. MINORITY INTEREST. US GAAP requires minority interest to be a separate
component of the balance sheet outside of equity. Australian GAAP requires
minority interest to be classified as a component of shareholders equity.
Additionally, US GAAP reports minority interest at book value while
Australian GAAP measures minority interest at fair value on the date the
entity becomes a subsidiary.
. DIVIDENDS PAYABLE. US GAAP classifies dividends payable in equity.
Australian GAAP presents dividends payable as a liability.
. PENSIONS AND EMPLOYEE BENEFITS. US GAAP measures such amounts at nominal
amounts. Australian GAAP measures the non-current portion at the present
value of expected future cash outflows.
. START-UP COSTS. US GAAP requires that all start-up costs be expensed as
incurred. There are no provisions for capitalizing start up costs under
Australian GAAP. In accordance with the 'matching' principle, start up
costs may be deferred and amortized provided the start-up costs meet the
definition of an asset.
. DEFERRED TAXES. US GAAP only provides for netting of deferred tax assets
and liabilities arising in the same taxing jurisdiction within each
current and non-current category. Under Australian GAAP, there is no
provision for netting deferred tax assets and liabilities of different
companies within a group in a consolidated set of accounts.
9.4 SELECTED FINANCIAL INFORMATION FOR NORMANDY
The following table sets forth selected historical financial data of
Normandy for each of the five years ended and as at June 30, 2001 and the
three-month periods ended September 30, 2000 and 2001. The selected historical
financial data for the five-year period ended June 30, 2001 has been extracted
from, and should be read in conjunction with, Normandy's audited annual
consolidated financial statements for the five-year period ended June 30, 2001,
including the notes thereto, included in Normandy's annual shareholder reports
prepared for those financial years. The selected historical financial data for
the three months ended September 30, 2000 and 2001 has been extracted from, and
should be read in conjunction with, Normandy's unaudited simplified financial
statements for these periods, including the notes thereto, included in
Normandy's reports on activities to shareholders for each of the three-month
periods ended September 30, 2000 and 2001. Normandy's audited annual
consolidated financial statements for each of the three years ended June 30,
2001, including the notes thereto, as extracted from Normandy's annual
shareholder reports, as well as Normandy's unaudited simplified financial
statements for the three months ended and as at September 30, 2001, including
the notes thereto, as extracted from Normandy's report on activities to
shareholders, have been reproduced in Annex B to this offer document.
Under U.S. securities laws, pro forma financial information for Normandy
would generally be required to be provided in this offer document. However,
Normandy has declined to assist in gathering this information and has not
provided Newmont access to Normandy's detailed accounting records, nor has
Normandy assisted in preparing reconciliations to US GAAP. Therefore, no such
US GAAP reconciliation is provided, nor is any pro forma financial information
related to Normandy provided in this offer document. See Section 3.1, "Risk
factors--Risks related to the Offer--We have not verified the reliability of
the Normandy information included in, or which may have been omitted from, this
offer document" on page 27. We note that Normandy's historical financial data
is presented in this offer document in accordance with Australian GAAP, which
differs in certain significant respects from US GAAP. See Section 9.3,
"Information about Normandy--Presentation of Normandy accounting
information--Key Differences between Australian GAAP and US GAAP" on page 112.
These
113
differences as they relate to Normandy cannot be quantified due to the limited
disclosures provided in Normandy's publicly available financial information.
The selected historical financial data for the five years ended and as at
June 30, 2001 were prepared in Australian dollars as prescribed by Australian
law and in accordance with Australian Accounting Standards. Except where
expressly stated otherwise, the financial information presented in this offer
document relating to Normandy is expressed in Australian dollars. For
information on the exchange rates between Australian dollars and U.S. dollars,
and Canadian dollars and U.S. dollars, see section 15.8, "Additional
Information--Selected exchange rate data" on page 168.
THREE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30,
------------ ---------------------------------
2001 2000 2001 2000 1999 1998 1997
----- ---- ----- ----- ----- ----- -----
A$M A$M A$M A$M A$M A$M A$M
CONSOLIDATED STATEMENT OF INCOME
Sales revenue..................................................... 430 * 1,544 1,324 1,356 1,484 1,334
Total depreciation and amortization............................... (72) (62) (287) (141) (160) (191) (166)
Profit/(loss) from ordinary activities(1)......................... 52 39 (103) (285) 113 140 206
Income tax (expense) benefit relating to ordinary activities...... (12) (8) (20) 9 (32) (33) (61)
Net profit/(loss) attributable to members of the parent entity.... 35 31 (155) (282) 104 119 124
OTHER FINANCIAL DATA
Basic earnings/(loss) per share (in Australian cents per share)(2) * * (8.6) (16.2) 6.1 7.2 7.8
Dividends per share (in Australian cents per share)............... -- -- 2.5 6.0 6.0 6.0 6.0
Total cash costs (A$/ounce)(3).................................... 310 298 300 304 335 321 336
CONSOLIDATED BALANCE SHEET DATA (AS AT END OF PERIOD)
Current assets.................................................... 870 800 672 838 570 595
Non-current assets................................................ 3,088 3,047 2,954 2,560 2,506 2,020
Total assets...................................................... 3,958 3,847 3,626 3,397 3,076 2,615
Current liabilities............................................... 622 603 523 907 366 507
Non-current liabilities........................................... 1,899 1,846 2,117 1,117 1,212 731
Total liabilities................................................. 2,521 2,449 2,640 2,024 1,578 1,238
Net assets........................................................ 1,437 1,398 986 1,373 1,498 1,377
Stockholders equity............................................... 1,437 1,398 986 1,373 1,498 1,377
SHARES IN ISSUE (IN MILLIONS)..................................... 2,231 2,231 1,752 1,717 1,671 1,632
--------
* This information has not been publicly disclosed by Normandy.
(1) Prior to the year ended June 30, 2001, information disclosed as operating
profit/(loss) before income tax.
(2) Prior to the year ended June 30, 2001, information disclosed as basic
earnings per share after abnormal items.
(3) A consolidated group cash cost (A$/ounce) is not presented, only cash cost
(A$/ounce) for gold operations is available.
See Annex B for more detailed information on Normandy's historical financial
information.
9.5 WHERE YOU CAN FIND MORE INFORMATION ON NORMANDY
As a reporting issuer in the Province of Ontario, Normandy is required to
file with the Ontario Securities Commission its periodic disclosure documents,
such as its annual audited financial statements, unaudited interim financial
statements, proxy materials and material change reports. These documents are
available through the internet on the System for Electronic Document Analysis
and Retrieval (SEDAR), which can be accessed at http://www.sedar.com.
Ordinary shares of Normandy are listed on the ASX under the symbol "NDY" and
Normandy ADSs are listed on the TSE under the symbol "NDY". You may consult
reports and other information about Normandy that it files pursuant to the
rules of the ASX and the TSE at the offices of the ASX, ASIC and the TSE.
For selected excerpts from Normandy's publicly available documents, see
Annex B. You may also find additional information on Normandy on its website at
http://www.normandy.com.au.
114
10 INFORMATION ABOUT FRANCO-NEVADA
10.1 GENERAL DESCRIPTION OF FRANCO-NEVADA'S OPERATIONS
ABOUT FRANCO-NEVADA
Franco-Nevada was originally incorporated under the Canada Business
Corporations Act on October 5, 1982. It amalgamated by plan of arrangement with
Euro-Nevada Mining Corporation Limited effective September 20, 1999, and its
incorporating documents are articles of arrangement dated September 20, 1999.
The primary business of Franco-Nevada is the acquisition of:
(1) direct interests in mineral properties and, when appropriate, developing
those properties;
(2) royalty interests in producing precious metals mines and precious metals
properties in the development or advanced exploration stage;
(3) direct interests in mineral properties with a view to exploring and
selling, leasing or joint venturing the properties to established mine
operators and retaining royalty interests; and
(4) indirect interests in mineral deposits through strategic interests in
companies that own interests in mineral deposits.
Franco-Nevada has a portfolio of royalty interests covering producing and
non-producing mineral properties located in the United States, Canada,
Australia, South Africa, Indonesia and various Latin American countries.
A detailed description of Franco-Nevada's royalty interests and investments
has been included in section 7, "Information about New Newmont" on page 66.
Franco-Nevada has a portfolio of oil and gas interests in Alberta,
Saskatchewan, Manitoba and the Canadian Arctic and also has various direct and
indirect interests in resource properties located in Nevada, Ontario,
Saskatchewan, Central and South America, the Dominican Republic, Australia,
Indonesia, and South Africa.
Franco-Nevada currently has 25 employees in total: 14 in Canada, and 11 in
the United States.
RECENT TRANSACTIONS
On September 20, 1999, Franco-Nevada and Euro-Nevada Mining Corporation
Limited merged. The name of the amalgamated corporation is Franco-Nevada Mining
Corporation Limited. The merger of Franco-Nevada and Euro-Nevada was accounted
for as a pooling of interests. Euro-Nevada shareholders received 0.77
Franco-Nevada shares for each Euro-Nevada share. At the time of the merger,
Franco-Nevada and Euro-Nevada were two of only four public companies in North
America actively pursuing NSRs and NPIs in mineral properties. Franco-Nevada
and Euro-Nevada shared four executive officers and three directors who
collectively owned 9% and 10% of the common shares of the two companies,
respectively. Management now owns 10% of Franco-Nevada.
During fiscal year 2001, Franco-Nevada:
(1) tendered its 9,576,173 Inco Limited Class VBN Shares to Inco in exchange
for 4,309,277 warrants of Inco and cash proceeds of C$72 million per VBN
share. Each warrant plus $30 is exchangeable for an Inco common share;
and
(2) sold its 2.5% interest in San Juan Basin Royalty Trust, an oil and gas
royalty trust listed on the NYSE. Franco-Nevada held 2,000,000 units.
115
NORMANDY TRANSACTION
On April 2, 2001, Franco-Nevada announced that it had entered into an
agreement with Normandy. On May 30, 2001, the transaction pursuant to this
agreement was completed. Under the terms of the agreement, Franco-Nevada
transferred to Normandy 100% ownership of its Ken Snyder Mine and Midas
exploration properties in Nevada and its Australian interests as well as
subscribe for $48 million in Normandy shares. In return, Franco-Nevada received
446.1 million new ordinary shares of Normandy representing a 19.99% interest
(currently 19.79%, calculated on a fully diluted basis) in Normandy, calculated
on a fully diluted basis. Franco-Nevada also retained a minimum 5% net smelter
return royalty on the Ken Snyder Mine and Midas exploration properties which
escalates at gold prices over $300 per ounce to a maximum 10% net smelter
return royalty at gold prices over US$400 per ounce. Both companies granted
each other preferential rights on future asset transactions.
STOCK EXCHANGES
Franco-Nevada's common shares are listed on the TSE under the symbol "FN",
its class A warrants are listed on the TSE under the symbol "FN.WT" and its
class B warrants are listed on the CDNX under the symbol "YFN.WT.B".
ADDRESS
The registered and principal executive office of Franco-Nevada is at Suite
1900, 20 Eglinton Avenue West, Toronto, Ontario M4R 1 K8.
10.2 SELECTED FINANCIAL INFORMATION FOR FRANCO-NEVADA
The table below shows selected historical financial information for
Franco-Nevada as of and for the years ended March 31, 2001, 2000, 1999, 1998
and 1997 and has been prepared using the audited consolidated financial
statements of Franco-Nevada. The information as of and for the six months ended
September 30, 2001 and 2000 has been prepared using the unaudited consolidated
financial statements of Franco-Nevada. This information is only summary, and
you should read it in conjunction with Franco-Nevada's historical financial
statements and related notes and Management's Discussion and Analysis contained
in Annex C of this document.
SIX MONTHS
SEPTEMBER 30 YEARS ENDED MARCH 31
------------------- -----------------------------------------------
2001 2000 2001 2000 1999 1998 1997
--------- --------- --------- --------- --------- --------- -------
CDN$, CDN GAAP
INCOME STATEMENT
Revenue.......................... 85,440 80,102 177,631 120,577 116,107 124,209 131,479
Income from continuing operations 55,115 44,186 79,872 63,995 63,454 72,628 77,839
Discontinued operations.......... 21,902 16,931 33,573 33,641 5,075 1,074 790
Net Income....................... 77,017 61,117 113,445 97,636 68,529 73,702 78,629
PER SHARE DATA
Income from continuing operations 0.35 0.28 0.51 0.41 0.42 0.49 0.55
Discontinued operations.......... 0.14 0.11 0.21 0.21 0.03 0.01 0.01
Net Income....................... 0.49 0.39 0.72 0.62 0.45 0.50 0.56
Dividend per share............... -- -- 0.35 0.30 0.21 0.19 0.23
BALANCE SHEET DATA
Cash and short term investments.. 864,053 730,099 939,011 705,714 707,507 766,004 636,819
Working capital.................. 932,359 829,992 941,193 739,489 720,467 782,833 637,624
Total assets..................... 1,607,126 1,514,516 1,547,750 1,420,891 1,389,525 1,146,256 932,625
Long term debt................... -- -- -- -- -- -- --
Net assets....................... 1,521,700 1,419,052 1,435,456 1,346,187 1,318,094 1,096,654 888,207
Minority interest................ -- -- -- -- -- -- --
Shareholders' equity............. 1,521,700 1,419,052 1,435,456 1,346,187 1,318,094 1,096,654 888,207
Common shares outstanding (000s). 158,920 158,631 158,631 158,631 158,357 152,293 145,781
See Annex C for more detailed information on Franco-Nevada's historical
financial information.
116
10.3 WHERE YOU CAN FIND MORE INFORMATION ON FRANCO-NEVADA
As a reporting issuer (or its equivalent) in each of the provinces of
Canada, Franco-Nevada is required to file with the various securities
commissions or similar authorities its periodic disclosure documents, such as
its annual audited financial statements, unaudited interim financial
statements, annual reports, annual information forms, proxy materials and
material change reports. These documents are available through the internet on
the System for Electronic Document Analysis and Retrieval (SEDAR), which can be
accessed at http://www.sedar.com.
Securities of Franco-Nevada are listed on the TSE and the CDNX. You may
consult reports and other information about Franco-Nevada that it files
pursuant to the rules of the TSE and CDNX at the offices of the TSE and the
CDNX or you can access their websites at http://www.tse.com and
http://www.cdnx.com.
You may also find additional information on Franco-Nevada on its website at
http://www.franco-nevada.com.
117
11 INTENTIONS
11.1 INTRODUCTION
This section sets out our intentions concerning:
(a) the continuation of the business of Normandy;
(b) any major changes to be made to the business of Normandy, including any
redeployment of the fixed assets of Normandy; and
(c) the future employment of the present employees of Normandy.
You should read this section in conjunction with section 7, "Information
about Newmont" on page 66.
Our intentions are based on our review of publicly available information
about Normandy and a review of selected non-public information about Normandy,
which is referred to in section 9.1. Prior to implementing the intentions set
out in this section, we will seek to undertake a thorough review of Normandy's
operations and any other internal confidential information and consideration of
any other relevant facts and circumstances to confirm our intentions.
Accordingly, the statements set out in this section are statements of current
intentions only and are based on limited information, which may vary as
circumstances and further information require.
11.2 INTENTIONS IF COMPULSORY ACQUISITION IS ACHIEVED
We have the following intentions if we become entitled to proceed to acquire
compulsorily the remaining Normandy shares (including shares represented by
Normandy ADSs) following completion of the offer:
(a) CORPORATE MATTERS
We intend to:
(1) acquire compulsorily the remaining Normandy shares (including shares
represented by Normandy ADSs) in accordance with the provisions of the
Corporations Act;
(2) seek to acquire compulsorily under the Corporations Act:
(A) Normandy options which have not been exercised prior to the
expiration of the offer, and
(B) any ordinary shares of Normandy issued after the expiration of the
offer as a result of the exercise of Normandy options;
(3) procure that Normandy's shares are removed from the official list of the
ASX and that Normandy applies to the Ontario Securities Commission to
cease to be a reporting issuer in the Province of Ontario and to the TSE
to delist the Normandy ADSs from that exchange;
(4) replace some or all of the members of the board of directors of
Normandy. Our representatives have not yet been identified and their
identity will depend on the circumstances at the relevant time; and
(5) reconstitute our board as outlined in section 7.1.
(b) INTEGRATION OF NEWMONT AND NORMANDY
Newmont and Normandy conduct exploration programs in many of the same
regions around the world. We intend to consolidate these programs and
prioritize exploration projects and expenditures in an optimized and efficient
manner. We intend that exploration activities within Australia will be
conducted on an ongoing basis, although the level of activity in any year will
vary, depending on, among other things, the prevailing gold price and prior
results. We expect to realize certain synergies with respect to this
consolidation effort that may include reduction or redeployment of existing
employees as well as the closure of certain exploration offices.
118
We do not have significant operations in Australia and intend to maintain a
regional office in Australia as a management platform for our Australasian
properties. We intend to maximize both companies' managerial and technical
expertise within New Newmont's worldwide operations and to realize cost savings
from the elimination of selected, redundant administrative functions.
We also intend to realize cost savings from the elimination of selected,
redundant administrative and mine operation functions at Normandy's Midas mine,
which is located near Newmont's mines in Nevada. In addition, we expect to
realize synergies from the application of Newmont's global procurement systems
to Normandy's operations.
(c) NON-CORE ASSETS
(1) GOLD
While we have no immediate intentions of making any major changes to
Normandy's business, we will review Normandy's gold assets over time and make
assessments regarding whether certain of these assets continue to fit into the
longer-term strategy of the combined company.
(2) NON-GOLD
In relation to Normandy's non-gold assets, our intentions are:
(A) GOLDEN GROVE. To continue to operate and maintain capital support for
Golden Grove until zinc and copper commodity prices materially
increase, when consideration will be given to whether a disposal of
the assets can be achieved on appropriate terms;
(B) AUSTRALIAN MAGNESIUM CORPORATION. To honor all of Normandy's
obligations and commitments known to us at the date of announcement
of this offer (being those referred to in the condition in section
5.10(a)(10) above), including those regarding the development of the
Stanwell Magnesium Project. As a gold company, Newmont might, in the
future, consider a possible exit from AMC, but we would not intend to
do so in a manner that would compromise the benefit AMC enjoys as a
result of Normandy's obligations and commitments.
(C) OTHER ASSETS. To dispose of other non-core, non-gold assets of
Normandy, provided appropriate prices can be obtained and appropriate
contractual terms can be negotiated.
11.3 INTENTIONS UPON GAINING CONTROL BUT LESS THAN 90% OF NORMANDY
If we gain control of Normandy but are not entitled to acquire compulsorily
the outstanding ordinary shares of Normandy (including shares represented by
Normandy ADSs), then we currently intend to:
(a) subject to the Corporations Act and the constitution of Normandy,
reconstitute the board of directors of Normandy to reflect our majority
ownership interest in Normandy. Replacement board members have not yet
been identified and their number and identity will depend on the
circumstances at the relevant time;
(b) subject to the ASX Listing Rules and the TSE Listing Rules, request that
the board of directors of Normandy review whether ordinary shares of
Normandy should continue to be listed on the ASX and whether the
Normandy ADSs should continue to be listed on the TSE; and
(c) to the extent possible, implement the intentions outlined above, which
are consistent with Newmont gaining control of Normandy.
We would only make decisions on these courses of action following receipt of
legal, taxation and financial advice and our intentions must be read as subject
to the legal obligation of the Normandy board of directors to comply with all
legal and regulatory requirements and their fiduciary and statutory duties.
119
11.4 EFFECTS OF THE OFFER ON THE MARKET FOR ORDINARY SHARES OF NORMANDY AND
NORMANDY ADSS
After the completion of the offer, in addition to the possible effects
outlined in sections 11.2 and 11.3, the number of Normandy shareholders or
Normandy ADS holders and the number of ordinary shares of Normandy or Normandy
ADSs remaining in public circulation may be reduced to a level that there will
be a less active trading market for ordinary shares of Normandy or Normandy
ADSs. This may adversely affect the market price of remaining ordinary shares
of Normandy or Normandy ADSs.
11.5 BUSINESS, ASSETS AND EMPLOYEES
Other than as set out in this section 11, it is our present intention:
(a) to continue the business of Normandy;
(b) not to make any major changes to the business of Normandy and not to
re-deploy any of the fixed assets of Normandy; and
(c) to maintain the employment of substantially all of Normandy's existing
employees.
120
12 SHARE INFORMATION
12.1 SHARE CAPITAL OF NEWMONT
As at November 30, 2001, Newmont had:
. issued and outstanding 196,129,592 shares of common stock, US$1.60 par
value;
. issued and outstanding 2,299,980 shares of $3.25 convertible preferred
stock, US$5.00 par value.
12.2 LISTING ON OTHER EXCHANGES
Newmont is a company incorporated in Delaware. Our shares are listed on the
NYSE under the symbol "NEM" and a supplemental listing application has been
submitted to list the shares to be issued in connection with the transaction.
We have filed an application to list our common stock on the ASX in the form of
CDIs.
12.3 COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF NEWMONT AND NORMANDY
We are incorporated under the laws of Delaware and Normandy is incorporated
under the laws of Australia. If the offer is completed, Normandy shareholders
exchanging their ordinary shares of Normandy (including shares represented by
Normandy ADSs) under the offer, whose rights are currently governed by the laws
of Australia and the constitution of Normandy, will, upon completion of the
offer, become holders of shares of our common stock in the form of shares of
our common stock or Newmont CDIs and their rights as such will be governed by
the Delaware General Corporation Law, the U.S. Securities Act of 1933, as
amended, the U.S. Securities Exchange Act of 1934, as amended, and the NYSE
listing requirements, as well as our restated certificate of incorporation and
by-laws. The material differences between the rights of holders of ordinary
shares of Normandy and the rights of holders of shares of our common stock,
resulting from the differences in our governing documents and governing laws,
are summarized below. In addition, where applicable, the summary below outlines
material differences between the rights of holders of shares of Newmont and
Delta Holdco Corp. ("Holdco"), a Delaware corporation whose certificate of
incorporation and by-laws are substantially similar to those of Newmont. The
following summary does not contain all the information that may be important to
you and is qualified in its entirety by reference to the laws of Delaware and
Australia and the governing corporate documents of Newmont and Normandy. To
learn how to obtain copies of the governing corporate documents of Newmont and
Normandy, see section 8.3, "Information about Newmont--Where you can find more
information on Newmont," on page 101 and section 9.5, "Information about
Normandy--Where you can find more information on Normandy" on page 114,
respectively.
RIGHTS OF HOLDERS OF RIGHTS OF HOLDERS OF
NEWMONT SHARES NORMANDY SHARES
------------------------------------------------ ---------------------------------------------
Amendment of Our restated certificate of incorporation may Under the Corporations Act, a company may by
constitutive generally be amended if the change is special resolution (75% of shareholders who
documents proposed by our board of directors and vote) amend or repeal its constitution or any
approved by the holders of a majority of provision of its constitution.
outstanding voting stock. However, the vote
of at least 80% of all classes of stock entitled
to vote in elections of directors is required to
amend the charter provisions relating to a
supermajority vote for certain mergers,
consolidations and transactions with
beneficial owners of more than 10% of the
outstanding shares entitled to vote in
elections of directors.
Subject to the by-laws made by the
stockholders, our board of directors may
make by-laws, and from time to time may
alter, amend or repeal any by-law or by-laws.
However, any by-law made by the board of
directors may be altered or repealed by the
stockholders.
The certificate of incorporation of Holdco
clarifies the board of directors' authority to
make, alter, amend or repeal by-laws, subject
to alteration or repeal by the stockholders at
any annual meeting or at a special meeting
where notice has been provided of the
proposed alteration or repeal.
121
RIGHTS OF HOLDERS OF RIGHTS OF HOLDERS OF
NEWMONT SHARES NORMANDY SHARES
----------------------------------------------- -----------------------------------------------
Voting Each share of common stock confers the Each share (subject to any specific terms of
right to one vote at all general meetings. issue) confers the right to vote at all general
meetings. On a show of hands, each
The restated certificate of incorporation and shareholder present in person, or by proxy,
the certificate of designation of the $3.25 representative or attorney has one vote. If a
Convertible Preferred Stock provide for poll is held, shareholders present in person
default voting rights: whenever dividends on or by their proxy, representative or attorney
the Convertible Preferred Stock are in will have one vote for each fully paid share
arrears in an amount equal to at least six held (and the equivalent fraction for partly
quarterly dividends (whether or not paid shares). A poll may be demanded by
consecutive), the number of members of the the chairman of the general meeting, at least
board of directors will be increased by two. three voting members, or by any number of
These two directors will be elected by the members holding either at least 5% of the
holders of the Convertible Preferred Stock, total voting rights or voting shares on which
voting separately as a class. The term of the total amount paid up is at least 5% of the
these additional directors, and the right of total paid up on all voting shares. There are
the holders of the Convertible Preferred no limitations on the right of non-Australian
Stock to elect them, terminate when the shareholders to hold or exercise voting
company pays or sets apart for payment all rights attaching to any shares in the
accrued and unpaid dividends on the company.
Convertible Preferred Stock.
All matters other than elections of directors
are generally decided by a majority vote
viva voce of the stockholders present in
person or by proxy.
Class voting Our restated certificate of incorporation The Corporations Act and Normandy's
provides that, except as otherwise provided constitution require voting by separate
by the restated certificate of incorporation or classes of shares only with respect to a
Delaware law, our common stock and variation of class rights.
preferred stock (and any other capital stock
that is entitled to vote) will vote together as
a class.
Delaware law requires voting by separate
classes only with respect to certificate of
incorporation amendments that adversely
affect the holders of those classes or that
increase or decrease the aggregate number
of authorized shares or the par value of the
shares of any of those classes.
Dividends Dividends upon our capital stock may be The shares will (unless the terms of issue
declared by the board of directors, payable provide otherwise) participate fully in all
in cash, in property or in shares of our dividends according to the amount paid up
capital stock. on each share. The board may deduct from
any cash dividend any money owed to the
The shares of our $3.25 Convertible company by a shareholder. No dividends
Preferred Stock rank prior to our common shall be payable except out of the profits of
stock as to payment of dividends. Holders of the company.
Convertible Preferred Stock are entitled to
receive dividends at the rate of $3.25 per The holders of Normandy shares, registered
annum per share. as at a record date, are entitled to receive
dividends as declared by the company.
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Directors: Our by-laws state that our board shall The Corporations Act requires that
Qualification consist of not less than eight and not more Normandy have at least three directors
and number of than fifteen directors (this number can be (excluding alternate directors), at least two
directors changed by the by-laws). Within these of whom ordinarily reside in Australia.
limits, the number of directors is determined Normandy's constitution limits the number
from time to time by the vote of a majority of directors to a maximum of 10 (excluding
of the directors then in office. Directors hold alternate directors). As of the date of this
office until the next annual meeting of offer document, Normandy has seven
stockholders and until their respective directors. The constitution allows Normandy
successors are elected and qualified. to vary the number of its directors in general
Directors need not be stockholders. As of meetings, provided that the variation falls
the date of this offer document, we have within the above requirements of the
twelve directors. Corporations Act. Normandy's constitution
does not require directors to hold any
If the number of directors is increased, the Normandy shares to qualify them for
additional directors may be elected by the appointment as directors.
directors or by the stockholders at an annual
or special meeting, as provided in the by-
laws.
The by-laws of Holdco will permit Holdco
to have up to 17 directors.
Removal of Any of our directors may resign at any time Any of Normandy's directors may resign at
directors and upon written notice to us. any time by giving notice in writing to
fillingof Normandy. The Corporations Act provides
vacancies Vacancies on our board of directors through that directors may be removed by a vote of
death, resignation or otherwise (including the majority of shareholders at a meeting of
newly created directorships resulting from which special notice has been given. The
an increase in the number of directors), may directors cannot remove a director from
be filled by the affirmative vote of a office or require a director to vacate their
majority of the directors then in office, office.
though less than a quorum, for the unexpired
portion of the term of the director whose Normandy's constitution provides that the
office is vacant, and until the election of a directors may appoint any person as a
successor. director (other than an alternate director)
either to fill a casual vacancy or as an
addition to the board, provided that the
maximum permitted number of directors is
not exceeded.
Rotation of None. Normandy's constitution specifies that
directors directors appointed to fill casual vacancies
and directors appointed by an extraordinary
general meeting, each since the previous
annual general meeting, and otherwise the
longest serving one-third of directors (or if
that is not a whole number the next lowest
whole number), excluding the managing
director and alternate directors, must retire
from office at each annual general meeting.
Any other director, who without
reappointment would hold office for more
than three years at the time of the next
annual general meeting, must also retire.
Retiring directors are eligible for re-election.
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Quorum of Our by-laws provide that a quorum for any Normandy's constitution provides that a
stockholders meeting of stockholders consists of the quorum for a general meeting consists of
for ageneral holders of record of a majority of our capital three shareholders present in person or by
meeting stock issued and outstanding and entitled to proxy, attorney or representative. If a
vote at the meeting. quorum is not achieved for a meeting
convened by a requisition of members, the
meeting is dissolved. All other meetings at
which a quorum is not achieved will be
adjourned to the day, time and place
determined by the board, or, failing
determination, the same day in the next
week at the same time and place. If a
quorum is not achieved at the adjourned
meeting, two natural persons, each being or
representing a voting member, constitute a
quorum. If a quorum is still not present, the
meeting is dissolved.
Calling of Special meetings of our stockholders may be The Corporations Act requires Normandy's
special called by directors to call and arrange to hold a
meetings of general meeting on the request of either
stockholders . Our board of directors; members holding at least 5% of the votes
that may be cast at the meeting, or at least
. the Chairman of the Board; or 100 members entitled to vote at the meeting.
The directors must call the meeting within
. the President. 21 days after the request is given to the
company, and the meeting must be held not
Special meetings must be called by the later than two months after the request is
Chairman of the Board or the President or given to the company. If the directors fail to
the Secretary upon a written request stating call the meeting within 21 days, members
the purpose of the meeting and signed by: holding at least 50% of the votes held by all
requisitionists may call and arrange to hold
. a majority of our board of directors; the meeting. The meeting must be held not
or later than three months after the initial
request is given to the company. Under the
. stockholders owning 25% of our Corporations Act, members holding at least
stock entitled to vote at the meeting. 5% of the votes that can be cast at a general
meeting may also call, and arrange to hold, a
general meeting, but this must be done at
their own expense.
Notice of Written notice of every stockholder meeting, As a listed company incorporated in
stockholder stating the time, place and purposes of the Australia, Normandy must give its
meetings meeting, must be given personally or by shareholders at least 28 days' notice of a
mail, not less than ten days nor more than meeting of members. Each shareholder is
sixty days before the date on which the entitled to individual written notice of each
meeting is to be held, to each stockholder of general meeting and has the right to be
record entitled to vote at that meeting. In the present and to speak at that meeting.
event of a special meeting called upon the
written request of stockholders, the notice
must describe any business set forth in the
statement of purpose in such written request
as well as any additional business proposed
to be conducted at the meeting by our board
of directors.
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Stockholder action without a meeting Our stockholders may consent in writing Normandy, as a public company, is not
without a meeting to the taking of any action permitted to pass resolutions on the basis of
that is required to be or may be taken at any written consent from shareholders.
annual or special meeting, as long as written
consents are signed by the holders of
outstanding stock having not less than the
minimum number of votes that would be
necessary to authorize or to take such action
if the actual meeting took place.
Delaware law provides that stockholders
may, unless the certificate of incorporation
otherwise provides, act by written consent to
elect directors; however, if such consent is
less than unanimous, such action by written
consent may be in lieu of holding an annual
meeting only if all of the directorships to
which directors could be elected at an annual
meeting held at the effective time of such
action are vacant and are filled by such
action.
Appointment of directors Our directors may be nominated at an annual Directors of Normandy may be appointed at
meeting of stockholders the annual general meeting of Normandy
shareholders. A person must have given the
. pursuant to our notice of meeting; company a signed consent to act as a
director before being appointed. Except in
. by or at the direction of our board of the case of existing directors retiring
directors; or automatically under the constitution, any
person not recommended for appointment by
. by any Newmont stockholder who the board is only eligible for appointment
was a stockholder of record at the where the signed consent is received at least
time of giving of notice who is 35 business days before a general meeting
entitled to vote at the meeting and called by directors and at least 30 business
who complies with the appropriate days before a general meeting that members
notice procedures. have.
Our directors may also be nominated at a
special meeting of stockholders at which
directors are to be elected pursuant to our
notice of meeting
. by or at the direction of our board of
directors; or
. if our board of directors has
determined that directors will be
elected at the special meeting, by any
Newmont stockholder who is a
stockholder of record at the time of
giving of notice of the special
meeting who is entitled to vote at the
meeting and who complies with the
appropriate notice procedures.
All elections of directors are by a plurality
vote by ballot.
The Chairman of the Board and the
President must be directors.
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Corporate governance Newmont's code of conduct, which must be Normandy's stated corporate governance
observed by all employees and directors, policies include:
requires compliance with applicable
securities and other laws and regulations, the Restrictions on trading in securities of the
existence of an internal audit department Normandy group by its employees, directors
which interacts directly with the Audit and associates, a code of conduct which
Committee of the Board of Directors and the must be observed by all employees and
use of board committees with, in some directors, the conduct of an internal audit
cases, approved charters. under formal charter, implementation of an
integrated risk management system, and the
use of board committees with board
approved written terms of reference.
Shareholder proposals If a special meeting is called upon the The Corporations Act provides that a notice
written request of stockholders, the notice of of meeting of a company's members must
meeting must describe any business set forth state the general nature of the meeting's
in the statement of purpose in that written business. The nature of all the business
request as well as any additional business which is required to be dealt with at an
proposed to be conducted at the meeting by annual general meeting need not be
the board of directors. specified in the notice of that meeting.
Any Newmont stockholder who was a Members holding at least 5% of the votes
stockholder of record at the time of giving of that may be cast on the resolution, or at least
notice of the stockholder meeting who is 100 members entitled to vote at a general
entitled to vote at the meeting and who meeting, may give the company notice of a
complies with the appropriate notice resolution that they propose to move at a
procedures may make nominations of general meeting. The company must then
persons for election to the board of directors give notice of this resolution, provided it is
or propose business to be considered by the not too long or defamatory, to all members
stockholders at the stockholder meeting. (at its cost if received in time to be sent with
the notice of meeting) and consider the
In addition, U.S. federal securities laws resolution at the next general meeting
provide guidelines for a corporation's occurring more than two months after notice
inclusion of shareholder proposals in its is given to the company. Members satisfying
proxy materials for stockholder meetings. the above thresholds may request
distribution of a statement relating to any
resolution proposed to be moved at a general
meeting, or any other matter to be
considered at a general meeting.
Business of the annual We will hold an annual meeting in each year The business of an annual general meeting
general meeting at such place and on such date and at such may include any of the following, even if
time as our board of directors designates by not referred to in the notice of meeting:
resolution, for the purpose of electing
directors and transacting such other business . considering the annual financial
as may properly be brought before the report, directors' report and auditor's
meeting. report;
. the election of directors;
. the appointment of the auditor; and
. the fixing of the auditor's
remuneration.
The chair of an annual general meeting must
allow a reasonable opportunity for the
members as a whole at the meeting to ask
questions about or make comments on the
management of the company. If the auditor
or the auditor's representative is present, the
members must also be allowed a reasonable
opportunity to ask questions relevant to the
conduct of the audit and the preparation and
content of the auditor's report.
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Vote required for extraordinary Delaware law provides that: The Corporations Act requires certain
corporate transactions matters to be resolved by a company by
. a domestic corporation may change special resolution, including:
its corporate name by amending its
certificate of incorporation. The . the change of name of a company;
board of directors must adopt a
resolution setting forth the . a selective reduction of capital or
amendment proposed, declaring its selective buy-back;
advisability and either calling a
special meeting or directing that the . the conversion of a company from
amendment proposed be considered one type or form to another; and
at the next annual meeting of
stockholders. The amendment will be . a decision to wind up the company
adopted if it receives the affirmative voluntarily.
vote of a majority of the outstanding
stock entitled to vote at the annual or Under the Corporations Act, a special
special meeting, and a majority of resolution may be passed by the company if
the outstanding stock of each class not less than 28 days' notice of a general
entitled to vote as a class; meeting is given, specifying the intention to
propose the special resolution and stating the
. a corporation may, by resolution of resolution. A special resolution may only be
its board of directors, reduce its passed by a vote of at least 75% of the votes
capital in any of four ways cast by members entitled to vote on the
enumerated by Delaware law; resolution. A scheme of arrangement must
be approved by a majority in number of the
. a domestic corporation may convert members (in the relevant class) present and
to a limited liability company, voting either in person or by proxy, and also
limited partnership or business trust by a vote of 75% of the votes cast on the
of Delaware if the board of directors resolution. The scheme is also subject to
adopts a resolution approving the court approval.
conversion, specifying the type of
entity into which the corporation will
be converted and recommending the
approval of the conversion by the
stockholders of the corporation. This
resolution must be submitted to the
stockholders of the corporation at an
annual or special meeting and must
be approved by the holders of all
outstanding shares of stock of the
corporation, whether voting or
nonvoting; and
. To dissolve a corporation, the board
must adopt a resolution deeming it
advisable that the corporation be
dissolved. The resolution must be
adopted by a majority of the entire
board at any meeting called for that
purpose. The proposed dissolution
must receive the affirmative vote of a
majority of the outstanding stock of
the corporation entitled to vote at the
stockholder meeting at which the
proposed dissolution is presented.
Dissolution of the corporation may
also be authorized without action of
the directors if all the stockholders
entitled to vote on the dissolution
consent in writing. The resolution
authorizing a proposed dissolution
may provide that notwithstanding
authorization or consent to the
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proposed dissolution by the
stockholders, the board of directors
may abandon the proposed dissolution
without further action by the
stockholders.
Our restated certificate of incorporation
provides that directors shall have the power,
with the consent in writing of the holders of a
majority of our voting stock issued and
outstanding, or upon the affirmative vote of
the holders of a majority of our stock issued
and outstanding having voting power, to sell,
lease or exchange all of our company's
property and assets, including its good will
and its corporate franchises, for cash or for
fully paid stock or bonds or both or other
obligations of any company upon such terms
and conditions as our board of directors deems
expedient and for the best interests of our
company.
Provisions Delaware law generally provides that any The Corporations Act prohibits an acquisition
affecting person that acquires 15% or more of a of shares in a company if, after the
control share corporation's voting stock may not engage in acquisition:
acquisitions a wide range of business combinations with
andbusiness the corporation for a period of three years, . any person's voting power in the
combinations unless: company would increase beyond 20%;
or
. the board of directors of the
corporation has approved, prior to the . any person's voting power in a
acquisition date, either the business company that is above 20% and below
combination or the transaction that 90%, increases.
resulted in the person becoming an
interested stockholder; There are a number of permitted methods to
exceed the 20% level, including:
. upon consummation of the transaction
that resulted in the person becoming an . an off-market takeover bid made to all
interested stockholder, the person shareholders which may be for all or a
owns at least 85% of the corporation's nominated proportion of their
voting stock (excluding shares owned shareholding;
by directors who are officers and
shares owned by employee stock plans . an unconditional on-market
in which participants do not have the takeoverbid on the ASX;
right to determine confidentially
whether shares will be tendered in a . acquisitions of not more than 3% of
tender or exchange offer); or voting shares every six months, by a
person who already holds at least 19%
. the business combination is approved of voting power; and
by the board of directors and
authorized by the vote of at least two- . acquisitions approved by ordinary
thirds of the outstanding voting stock resolution of shareholders who are
not owned by the interested unassociated with the parties to the
stockholder. transaction.
Normandy's constitution prohibits the transfer
of Normandy shares under a proportional
takeover bid unless the bid had been approved
by a simple majority of shareholders in
general meeting.
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These restrictions on interested stockholders
do not apply under some circumstances,
including if the corporation, by action of its
stockholders, adopts an amendment to its
certificate of incorporation or by-laws
expressly electing not to be governed by these
provisions of Delaware law. The amendment
will be effective twelve months thereafter.
Neither our restated certificate of
incorporation nor our by-laws contain a
provision electing not to be governed by these
provisions of Delaware law. Rather, our
restated certificate of incorporation provides
that, with some exceptions, the sale or lease of
all or any substantial part of our assets to, or
any sale or lease to us or any of our
subsidiaries in exchange for our securities of
any assets of any other corporation, person or
other entity that is the beneficial owner of
more than 10% of the outstanding shares of
stock entitled to vote in elections of directors
requires the affirmative vote of at least 80% of
all classes of stock entitled to vote in elections
of directors. This requirement is not
applicable, however, if our board of directors
by resolution approves a memorandum of
understanding with the other corporation,
person or entity prior to the time that the other
corporation, person or entity becomes a holder
of more than 10% of the outstanding shares of
our stock entitled to vote in elections of
directors. This requirement is also not
applicable to any sale or lease to us or any of
our subsidiaries of any of the assets of any
corporation of which a majority of the
outstanding shares of all classes of stock
entitled to vote in elections of directors is
owned by us or our subsidiaries.
Mergers, Delaware law requires approval of mergers or See "Provisions Affecting Control Share
acquisitions, consolidations by a majority of the Acquisitions and Business Combinations."
share outstanding voting stock, unless the
purchases and corporation's certificate of incorporation
certain other specifies a different percentage. Our restated
transactions certificate of incorporation requires an
additional vote or consent of the holders of
80% of all classes of stock entitled to vote in
elections of directors for the adoption of any
agreement providing for a merger or
consolidation with a corporation that is the
beneficial owner of more than 10% of the
outstanding shares of stock entitled to vote in
the election of directors. This requirement is
not applicable, however, if our board of
directors by resolution approves a
memorandum of understanding with the other
corporation, person or entity prior to the time
that the other corporation, person or entity
becomes a holder of more than 10% of the
outstanding shares of our stock entitled to vote
in elections of directors. This requirement also
is not applicable to any merger or
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consolidation of us with a corporation of
which a majority of the outstanding shares of
all classes of stock entitled to vote in elections
of directors is owned by us or our subsidiaries.
Right to inspect corporate Our restated certificate of incorporation is on Under the Corporations Act, every member of
books and records file with the Secretary of State of Delaware. a company at the member's request and on
payment of any fee (up to a prescribed
Delaware law provides that any stockholder amount) must be sent a copy of the
shall, upon written demand under oath stating constitution within seven days. The
the purpose thereof, have the right during the constitution of a public company (and any
usual hours for business to inspect for any modification to it) is also lodged with ASIC
proper purpose the corporation's stock ledger, and may be obtained by any member of the
stockholder list and its other books and public on payment of a prescribed fee. The
records and to make copies or extracts company's certificate of registration is issued
therefrom. If the corporation refuses to permit by ASIC. ASIC keeps a record of the
the stockholder's inspection or does not reply registration and is obliged to give a person,
to the stockholder's written demand, the upon request, a copy of the certificate
stockholder may seek remedy in the Delaware (certified if required).
Court of Chancery.
Under the Corporations Act, each member is
Our restated certificate of incorporation entitled to receive a copy of the company's
provides that the directors from time to time last annual financial report, directors' report
may determine whether and to what extent, and auditor's report, or a concise report for
and at what times and places and under what that financial year, by the later of seven days
conditions and regulations, the accounts and after the request is received by the company
books of the corporation (other than the stock and either four months after the end of the
ledger), or any of them, shall be open to the financial year or 21 days before the next
inspection of the stockholders. No stockholder annual general meeting (whichever is earlier).
shall have the right to inspect any account or Normandy's constitution provides that the
book or document of the corporation, unless company must keep accounting records. It
expressly so authorized by statute or by a gives members no right to inspect any
resolution of the stockholders or the directors. information concerning Normandy's affairs,
except as provided by the Corporations Act or
as permitted by the board.
Under the Corporations Act, a member must
obtain a court order to obtain access to the
corporate books and records.
Right to inspect Delaware law and our by-laws provide that for Under the Corporations Act, the register of
the register of stockholders every stockholder meeting, a complete list of members of a company is usually kept at the
the stockholders entitled to vote at the meeting registered office or principal place of business
must be made and be open to the examination in Australia, and must be available for
of any stockholder during ordinary business inspection at all times when the registered
hours for at least ten days prior to the meeting office is open to the public. Normandy's
at the corporation's principal place of constitution states that, subject to the
business. Delaware law provides that the Corporations Act and the ASX Listing Rules,
stockholder list may also be made available on the board may close the register at such times
a reasonably accessible electronic network, as it determines. Members may inspect the
provided that the information required to gain register free of charge, and any other person
access to the list is provided with the notice of may inspect upon payment of any fee (up to a
the meeting. The list must be produced at the prescribed amount) required by the company.
meeting and be subject at all times during the Normandy must give a person a copy of the
meeting to the inspection of any stockholder register (or any part of the register) within
present. seven days if the person asks for a copy and
pays the requested fee (up to a prescribed
amount).
This also applies in respect of Normandy's
register of option holders and debenture
holders. In addition, the company must keep a
register of charges which may be inspected by
members on payment of a fee.
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Derivative Under Delaware common law, a stockholder A member of a company no longer has the
action and may bring a derivative action on behalf of the right to bring a common law action on behalf
stockholder corporation where those in control of the of the company. The member must instead
class action corporation have refused to assert a claim bring a statutory derivative action under the
suits belonging to the corporation (and to the Corporations Act.
stockholders collectively).
Under the Corporations Act, a statutory
Under Delaware law, a stockholder who derivative action may be instituted by a
wishes to bring a derivative suit must meet member, former member, or person entitled to
certain eligibility and standing requirements, be registered as a member, of a company. It
including a requirement that the plaintiff have can also be brought by an officer or former
been a stockholder of the corporation at the officer. In all cases leave of the court is
time of the act of which he complains and that required. This will be granted if it is probable
he maintain his status as a stockholder that the company will not itself bring the
throughout the course of the litigation. In proceedings or properly take responsibility for
addition, a derivative plaintiff must make a them, the applicant is acting in good faith, the
demand on the directors of the corporation to granting of leave is in the best interests of the
assert the corporate claim, unless that demand company and there is a serious question to be
would be futile. tried. 14 days written notice must usually be
given to the company before making the
Settlement or dismissal of a derivative action application. The proceedings can be instituted
requires the approval of the Court and notice even if the company has ratified or approved
to stockholders of the proposed dismissal. the conduct, although the court will take the
ratification into account when making orders.
Bringing a statutory derivative action will not
prevent a member bringing, or intervening in,
proceedings on their own behalf in respect of a
personal right.
Oppression None. Under the Corporations Act any member can
remedy bring an action in cases of conduct which are
either contrary to the interests of the members
as a whole, or oppressive to, unfairly
prejudicial to, or unfairly discriminatory
against, any member in his capacity as
member, or himself in a capacity other than as
a member. Former members can also bring an
action if it relates to the circumstances in
which they ceased to be members. The court
may make orders that it considers appropriate,
including orders regulating the future conduct
of the company's affairs or for the purchase of
any shares by any member. The court can also
order the modification or repeal of the
company's existing constitution.
Indemnification Delaware law provides that a corporation may The Corporations Act provides that a company
of officers indemnify a director, or officer, employee or and its related bodies must not exempt or
and directors agent against expenses (including attorneys' indemnify the company's officers or auditor
fees), judgments, fines and amounts paid in from liability owed to the company or a
settlement actually and reasonably (other than related body. The company must also not
in an action by or in the right of the indemnify its officers or auditor from liability
corporation) incurred by such individual, for fines and compensation orders, and
provided the individual acted in good faith and liability owed to anyone arising out of conduct
in a manner the individual reasonably believed which was not in good faith. In these
to be in or not opposed to the best interests of circumstances the person is also not allowed
the corporation and, with respect to any an indemnity for related legal costs. The
criminal proceeding, had no reason to believe company can otherwise indemnify for costs
the conduct was unlawful. For actions or suits incurred defending or resisting criminal
brought by or in the name of the corporation, a proceedings in which the person is not found
corporation may indemnify a director, or guilty and proceedings brought by ASIC or a
officer, employee or agent against expenses liquidator where the grounds for the court
incurred if the individual acted in good faith order are not established. Legal costs are
and in a manner the individual reasonably allowed in proceedings for relief granted by
believed to be in or not opposed to the best the court. The company must not pay an
interests of the corporation, except that if the insurance premium for liabilities of its officers
individual is adjudged to be liable to the or auditor where the liabilities arise out of a
corporation, the individual can be indemnified willful breach of duty against the company, or
an improper use of position or company
information.
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if and only to the extent that a court
determines that despite the adjudication of Section 1318 of the Corporations Act allows
liability, the individual is fairly and reasonably the court to grant relief to any officer or
entitled to indemnity. auditor of a company in a civil proceeding for
negligence, default, breach of duty or breach
Our restated certificate of incorporation of trust, if it appears to the court that the
provides that we will indemnify each director person is or may be liable but has acted
and officer to the fullest extent permitted by honestly and, having regard to all the
applicable law, except as may be otherwise circumstances of the case, including those
provided in our by-laws. Our restated connected with the appointment, that person
certificate of incorporation expressly ought fairly to be excused. The court may
authorizes our board of directors to amend the relieve the person from liability either wholly
by-laws from time to time to give full effect to or partly, on such terms as the court deems fit.
the indemnification provision, notwithstanding
the possible self-interest of the directors in the Normandy's constitution provides that, to the
action being taken. maximum extent permitted by law, every
person who is or has been a director, secretary
Our by-laws also provide that any person or executive officer of Normandy or of any
entitled to be indemnified may elect to have the other company as Normandy's nominee, will
right to indemnification interpreted on the basis be indemnified against any liability incurred in
of the applicable law in effect at the time of the that capacity and against any costs and
occurrence of the event or events giving rise to expenses incurred in defending civil or
the action, suit or proceeding, to the extent criminal proceedings in respect of the liability
permitted by applicable law, or on the basis of or that person's conduct. The indemnity is
the applicable law in effect at the time subject to the person's co-operation in
indemnification is sought. facilitating Normandy's supervision and
direction of the defense. The constitution also
Holdco's certificate of incorporation states allows Normandy to pay insurance premiums
that the corporation will indemnify each for costs and expenses incurred in defending
director and officer to the fullest extent proceedings relating to an officer's position
permitted by applicable law, without with the company, regardless of their
qualification by its by-laws. outcome.
Directors' liability Delaware law provides that a corporation may Under Australian common law, directors are
include in its certificate of incorporation a required to comply with certain fiduciary
provision eliminating or limiting the personal obligations to the company. These fiduciary
liability of a director to the corporation or its duties include: the duty to act in good faith in
stockholders for monetary damages for breach the interests of the company; the duty to act
of fiduciary duty as a director. However, the for a proper purpose; the duty not to fetter
provision may not eliminate or limit the their discretion; the duty to exercise care, skill
liability of a director for: and diligence; the duty to avoid conflicts of
interest; the duty not to use their position to
. breach of the duty of loyalty; advantage, and to account to the company for
any consequent gain; and the duty not to
. acts or omissions not in good faith or misappropriate company property for their
that involve intentional misconduct or own or third party benefit. In addition to these
a knowing violation of law; common law duties, directors of Australian
companies are required to comply with a
. unlawful payments of dividends, number of statutory duties imposed by the
certain stock repurchases or Corporations Act, which are, in part, similar to
redemptions; or the fiduciary duties of directors.
. any transaction from which the
director derived an improper personal
benefit.
Our restated certificate of incorporation
contains a provision eliminating the personal
liability of a director to us and our
stockholders for monetary damages for breach
of fiduciary duty as a director, except as
restricted by Delaware law.
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RIGHTS OF HOLDERS OF RIGHTS OF HOLDERS OF
NEWMONT SHARES NORMANDY SHARES
------------------------------------------------- -------------------------------------------------
Transactions Delaware law provides that a contract or The Corporations Act prohibits a public
involving transaction between a corporation and one or company from giving directors a financial
directorsand more of its directors or officers will not be benefit unless it obtains the approval of the
officers void or voidable solely for this reason, or shareholders or the financial benefit is exempt.
solely because the director or officer is present Exempt financial benefits include indemnities,
at or participates in the meeting of the board insurance premiums and payment for legal
or committee which authorizes the contract or costs which are not otherwise prohibited by
transaction, or solely because that director's or the Corporations Act, and benefits given an
officer's votes are counted for such purpose, arm's length terms.
if:
The Corporations Act generally requires a
. the material facts as to the director's or director of a company who has a material
officer's relationship or interest and as personal interest in a matter that relates to the
to the contract or transaction are affairs of the company to give the other
disclosed or are known to the board of directors notice of the interest. Such a director
directors of the committee, and the must not be present at a meeting where that
board or committee in good faith matter is being considered or vote on the
authorizes the contract or transaction matter unless the other directors or ASIC
by the affirmative votes of a majority approve, or the matter is not one which
of the disinterested directors, even requires disclosure under the Corporations
though the disinterested directors be Act.
less than a quorum; or
Directors, in entering into transaction
. the material facts as to the director's or involving the company, are subject to their
officer's relationship or interest and as common law and statutory duties to avoid
to the contract or transaction are conflicts of interest. The ASX Listing Rules
disclosed or are known to the also require shareholder approval of certain
shareholders entitled to vote on the transactions with directors (including some
matter, and the contract or transaction issuances of securities to directors).
is specifically approved in good faith
by vote of the shareholders; or
. the contract or transaction is fair as to
the corporation as of the time it is
authorized, approved or ratified, by the
board of directors, a committee or the
shareholders.
Delaware law further provides that interested
directors may be counted in determining the
presence of a quorum at a meeting of the
board of directors or of a committee which
authorizes the contract or transaction.
Stockholder We entered into a Rights Agreement, dated as
rights plan of August 31, 2000, with ChaseMellon
Shareholder Services LLC as rights agent,
pursuant to which we issued rights,
exercisable only upon the occurrence of
certain events, to purchase our Series A Junior
Participating Preferred Stock. The rights
expire on September 11, 2010.
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12.4 RIGHTS ATTACHING TO NEWMONT CDIS
All Normandy shareholders whose address on the register of Normandy
shareholders is in Australia, and who receive the offer and accept it, will,
subject to the terms of the Australian offer, have their entitlement to receive
our common stock issued in the form of Newmont CDIs. Newmont CDIs will be
issued on the basis of ten Newmont CDIs for one underlying share of our common
stock.
Shareholders who have a registered address in the Normandy shareholder
register outside Australia and its external territories will be treated in the
manner set out in section 5.1(b).
The issue of Newmont CDIs in accordance with the terms of the Australian
offer will facilitate trading on ASX and settlement of trades of our common
stock, in the form of Newmont CDIs.
Settlement of trading of quoted securities on the ASX market takes place on
CHESS, which is the ASX's electronic transfer and settlement system. CHESS
allows for the transfer and settlement of transactions in securities quoted on
the ASX to be effected electronically. As a consequence, dealings in securities
of companies which are admitted to the ASX official list are required to be
effected electronically. No share or security certificates are issued in
respect of shareholdings or security holdings which are quoted on ASX and
settled on CHESS, nor is it a requirement for transfer forms to be executed in
relation to transfers which occur on CHESS.
It is not possible for Newmont, which is subject to the laws of Delaware, to
facilitate our common stock being settled electronically or held in CHESS.
Hence, Newmont CDIs have been created and will be issued in accordance with
the terms of the Australian offer.
CDIs are units of beneficial ownership in our common stock held by CHESS
Depositary Nominees Pty Ltd (CDN), a wholly owned subsidiary of ASX. The main
difference between holding CDIs and holding shares is that the holder of CDIs
has beneficial ownership of the underlying shares in Newmont instead of legal
title, at a ratio of ten CDIs to one share of our common stock. Legal title is
held by CDN. The shares are registered in the name of CDN and held on trust by
CDN for the benefit of the CDI holder.
Each Normandy shareholder who accepts an Australian offer will, subject to
the terms of the Australian offer, be issued with such number of Newmont CDIs
equal to the number of shares of our common stock such shareholder is entitled
to receive, multipled by ten (or, in the case of certain holders who are not
permitted to receive Newmont CDIs, the cash proceeds of a sale, on Newmont's
behalf, of the Newmont CDIs to which such holders would otherwise have been
entitled). Holders of Newmont CDIs have all the direct economic and other
benefits of holding the underlying securities, as discussed below.
Holders of Newmont CDIs will be able to transfer and settle transactions
electronically on ASX in CHESS.
As a consequence of issuing Newmont CDIs, we will operate a certificated
register of our common stock, an uncertificated issuer sponsored subregister of
CDIs and an uncertificated CHESS subregister of CDIs. The certificated register
will be the register of legal title and the two uncertificated CDI subregisters
combined will make up the register of beneficial title.
A summary of the rights and entitlements of holders of Newmont CDIs is set
out below:
TRADING ON THE ASX OR THE NYSE
Newmont CDIs will trade on ASX but they will not trade on the NYSE.
Our common stock trades on the NYSE but will not trade on ASX.
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Holders of Newmont CDIs may surrender their CDIs (in multiples of 10) in
exchange for the underlying shares of our common stock as set out below. On
conversion, the holder or its nominee will be registered as holder of our
common stock and will thereafter be entitled to trade such common stock on the
NYSE. Similarly, our common stock can be transferred to CDN in exchange for the
issue of Newmont CDIs.
DIVIDENDS, RIGHTS AND OTHER SHAREHOLDER ENTITLEMENTS
The Securities Clearing House (SCH) Business Rules, which have statutory
recognition under the Corporations Act, require us to treat holders of Newmont
CDIs as if they are holders of the underlying shares of our common stock. The
SCH Business Rules seek to ensure that holders of Newmont CDIs have all the
direct economic benefits of legal ownership of our common stock (for example,
the right to receive the same dividends, rights issue and bonus issues) through
CDN.
If a cash dividend or any other cash distribution is made in a currency
other than Australian dollars, our Australian share registry (acting as CDN's
agent) will convert the dividend or other cash distribution into Australian
dollars. That dividend or distribution will then be made to holders of Newmont
CDIs in Australian dollars in accordance with each holder's entitlement.
ATTENDANCE AT MEETINGS--VOTING ENTITLEMENTS
Holders of Newmont CDIs are entitled to attend meetings of our stockholders.
However, holders of Newmont CDIs will not appear on our stock register as
the legal holder of our common stock and therefore they will not be able to
vote the underlying shares of our common stock.
Accordingly, voting rights attached to the underlying shares of our common
stock may only be capable of enforcement by holders of Newmont CDIs by
instructing CDN to vote in a particular way or by converting the holding to a
holding of our common stock. A Newmont CDI holder may convert to the underlying
shares of our common stock at any time.
CONVERSION OF NEWMONT CDIS TO SHARES OF OUR COMMON STOCK
Holders of Newmont CDIs can convert their holdings to holdings of our common
stock at a ratio of 10 Newmont CDIs to one share of our common stock by:
. in the case of Newmont CDIs on the issuer sponsored sub-register
operated by us, notifying our Australian share registry Computershare
Investor Services; or
. in the case of Newmont CDIs which are sponsored on the CHESS
sub-register, notifying their controlling participant, which in turn
will notify our Australian share register of the request.
Once our Australian share registry has been notified of a request of the
holder of Newmont CDIs to convert their holding to shares of our common stock,
the Australian share registry will request that the relevant number of shares
of our common stock be registered in the name of the holder or their nominee.
It is expected that this process will take approximately 2 to 3 business
days to complete, following the initial conversion request being made although
no guarantee can be given about the time for conversion to take place. No
trading of our common stock on the NYSE can take place until the share register
entries, referred to above, have been rectified and completed.
TAKEOVERS
CDN is prohibited by the SCH Business Rules from accepting a takeover offer
in respect of our common stock which it holds on behalf of a holder of Newmont
CDIs, unless it is instructed to do so by that holder.
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CDN must ensure that the bidder or the bidder's agent under such a takeover,
processes acceptances from the holders of Newmont CDIs.
COMMUNICATION WITH NEWMONT CDI HOLDERS
Our Australian registry will have access to the registration details and
holding balances of each Newmont CDI holding. This will enable us to
communicate directly with the holders of Newmont CDIs when processing corporate
actions, such as dividends, bonus issues and rights issues and when sending
notices and announcements (for instance annual reports).
FEES
Newmont, CDN and Newmont's registry service providers do not charge the
holder of Newmont CDIs any additional fees or charges as a result of being such
a holder, or on conversion.
FURTHER INFORMATION
Further information about Newmont CDIs and the various matters referred to
above will be available from our Australian share registry, Computershare
Investor Services, or any stockbroker.
12.5 RIGHTS ATTACHING TO OTHER NEWMONT SECURITIES
CONVERTIBLE PREFERRED SHARES
Newmont has approximately 2,300,000 US$3.25 convertible preferred shares,
par value US$5 per share. These shares have the following rights:
DIVIDEND RIGHTS
If and when declared by our directors, holders of the convertible preferred
shares are entitled to receive an annual cash dividend of US$3.25 per share
payable in equal quarterly installments beginning on February 15, 2001.
Dividends on the convertible preferred shares accrue without interest and are
cumulative from the date of initial issuance.
CONVERSION RIGHTS
Each convertible preferred share is convertible into shares of our common
stock at any time at a basic conversion price of US$100. The basic conversion
price is liable to adjustment upon the occurrence of certain events, including:
(i) the issuance of common stock as a dividend or distribution on our common
stock, (ii) a combination, subdivision or reclassification of common stock,
(iii) the issuance to holders of common stock of rights or warrants entitling
them to subscribe for common stock at the less than market price and (iv) the
granting to holders of common stock or other capital stock in Newmont of
certain other rights.
We have the right to decrease the conversion price by any amount for any
period of at least 20 days provided that the decrease is irrevocable during
such period.
Except in limited circumstances, there will be no adjustment to the
conversion price in the case of any consolidation or merger to which Newmont is
a party or the sale by Newmont of all or substantially all its assets.
If the Newmont reorganization is completed, each convertible preferred share
will become convertible into a share of common stock of New Newmont on the same
basis as set out above.
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LIQUIDATION RIGHTS
In the event of any liquidation or winding up of Newmont, the holders of
convertible preferred shares are entitled to receive a liquidation preference
of US$50 per share (plus an amount equal to any accrued and unpaid dividends to
the date of payment) before any distribution of assets is made to the holders
of common stock or any other stock that ranks junior to the convertible
preferred stock as to liquidation rights.
The holders of convertible preferred shares (and any other stock issued that
rank equally in respect of liquidation rights with convertible preferred
shares) are entitled to a ratable share in any distribution which is not
sufficient to pay the full aggregate amount payable in respect of such shares.
After payment in full of the sum referred to above, holders of the
convertible preferred shares will not be entitled to any further participation
in the assets of Newmont upon a liquidation or winding up.
REDEMPTION AT OPTION OF NEWMONT
The convertible preferred shares are redeemable at the option of Newmont for
shares of common stock at any time, at an equivalent of US$50.650 per share in
the twelve-month period beginning May 15, 2001, US$50.325 per share in the
twelve-month period beginning May 15, 2002 and thereafter at US$50 per share
plus, in all cases, unpaid dividends up to the redemption date. However, the
convertible preferred shares are not redeemable for cash, except in the case of
fractional entitlements to common stock. The amount of common stock issued on
redemption will be calculated by reference to the market price of the common
stock at the appropriate time and the dollar entitlement of the stock (as
stated above at the relevant time) as adjusted.
We can redeem fewer than all the outstanding convertible preferred shares in
any way our directors determine.
If we have failed to pay any accrued dividends on the convertible preferred
shares, we cannot redeem less than all of the then outstanding convertible
preferred shares until the outstanding dividend payments have been made in full.
VOTING RIGHTS
If, pursuant to the reorganization, the convertible preferred shares are
exchanged for convertible preferred shares of Delta Holdco Corp., such
convertible preferred shares of Delta Holdco Corp. will vote along with our
common shares on an as converted basis, subject to adjustment at closing. If
the reorganization is consummated and the convertible preferred shares remain
as shares of Newmont Mining Corporation and are not exchanged for convertible
preferred shares of Delta Holdco Corp., such convertible preferred shares will
be given a vote in the issuer, Newmont Mining Corporation, appropriate to their
proportionate economic interest prior to the consummation of the reorganization.
Holders of convertible preferred shares have no voting rights except in the
following circumstances:
. whenever dividends on the convertible preferred shares have not been paid
in respect of six quarterly dividend payments, whether or not consecutive,
the number of our directors can be increased by two. The holders of the
convertible preferred shares (together with the holders of any other class
of shares in respect of which dividend payments have not been made) are
entitled to elect these two additional directors. Any directors appointed
under these provisions will terminate immediately upon payment of the
outstanding dividends; and
. so long as any convertible preferred share is outstanding, we will not,
without the consent of at least two-thirds of the outstanding convertible
preferred shares: (i) amend, alter or repeal any provision of our
certificate of incorporation or by-laws to affect adversely the rights of
the holders of the convertible preferred shares, (ii) authorize or issue
or increase the authorized amount of any additional class of stock ranking
senior to the convertible preferred shares as to dividends or rights upon
liquidation or (iii) effect any reclassification of the convertible
preferred shares.
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SERIES A JUNIOR PARTICIPATING PREFERRED SHARES
Under a rights agreement, dated as of August 31, 2000, our board declared a
dividend of a series A junior participating preferred stock purchase right on
each outstanding share of our common stock. The dividend was paid on September
11, 2000 to our common stockholders of record on that date.
Purchase rights accompany any new shares of common stock we issued after
September 11, 2000, until the date when the purchase rights become exercisable.
The main aim of the rights agreement is to impose a penalty upon any person
or group which acquires 15% or more of our common stock without the approval of
our board, by providing a mechanism to dilute an acquirer's shareholding.
EXERCISE PRICE
Each purchase right allows its holder to purchase from us 1,000th of a share
of series A junior participating preferred stock for US$100, once the purchase
rights become exercisable. This portion of a share of series A junior
participating preferred stock gives the stockholder approximately the same
dividend, voting and liquidation rights as one share of our common stock. Prior
to exercise, the purchase right does not give its holder any dividend, voting
or liquidation rights.
EXERCISABILITY
The rights to acquire series A junior participating preferred stock are not
exercisable until the earlier of:
. ten days after the public announcement that a person or group has
obtained a beneficial interest in at least 15% of our common stock
(referred to as an "acquiring person"); or
. ten business days (or a later date determined by our board) before any
person or group becomes an acquiring person after a person or group
begins a tender or exchange offer for which, if completed, would result
in that person or group becoming an acquiring person.
Any purchase rights held by an acquiring person are void and cannot be
exercised.
The purchase rights will expire on September 11, 2010.
CONSEQUENCES OF A PERSON BECOMING AN ACQUIRING PERSON
If a person or group becomes an acquiring person, all holders of purchase
rights, except the acquiring person, may for US$100, purchase shares of our
common stock with a market value of US$200.
Further, if we are acquired in a merger or similar transaction (after the
distribution date), all holders of purchase rights, except the acquiring person
may, for US$100, purchase shares of the acquiring corporation with a market
value of US$200, based on the market price of the acquiring corporation's stock
prior to such merger.
RIGHTS ATTACHING TO SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Each 1,000th of a series A junior participating preferred stock, if issued:
. will not be redeemable;
. will entitle the holder to quarterly dividend payments of US$0.001 per
share, or an amount equal to the dividend paid on one share of common
stock, whichever is greater;
. will entitle the holder upon liquidation to receive US$1 per share, or
an amount equal to the payment made on one share of common stock,
whichever is greater;
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. will have the same voting power as one share of our common stock; and
. if shares of our common stock are exchanged by a merger or
consolidation, will entitle holders to a per share payment equal to the
payment made on one share of our common stock.
REDEMPTION
Our board may redeem the purchase rights for US$0.001 per right at any time
before a person or group becomes an acquiring person.
EXCHANGE
After a person or group becomes an acquiring person, but before acquiring
50% or more of our common stock, our board may extinguish the purchase rights
by exchanging one share of our common stock for each purchase right, other than
purchase rights held by the acquiring person.
AMENDMENTS
The terms of the rights agreement may be amended by our board without
consent of holders of the purchase rights, except that the board cannot amend
the rights agreement to lower the threshold at which a person becomes an
acquiring person to below 10% of our common stock or cannot amend the rights
agreement in a way that adversely affects the holders of the purchase rights.
If the Newmont reorganization is completed, the series A junior
participating preferred stock will be cancelled and equivalent preferred shares
will be issued by New Newmont having the same terms as set out above.
12.6 EMPLOYEE INCENTIVE PLANS
STOCK OPTIONS
Under our stock option plans, options to purchase shares of our common stock
have been granted to key employees, generally with exercise prices at the fair
market value of such shares on the date of grant. The options under these plans
vest over a two-year period and, for certain options, over a four-year period.
Generally, the options are exercisable over a period not exceeding 10 years.
Further options have been granted with an exercise price equal to the fair
market value on the date of grant with no restrictions on exercisability after
vesting.
Further options have been granted where the exercise price is equal to the
fair market value on the date of grant but which cannot be exercised unless the
market value of our common stock is a defined amount above the option exercise
price. Individuals who have been granted options in this category have also
been granted options with exercise prices in excess of the fair market value on
the date of grant. Generally, these options vest over a period of one to five
years and are exercisable over a ten-year period.
STOCK INCENTIVE PLAN
In 1997, we adopted an intermediate term incentive plan under which
restricted stock may be granted to certain key employees. This stock is granted
upon achievement of certain financial and operation thresholds at fair market
value on the date of grant. Stock granted under this scheme is subject to
certain restrictions relating to ownership and transferability that currently
lapse two years from the date of grant for ownership and five years from the
date of grant for transfer.
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12.7 CERTAIN BENEFICIAL SHAREHOLDERS OF NEWMONT
Based on filings made with the SEC, certain beneficial shareholders of
Newmont as of December 31, 2001 are as follows:
NUMBER OF PERCENTAGE
SHARES OF CLASS OF
BENEFICIALLY RELEVANT
NAME TITLE OF CLASS HELD SHARES
---- -------------- ------------ -----------
Capital Research & Management Company Common Stock 10,750,000 6.4%
FMR Corporation...................... Common Stock 17,290,080 10.3%
--------
Note: FMR Corporation is a parent company and the above figures include stock
owned or controlled by its affiliated companies.
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13 TAXATION
THIS SECTION IS A SUMMARY OF CERTAIN AUSTRALIAN, UNITED STATES AND CANADIAN
TAX LAWS. IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR
TAX ADVICE TO ANY PARTICULAR HOLDER OF ORDINARY SHARES OF NORMANDY OR NORMANDY
ADSS. YOU SHOULD NOT RELY ON THIS OVERVIEW AS ADVICE ON YOUR OWN AFFAIRS. TAX
LAWS ARE COMPLEX AND THERE COULD BE IMPLICATIONS FOR YOU IN ADDITION TO THOSE
DESCRIBED BELOW. ACCORDINGLY, HOLDERS OF ORDINARY SHARES OF NORMANDY AND
NORMANDY ADSS SHOULD CONSULT THEIR OWN TAX ADVISORS FOR ADVICE WITH RESPECT TO
THE TAX CONSEQUENCES OF DISPOSING OF THEIR ORDINARY SHARES OF NORMANDY OR
NORMANDY ADSS HAVING REGARD TO THEIR PARTICULAR CIRCUMSTANCES.
13.1 MATERIAL AUSTRALIAN TAX CONSEQUENCES
The following is a summary of certain Australian tax consequences of
disposing of ordinary shares of Normandy or Normandy ADSs by accepting the
offer and acquiring, owning and disposing of shares of our common stock or
Newmont CDIs. This summary is necessarily general in nature. It is not intended
to be authoritative or complete advice on the Australian tax consequences
applicable to any particular holder of ordinary shares of Normandy or Normandy
ADSs. All holders of ordinary shares of Normandy or Normandy ADSs should obtain
independent professional advice in relation to the Australian tax consequences
applicable to their own particular circumstances.
(a) OVERVIEW
The Australian tax consequences of disposing of your ordinary shares of
Normandy or Normandy ADSs by accepting the offer and acquiring, owning and
disposing of shares of our common stock or Newmont CDIs will depend on a number
of factors including:
. whether you are an Australian resident or a non-resident;
. whether you hold your ordinary shares of Normandy or Normandy ADSs on
capital or revenue account;
. when you acquired your ordinary shares of Normandy or Normandy ADSs;
. the cost of acquiring your ordinary shares of Normandy or Normandy ADSs;
. whether you are an individual, a company, a trustee of a trust or a
complying superannuation entity; and
. whether we acquire 80% or more of all shares of Normandy as a result of
the offer.
Broadly, if you are an Australian resident and you hold your ordinary shares
of Normandy or Normandy ADSs on revenue account, then you will be liable to
Australian tax on any gain you make on the disposal of your ordinary shares of
Normandy or Normandy ADSs by accepting the offer.
If you are an Australian resident and hold your ordinary shares of Normandy
or Normandy ADSs on capital account, then you will be liable to Australian tax
on any capital gain you make on the disposal of your ordinary shares of
Normandy or Normandy ADSs by accepting the offer unless you acquired your
ordinary shares of Normandy or Normandy ADSs before September 20, 1985 or
roll-over relief is available and you choose it.
If you are a non-resident of Australia and hold your ordinary shares of
Normandy or Normandy ADSs on revenue account, then you will be liable to
Australian tax on any gain you make on the disposal of your ordinary shares of
Normandy or Normandy ADSs by accepting the offer if the gain has an Australian
source. However, if you are a resident of a country with which Australia has
entered into a double taxation agreement, then the terms of that double
taxation agreement should also be taken into account.
If you are a non-resident of Australia and hold your ordinary shares of
Normandy or Normandy ADSs on capital account, then you will only be liable to
Australian tax on any capital gain you make on the disposal of
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your ordinary shares of Normandy or Normandy ADSs by accepting the offer if you
acquired your ordinary shares of Normandy or Normandy ADSs on or after
September 20, 1985 and you and your associates have owned at least 10% by value
of all shares of Normandy at any time during the 5 years before you accept the
offer. If you are a resident of a country with which Australia has entered into
a double taxation agreement, then the terms of that double taxation agreement
should also be taken into account.
The Australian tax consequences are explained in more detail below.
(b) HOLDING YOUR ORDINARY SHARES OF NORMANDY OR NORMANDY ADSS ON REVENUE OR
CAPITAL ACCOUNT
Broadly, if you acquired your ordinary shares of Normandy or Normandy ADSs
as part of a share trading business, as part of certain other businesses (e.g.,
banking and insurance) or for the purpose of re-selling them at a profit, then
you most likely hold your ordinary shares of Normandy or Normandy ADSs on
revenue account.
If, on the other hand, you acquired your ordinary shares of Normandy or
Normandy ADSs as a passive investment with the intention of generating dividend
income and long term capital growth, then you most likely hold your ordinary
shares of Normandy or Normandy ADSs on capital account.
(c) AUSTRALIAN RESIDENT--ORDINARY SHARES OF NORMANDY OR NORMANDY ADSS HELD ON
REVENUE ACCOUNT
If you are an Australian resident and hold your ordinary shares of Normandy
or Normandy ADSs on revenue account, then you will be liable to Australian tax
on any gain you make on the disposal of your ordinary shares of Normandy or
Normandy ADSs by accepting the offer. Broadly, the amount of the gain liable to
Australian tax will be the amount by which the market value of our common stock
or Newmont CDIs and the cash you receive exceeds the cost of your ordinary
shares of Normandy or Normandy ADSs. You must include any gain in your
assessable income and it will be liable to Australian tax at ordinary rates.
If, on the other hand, the cost of your ordinary shares of Normandy or
Normandy ADSs exceeds the market value of our common stock or Newmont CDIs and
the cash you receive, then you will incur a loss equal to the excess. Any loss
will be an allowable deduction from your other assessable income or capital
gains.
(d) AUSTRALIAN RESIDENT--ORDINARY SHARES OF NORMANDY OR NORMANDY ADSS HELD ON
CAPITAL ACCOUNT
If you are an Australian resident and acquired your ordinary shares of
Normandy or Normandy ADSs on capital account before September 20, 1985, then
you will not be liable to Australian tax on any capital gain you make on the
disposal of your ordinary shares of Normandy or Normandy ADSs by accepting the
offer. (Note, however, that there are circumstances in which you may be deemed
to have acquired your ordinary shares of Normandy or Normandy ADSs on or after
September 20, 1985.) However, you will be liable to Australian tax on any
capital gain you make on a subsequent disposal of our common stock or Newmont
CDIs. In this regard, our common stock or Newmont CDIs will have a cost base
equal to their market value at the time you accept the offer.
If you are an Australian resident and acquired your ordinary shares of
Normandy or Normandy ADSs on capital account on or after September 20, 1985,
then you will be liable to Australian tax on any capital gain you make on the
disposal of your ordinary shares of Normandy or Normandy ADSs by accepting the
offer unless roll-over relief is available and you choose it. Broadly, the
amount of any capital gain liable to Australian tax will be the amount by which
the market value of our common stock or Newmont CDIs and the cash you receive
exceeds the cost base of your ordinary shares of Normandy or Normandy ADSs.
However, the amount of any capital gain liable to Australian tax may be reduced
if you are entitled to the CGT discount. Roll-over relief, the cost base of
your ordinary shares of Normandy or Normandy ADSs and the CGT discount are
explained in more detail below.
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If, on the other hand, the cost base of your ordinary shares of Normandy or
Normandy ADSs exceeds the market value of our common stock or Newmont CDIs and
the cash you receive, then you will make a capital loss equal to the excess.
Such a capital loss may be used to offset a capital gain made in the same
income year or a future income year. That is, a capital loss may not be used to
offset ordinary assessable income.
(e) ROLL-OVER RELIEF
If, as a result of the offer, we acquire 80% or more of all shares of
Normandy, then you may choose roll-over relief if you are an Australian
resident and you would otherwise make a capital gain on the disposal of your
ordinary shares of Normandy or Normandy ADSs. Note that roll-over relief is not
available if you would otherwise make a capital loss on the disposal of your
ordinary shares of Normandy or Normandy ADSs or if you are a non-resident.
If roll-over relief is available and you choose it, then the capital gain
you make on the disposal of your ordinary shares of Normandy or Normandy ADSs
will not be liable to Australian tax to the extent you receive our common stock
or Newmont CDIs. However, the capital gain you make on the disposal of your
ordinary shares of Normandy or Normandy ADSs will remain liable to Australian
tax to the extent you receive cash. That is, only a partial roll-over is
available where you receive cash and in working out the capital gain that
remains liable to Australian tax, you must reasonably apportion the cost base
of your ordinary shares of Normandy or Normandy ADSs between our common stock
or Newmont CDIs and the cash you receive.
As a consequence of roll-over relief, our common stock or Newmont CDIs will
have a cost base equal to the cost base of your ordinary shares of Normandy or
Normandy ADSs less that part of the cost base of your ordinary shares of
Normandy or Normandy ADSs that you reasonably apportion to the cash you
receive. The cost base of our common stock or Newmont CDIs is relevant to
working out any capital gain liable to Australian tax on a subsequent disposal
of our common stock or Newmont CDIs.
If you choose roll-over relief, then the choice must be made before you
lodge your income tax return for the income year in which you accept the offer.
(f) COST BASE
The cost base of your ordinary shares of Normandy or Normandy ADSs is
generally their cost of acquisition (including brokerage and stamp duty). If
you acquired your ordinary shares of Normandy or Normandy ADSs before 11:45 am
(by legal time in the Australian Capital Territory) on September 21, 1999 and
held them for at least 12 months before accepting the offer, then you may
adjust the cost base of your ordinary shares of Normandy or Normandy ADSs to
include indexation by reference to changes in the Consumer Price Index from the
calendar quarter in which you acquired your ordinary shares of Normandy or
Normandy ADSs until the calendar quarter ended September 30, 1999.
If you are an individual, the trustee of a trust or a complying
superannuation entity and you choose to make this adjustment, then you will not
be entitled to the CGT discount. If you are a company, then you may make this
adjustment without having to choose it and you are not entitled to the CGT
discount in any event.
Note that the cost base cannot be adjusted to include indexation in working
out the amount of any capital loss.
(g) CGT DISCOUNT
If you are an individual, the trustee of a trust, or a complying
superannuation entity, then you may reduce any capital gain otherwise liable to
Australian tax provided that:
. you acquired your ordinary shares of Normandy or Normandy ADSs at least 12
months before disposing of them by accepting the offer;
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. you do not choose to adjust the cost base of your ordinary shares of
Normandy or Normandy ADSs to include indexation; and
. either roll-over relief is not available or you do not choose it.
The CGT discount applicable to an individual or the trustee of a trust is
one half. The CGT discount applicable to a complying superannuation entity is
one third. That is, the capital gain you take into account in working out your
taxable income is reduced by one half or one third as appropriate.
(h) NON-RESIDENT--ORDINARY SHARES OF NORMANDY OR NORMANDY ADSS HELD ON
REVENUE ACCOUNT
If you are a non-resident of Australia and you hold your ordinary shares of
Normandy or Normandy ADSs on revenue account, then you will be liable to
Australian tax on any gain you make on the disposal of your ordinary shares of
Normandy or Normandy ADSs by accepting the offer if the gain has an Australian
source. The source of any gain will depend on a number of factors including the
place of contract to acquire and dispose of your ordinary shares of Normandy or
Normandy ADSs and the place of any activities relevant to the holding of your
ordinary shares of Normandy or Normandy ADSs.
If you are a resident of a country with which Australia has entered into a
double taxation agreement and hold your ordinary shares of Normandy or Normandy
ADSs on revenue account, then the terms of that double taxation agreement
should also be taken into account. For example, if you are a United States or
Canadian resident and any gain having an Australian source is a business
profit, then you will only be liable to Australian tax if the gain is
attributable to a permanent establishment you have in Australia. In that case,
the amount of any gain liable to Australian tax will be the amount by which the
market value of our common stock or Newmont CDIs and the cash you receive
exceeds the cost of your ordinary shares of Normandy or Normandy ADSs. Broadly,
a "permanent establishment" is a fixed place of business at or through which
the enterprise of a non-resident is carried on in Australia.
(i) NON-RESIDENT--ORDINARY SHARES OF NORMANDY OR NORMANDY ADSS HELD ON
CAPITAL ACCOUNT
If you are a non-resident of Australia and acquired your ordinary shares of
Normandy or Normandy ADSs on capital account before September 20, 1985, then
you will not be liable to Australian tax on any capital gain you make on the
disposal of your ordinary shares of Normandy or Normandy ADSs by accepting the
offer. (Note, however, that there are circumstances in which you may be deemed
to have acquired your ordinary shares of Normandy or Normandy ADSs on or after
September 20, 1985.)
If you are a non-resident of Australia and acquired your ordinary shares of
Normandy or Normandy ADSs on capital account on or after September 20, 1985,
then you will only be liable to Australian tax on any capital gain you make on
the disposal of your ordinary shares of Normandy or Normandy ADSs if you and
your associates have owned at least 10% by value of all shares of Normandy at
any time during the 5 years before you accept the offer. In that case, the
amount of any capital gain liable to Australian tax will be the amount by which
the market value of our common stock or Newmont CDIs and the cash you receive
exceeds the cost base of your ordinary shares of Normandy or Normandy ADSs
(subject to the availability of the cost base adjustment to include indexation
or the CGT discount).
If you are a resident of a country with which Australia has entered into a
double taxation agreement, then the terms of that double taxation agreement
should also be taken into account.
(j) GST AND STAMP DUTY
No Australian goods and services tax or stamp duty will be payable by you as
a consequence of accepting the offer.
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(k) OWNERSHIP OF OUR COMMON STOCK OR NEWMONT CDIS
Broadly, if you are an Australian resident and we pay a dividend on our
common stock or Newmont CDIs, then the gross amount of the dividend must be
included in your assessable income for the income year of payment.
If the dividend is liable to tax in the United States (e.g., withholding
tax), then you may be entitled to a foreign tax credit to offset the Australian
tax payable on the dividend. The amount of the foreign tax credit will be equal
to the lesser of the United States tax paid or the Australian tax payable on
the dividend.
The tax laws applicable to the foreign source income of an Australian
resident are complex and you should seek independent professional advice in
relation to the tax consequences of holding shares or CDIs in a foreign
company. Relevantly, there are tax reforms proposed which, if implemented, may
impact on the tax consequences.
(l) DISPOSAL OF OUR COMMON STOCK OR NEWMONT CDIS
If you are an Australian resident, then the Australian tax consequences of
any disposal of our common stock or Newmont CDIs will be similar to the
consequences of the disposal of your ordinary shares of Normandy or Normandy
ADSs (unless you change the account on which you hold our common stock or
Newmont CDIs). However, there will be a difference in the cost base of our
common stock or Newmont CDIs held on capital account depending on whether
roll-over relief was available on the disposal of your ordinary shares of
Normandy or Normandy ADSs and you chose it.
If roll-over relief was available on the disposal of your ordinary shares of
Normandy or Normandy ADSs and you chose it, then the cost base of our common
stock or Newmont CDIs will be equal to the cost base of your ordinary shares of
Normandy or Normandy ADSs less that part of the cost base of your ordinary
shares of Normandy or Normandy ADSs that you reasonably apportion to the cash
you receive.
Alternatively, if roll-over relief was not available on the disposal of your
ordinary shares of Normandy or Normandy ADSs or you did not choose it, then the
cost base of our common stock or Newmont CDIs will be equal to the market value
of our common stock or Newmont CDIs at the time you accept the offer.
13.2 MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the anticipated material U.S.
federal income tax consequences to U.S. holders and non-U.S. holders of
ordinary shares of Normandy that exchange ordinary shares of Normandy for our
common stock or Newmont CDIs and U.S. holders and non-U.S. holders of Normandy
ADSs that exchange Normandy ADSs for our common stock or Newmont CDIs, in each
case pursuant to the offer. This discussion addresses only those stockholders
that hold their ordinary shares of Normandy or Normandy ADSs as a capital
asset, does not address Franco-Nevada or any of its affiliates and does not
address all the U.S. federal income tax consequences that may be relevant to
particular Normandy stockholders or ADS holders in light of their individual
circumstances, or to Normandy stockholders or ADS holders that are subject to
special rules, such as:
. financial institutions,
. mutual funds,
. tax-exempt organizations,
. insurance companies,
. dealers in securities or foreign currencies,
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. traders in securities who elect to apply a mark-to-market method of
accounting,
. persons who hold their shares or ADSs as a hedge against currency risk or
as part of a straddle, constructive sale or conversion transaction, or
. holders who acquired their shares or ADSs upon the exercise of employee
stock options or otherwise as compensation.
This discussion assumes that Normandy does not have a special status for
United States federal income tax purposes, such as being a "passive foreign
investment company," "controlled foreign corporation" or "foreign personal
holding company." This discussion also assumes that holders of Normandy ADSs
will be treated as owning the ordinary shares of Normandy represented by those
Normandy ADSs and that holders of Newmont CDIs will be treated as owning the
common shares of Newmont represented by those Newmont CDIs. Accordingly, for
purposes of this section 13.2, references to ordinary shares of Normandy
include a reference to Normandy ADSs and references to Newmont shares include a
reference to Newmont CDIs. Holders of Normandy ADSs and prospective holders of
Newmont CDIs should consult with their tax advisors regarding special rules
that may be applicable to them.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code of 1986, as amended, regulations,
rulings and decisions in effect as of the date of this offer document, all of
which are subject to change, possibly with retroactive effect. Tax consequences
under state, local and foreign laws and U.S. federal laws other than U.S.
federal income tax laws, are not addressed.
(a) U.S. HOLDERS
In general, "U.S. holder" means a holder that is (i) a citizen or resident
of the United States, (ii) a corporation created or organized in or under the
laws of the United States or any state thereof (including the District of
Columbia), (iii) an estate the income of which is subject to U.S. federal
income taxation regardless of its source, (iv) a trust if a court within the
United States is able to exercise primary supervision over the administration
of the trust and if one or more U.S. persons has the authority to control all
substantial decisions of the trust or (v) a trust that has a valid election in
effect to be treated as a U.S. person.
We have structured this transaction so that it is anticipated that the
exchange of ordinary shares of Normandy for our common stock pursuant to the
offer, taken together with the exchange of Newmont common stock for New Newmont
common stock and the exchange of Franco-Nevada common stock for New Newmont
common stock, will be treated as an exchange described in Section 351 of the
Internal Revenue Code. Assuming the offer is treated as an exchange described
in Section 351 of the Internal Revenue Code:
. U.S. holders of ordinary shares of Normandy who exchange such shares for
our common stock and cash will recognize gain (but not loss) for U.S.
federal income tax purposes in respect of any ordinary share of Normandy
exchanged, but not in excess of the amount of cash received for that
ordinary share of Normandy. The amount of gain realized in respect of any
ordinary share of Normandy is the excess of the amount realized for such
share over the holder's tax basis in such share. The consideration
received or deemed received for any one ordinary share of Normandy will be
the amount a holder realizes which is attributable to that share. A
holder's aggregate amount realized is the sum of (i) the amount of cash
the holder receives plus (ii) the fair market value of our common stock
received, in each case pursuant to the offer. The gain realized
calculation must be made separately for each ordinary share of Normandy
surrendered, and a loss realized on one share may not be used to offset a
gain realized on another share. Under most circumstances, a holder's gain
will be capital gain and will be long-term capital gain if the holder has
held the holder's ordinary shares of Normandy for more than one year.
. If a U.S. holder of ordinary shares of Normandy receives cash in lieu of a
fractional share of our common stock, that holder will recognize gain or
loss equal to the difference between the amount of cash received
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and that holder's tax basis in our common stock that is allocable to the
fractional share of our common stock. Under most circumstances, a holder's
gain or loss will be capital gain or loss and will be long-term capital
gain or loss if the holder has held the holder's ordinary shares of
Normandy for more than one year.
. In the case of a U.S. holder receiving Australian dollars, for U.S.
federal income tax purposes the amount realized will be equal to the U.S.
dollar value of the Australian dollars received on the date such payment
is included in income, regardless of whether the payment is in fact
converted into U.S. dollars. Such a U.S. holder will generally be required
to recognize U.S. source ordinary income or loss upon the sale or
disposition of Australian dollars. This foreign currency gain or loss will
generally be U.S. source ordinary income or loss.
. A U.S. holder's aggregate tax basis in our common stock received pursuant
to the offer will be the same as that holder's aggregate tax basis in the
ordinary shares of Normandy exchanged therefor, (A) decreased by (i) the
tax basis allocable to any fractional share interest for which cash is
received and (ii) the amount of cash received pursuant to the offer, and
(B) increased by the amount of gain, if any, recognized on the receipt of
cash consideration (but not by gain recognized upon the receipt of cash in
lieu of any fractional share interest).
. The holding period of our common stock received in the exchange by a
holder of ordinary shares of Normandy will include the holding period of
the ordinary shares of Normandy surrendered in the exchange.
If the offer is consummated but is not treated as an exchange described in
Section 351 of the Internal Revenue Code, the exchange of ordinary shares of
Normandy for our common stock and cash pursuant to the offer will be a taxable
transaction for U.S. federal income tax purposes. The exchange of ordinary
shares of Normandy for our common stock and cash would not be treated as an
exchange described in Section 351 of the Code if, for example, we do not
consummate the merger of Newmont with its indirect wholly owned subsidiary,
described in Section 1.1 above. If the exchange is not described in Section 351
of the Code, U.S. holders will generally be subject to tax on the gain (if any)
recognized on the exchange of ordinary shares of Normandy for our common stock
and cash. Each such stockholder of Normandy will recognize gain equal to the
excess, if any, of (i) the sum of the fair market value of the shares of our
common stock and cash received pursuant to the offer over (ii) such
stockholder's basis in the shares exchanged therefor. If such Normandy
stockholder's basis in such stockholder's stock exchanged in the offer exceeds
the sum of the fair market value of the shares of our common stock and cash
received pursuant to the offer, then such stockholder should recognize a loss
equal to such excess. U.S. holders that will realize a loss on ordinary shares
of Normandy exchanged pursuant to the offer should consult their own tax
advisor regarding allowance of the loss in their particular circumstances.
(b) NON-U.S. HOLDERS
A holder that is not a U.S. holder (a "non-U.S. holder") generally will not
be subject to U.S. federal income tax on the gain (if any) recognized on the
exchange of ordinary shares of Normandy for our common stock and cash (or, in
the case of certain holders located outside Australia who are not entitled to
Newmont CDIs, only cash), in each case pursuant to the offer, unless (i) such
gain is effectively connected with a trade or business of the non-U.S. holder
in the United States, and, if a tax treaty applies, is attributable to a
permanent establishment maintained by the non-U.S. holder in the United States
or (ii) the non-U.S. holder is an individual who holds such ordinary shares of
Normandy as a capital asset and is present in the United States for 183 days or
more in the taxable year of disposition (and certain other conditions are
satisfied).
Dividends paid to a non-U.S. holder with respect to our common stock
generally will be subject to withholding of U.S. federal income tax at a 30%
rate, or such lower rate as may be specified by an applicable income tax
treaty, unless the dividend (i) is effectively connected with the conduct of a
trade of business of the non-U.S. holder in the United States and (ii) if a tax
treaty applies, is attributable to a permanent establishment
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maintained by the non-U.S. holder in the United States. In order to claim the
benefit of a reduced treaty rate, a non-U.S. holder may have to file with us or
our paying agent an exemption certificate or letter in accordance with the
terms of such treaty. Furthermore, under current regulations, a non-U.S.
holder, including, in certain cases of non-U.S. holders that are entities, the
owner or owners of such entities, will be required to satisfy certain
certification requirements in order to claim a reduced rate of withholding
under an applicable income tax treaty. Holders of our common stock should
consult with their tax advisors regarding the applicability to them of any
treaty.
Dividends which are effectively connected with a United States trade or
business and, if a tax treaty applies, are attributable to a U.S. permanent
establishment, are generally subject to tax on a net income basis, that is,
after allowance for applicable deductions, at rates applicable to U.S.
citizens, resident aliens and domestic United States corporations and are not
generally subject to withholding. Any such dividends received by a non-U.S.
holder that is a corporation may also, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may
be specified by an applicable income tax treaty.
A non-U.S. holder generally will not be subject to U.S. federal income tax
on any gain recognized on the sale or other disposition of our common stock
unless:
(1) such gain is effectively connected with a trade or business of the
non-U.S. holder in the United States, and, if a tax treaty applies, such
gain is attributable to a permanent establishment maintained by the
non-U.S. holder in the United States;
(2) the non-U.S. holder is an individual who holds such Newmont common stock
as a capital asset and is present in the United States for 183 or more
days in the taxable year of the disposition (and certain other
conditions are satisfied); or
(3) (a) We are or have been a "U.S. real property holding corporation" for
U.S. federal income tax purposes at any time during the five-year period
ending on the date of the disposition, or, if shorter, the period during
which the non-U.S. holder held our common stock, and (b) the non-U.S.
holder is a greater than 5% holder of our common stock for federal
income tax purposes. Because of our significant mining assets in the
United States, we believe we may be, have been or become a U.S. real
property holding corporation.
If a non-U.S. holder is covered by clause (1) above, such holder generally
will be taxed on the net gain derived from a sale or disposition of our common
stock under regular graduated U.S. federal income tax rates. If a non-U.S.
holder is covered by clause (2) above, such holder generally will be subject to
a flat 30% tax on the gain derived from a sale or disposition of our common
stock, which may be offset by certain U.S. capital losses (notwithstanding the
fact that such individual is not considered a resident of the United States).
We encourage non-U.S. holders who have spent (or expect to spend) 183 days or
more in the United States in the taxable year in which they contemplate a sale
or disposition of our common stock to consult their tax advisors as to the tax
consequences of such sale or disposition. If a non-U.S. holder is covered by
clause (3) above, such holder generally will be taxed on the net gain derived
from a sale or disposition of our common stock under regular graduated U.S.
federal income tax rates, and in addition, the total amount realized in such a
sale or disposition of our common stock could be subject to a 10% withholding
tax.
If a non-U.S. holder that is a foreign corporation is covered by clause (1)
or (3) above, the net gain from a sale or disposition of our common stock may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty.
U.S. HOLDERS AND NON-U.S. HOLDERS OF ORDINARY SHARES OF NORMANDY AND
NORMANDY ADSS ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER, INCLUDING THE APPLICABILITY AND
EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS IN
THEIR PARTICULAR CIRCUMSTANCES.
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13.3 MATERIAL CANADIAN TAX CONSEQUENCES
The following is a summary of the principal Canadian federal income tax
consequences under the INCOME TAX ACT (Canada) (the "Tax Act") generally
applicable to Normandy shareholders resident in Canada who dispose of their
ordinary shares of Normandy pursuant to the offer. The summary is based upon
the current provisions of the Tax Act, the regulations thereunder, all specific
proposals to amend the Tax Act and regulations publicly announced by the
Minister of Finance (Canada) prior to the date hereof (which we refer to as the
"Proposed Amendments") and counsel's understanding of the current published
administrative policies of the Canada Customs and Revenue Agency (the "CCRA").
Except for the Proposed Amendments, the summary does not take into account or
anticipate changes in the law, whether by way of judicial decision, legislative
action or change to the administrative position of the CCRA, nor does it take
into account tax legislation of countries other than Canada or any relevant
provincial or territorial tax legislation.
The following summary is applicable to a Normandy shareholder who, for the
purposes of the Tax Act and at all relevant times, is resident in Canada, holds
its ordinary shares of Normandy, and will hold its shares of our common stock,
as capital property, deals at arm's length with us and Normandy, is not
affiliated with us or Normandy, is not a "specified financial institution" or
"financial institution" as defined in the Tax Act, and for whom Normandy is not
a "foreign affiliate" (a "Holder"). Ordinary shares of Normandy will generally
be considered to be capital property of a Holder unless the ordinary shares of
Normandy are held in the course of carrying on a business of buying and selling
securities or the ordinary shares of Normandy were acquired in a transaction
considered to be an adventure in the nature of trade.
This summary assumes that holders of Normandy ADSs will be treated as owning
the ordinary shares of Normandy represented by those Normandy ADSs and that the
holders of Newmont CDIs will be treated as owning the shares of our common
stock represented by those Newmont CDIs. Accordingly, for the purposes of this
summary, a reference to the "ordinary shares of Normandy" includes Normandy
ADSs, and a reference to "shares of our common stock" includes Newmont CDIs.
(a) TAXATION ON EXCHANGE
Under the Tax Act, a Holder who exchanges ordinary shares of Normandy for
consideration which consists of shares of our common stock and cash will
realize a capital gain (or capital loss) to the extent that the aggregate of
the fair market value of the shares of our common stock received on the
exchange, plus the fair market value of any cash or other non-share
consideration received, all expressed in Canadian dollars, exceeds (or is less
than) the aggregate of the adjusted cost base of the ordinary shares of
Normandy to the Holder, expressed in Canadian dollars, and any reasonable costs
of disposition. The cost to the Holder of the shares of our common stock
received will be equal to the fair market value of such shares of our common
stock on receipt. In computing the adjusted cost base to a Holder of a share of
our common stock, the cost of each share of our common stock acquired pursuant
to the offer must generally be averaged with the adjusted cost base of all
other shares of our common stock owned by such Holder immediately before such
acquisition as capital property.
One-half of any such capital gain will generally be included as a taxable
capital gain in computing the Holder's income for the taxation year of
disposition, and one-half of any such capital loss may generally be deducted
from the Holder's taxable capital gains in accordance with the rules in the Tax
Act. Taxable capital gains realized upon the disposition of ordinary shares of
Normandy by a Holder that is a Canadian-controlled private corporation (as
defined in the Tax Act) may be subject to an additional refundable tax at a
rate of 6-2/3%. In certain circumstances, capital gains realized by an
individual or certain trusts may result in such person being liable to pay
alternative minimum tax under the Tax Act.
(b) TAXATION OF DIVIDENDS
The Canadian dollar equivalent of dividends, computed at the currency
exchange rate prevailing at the time of receipt by the Holder, paid to a Holder
of shares of our common stock who is an individual will generally be
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income to such individual for Canadian federal income tax purposes for the year
in which the dividend is received and will not be eligible for the gross-up and
dividend tax credit treatment accorded dividends received from taxable Canadian
corporations. A Holder of shares of our common stock which is a taxable
Canadian corporation will generally include such dividends in income for the
year in which they are received but will not be entitled to the intercorporate
dividend deduction in computing taxable income which generally applies to
Canadian source dividends. Foreign withholding tax on such dividends, if any,
may be eligible for foreign tax credit or deduction treatment where applicable
under the Tax Act.
(c) QUALIFIED INVESTMENTS
The shares of our common stock will, on the date of issue, be qualified
investments for trusts governed by registered retirement savings plans,
registered retirement income funds, registered education savings plans and
deferred profit sharing plans, provided that the shares are listed on a
"prescribed stock exchange" (which includes the NYSE).
(d) FOREIGN PROPERTY
Shares of our common stock will be "foreign property" for purposes of the
Tax Act.
(e) FOREIGN INVESTMENT ENTITY DRAFT LEGISLATION
On August 2, 2001, the Minister of Finance (Canada) released draft
legislation to amend the Tax Act to implement a proposal concerning the
taxation of holdings in "foreign investment entities." In general terms, if we
were a "foreign investment entity" and if the shares of our common stock did
not constitute an "exempt interest" of a Canadian resident, the Canadian
resident would be required to take into account in computing income, on an
annual basis, any increase (or decrease) in the value of the shares of our
common stock during each taxation year, or the relevant share of such holder in
our underlying income, calculated in accordance with Canadian tax rules
(whether or not cash distributions were received by the Canadian resident).
Even if we were a "foreign investment entity," the proposed new rules would
not apply to a Canadian resident whose shares of our common stock constitute an
"exempt interest." Because the shares of our common stock will be listed on the
NYSE and will be "widely held" and "actively traded" (as such terms are defined
in the Tax Act), the shares of our common stock will constitute an "exempt
interest" to a Canadian resident, unless it is reasonable to conclude that the
Canadian resident has a tax avoidance motive for the acquisition of the shares.
On December 17, 2001, the Minister of Finance (Canada) announced that the
implementation of the proposed new rules would be delayed to take effect for
taxation years beginning after 2002. This delay is intended to facilitate the
consideration of submissions received by the Minister of Finance (Canada) in
respect of the proposed rules. It is, therefore, possible that the rules
ultimately implemented will differ from the rules described herein. Holders are
urged to consult their own tax advisors.
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14 CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH RESPECT TO NEWMONT, NORMANDY AND
FRANCO-NEVADA
14.1 DEEDS OF UNDERTAKING
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS (NOT OTHERWISE DISCUSSED IN
THIS OFFER DOCUMENT) OF THREE DEEDS OF UNDERTAKING, TWO DATED AS OF NOVEMBER
14, 2001 AND ONE DATED AS OF DECEMBER 10, 2001, BY AND BETWEEN US AND NORMANDY,
IN RELATION TO OUR OFF-MARKET BID FOR THE ORDINARY SHARES IN THE CAPITAL OF
NORMANDY. ALTHOUGH NORMANDY HAS ENTERED INTO THE DEEDS OF UNDERTAKING,
NORMANDY, DESPITE REPEATED REQUESTS FROM NEWMONT, HAS DECLINED TO SUPPLY
CERTAIN INFORMATION TO NEWMONT THAT WOULD GENERALLY BE REQUIRED TO BE INCLUDED
IN THIS OFFER DOCUMENT UNDER RULES PROMULGATED BY THE SEC. SEE SECTION 3.1,
"RISK FACTORS--RISKS RELATED TO THE OFFER--ALTHOUGH NORMANDY HAS RECOMMENDED
THE NEWMONT OFFER, IT HAS DECLINED TO PROVIDE NEWMONT WITH FINANCIAL
INFORMATION THAT NEWMONT HAS REQUESTED FOR INCLUSION IN THIS OFFER DOCUMENT"
AND "--WE HAVE NOT VERIFIED THE RELIABILITY OF THE NORMANDY INFORMATION
INCLUDED IN, OR WHICH MAY HAVE BEEN OMITTED FROM, THIS OFFER DOCUMENT" ON PAGE
27.
FIRST DEED OF UNDERTAKING
(a) NON-SOLICITATION. Normandy may not, nor may it permit its subsidiaries
to, nor may it authorize or permit any of its officers, directors or employees
or require any investment banker, attorney or other advisor, agent or
representative of Normandy or its subsidiaries to:
(1) directly or indirectly solicit, initiate or encourage the making of
(including by way of furnishing non-public information) any inquiries or
proposals regarding a competing takeover proposal;
(2) accept or enter into any agreement, arrangement or understanding with
respect to a competing takeover proposal or directly or indirectly
participate in any discussions or negotiations regarding or furnish to any
person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, a competing takeover proposal; or
(3) approve or recommend a competing takeover proposal.
A "competing takeover proposal" is defined as any proposal or offer
(not including the bid for Normandy by AngloGold as initially announced
and constituted by AngloGold's bidder's statement dated October 16, 2001
and the supplementary bidder's statement dated November 1, 2001, but
including any increase or proposed increase by AngloGold of the
consideration offered under the AngloGold bid) with respect to any
transaction that would, if completed substantially in accordance with
its terms, result in any person or group of persons other than us and
our subsidiaries acquiring (a) assets of Normandy and/or its
subsidiaries that have, individually or in the aggregate, a market value
exceeding 15% of the market value of all the assets of Normandy and its
subsidiaries (taken as a whole) or (b) 25% or more of the voting shares
of Normandy.
The restrictions in (1) and (2) above do not prevent Normandy and the
Normandy board from taking or refusing to take any action with respect
to a bona fide competing takeover proposal, provided that the Normandy
board has determined in good faith and acting reasonably after
consultation with its financial advisors and outside legal counsel that
the bona fide competing takeover proposal, which was not solicited,
initiated or encouraged by Normandy in violation of (1) above and did
not otherwise result from a breach or deemed breach of (1) or (2) above,
is a superior takeover proposal.
A "superior takeover proposal" is defined as a bona fide competing
takeover proposal which the Normandy board has determined, acting
reasonably and in good faith (after consulting its financial and legal
advisors and considering all material aspects of the proposal and the
party making that proposal), would, if consummated in accordance with
its terms, be reasonably likely to result in a transaction more
favorable to the holders of Normandy shares than our takeover bid.
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Normandy's obligations under these non-solicitation provisions do not
restrict Normandy or the Normandy board from taking or failing to take
actions where the Normandy board determines in good faith and acting
reasonably after consulting its financial advisors and outside legal
advisors that to take or fail to take such action constitutes, or would
be likely to constitute, a breach of the fiduciary or statutory duties
or obligations of the members of the Normandy board.
(b) UNDERTAKING. Normandy must make a payment to us of A$38.33 million as
compensation for our reasonable opportunity costs, reputational costs
associated with a failed transaction and costs and expenses in connection with
our proposed bid, if:
(1) a competing takeover proposal is announced or open for acceptance
and, pursuant to that proposal, the bidder acquires a relevant interest in
more than 50% of all Normandy's shares and that proposal becomes free from
any defeating conditions either before or after the end of the applicable
offer period; or
(2) the Normandy board fails to recommend our takeover bid in Normandy's
target statement in response to our takeover bid, or the board withdraws or
modifies in a manner adverse to us a recommendation previously made in
respect of our bid (or proposed bid) or enters into any agreement,
arrangement or understanding to recommend or support, or recommends, a
competing takeover proposal.
Normandy is not obligated to make the payment if the following events occur,
unless another person, including AngloGold, makes a competing takeover proposal
which becomes free from any defeating conditions either before or after the end
of the applicable offer period: (a) the terms and conditions of our bid when
made are materially less favorable to Normandy shareholders than the terms and
conditions of the bid specified in the announcement of our intention to make
our bid made on November 14, 2001; (b) our stockholders vote against the
resolution to approve the issue of our securities under our bid; or (c) our bid
does not receive the required approval from the Treasurer of Australia on terms
acceptable to us.
(c) SECURITY BOND. Normandy must provide a security bond to us as security
for its obligation to make the payment referred to above.
(d) FACILITATION OF OFFER. Normandy agrees, in certain circumstances, to
permit us to distribute our bidder's statement to Normandy shareholders within
five days of the date it is sent to Normandy and to use best efforts to
distribute its target statement in response to our bid as soon as practicable.
(e) NORMANDY WARRANTIES. Normandy makes certain representations and
warranties to us in connection with a number of matters including:
(i) its share capital and authority to enter into the deed;
(ii) the accuracy of information it has provided to us in connection with
our due diligence of Normandy;
(iii) Normandy's conduct of its business; and
(iv) the reserves and resources of the Normandy group.
(f) ORDINARY COURSE OF BUSINESS. Normandy agrees, until the consummation of
our bid, to conduct its business consistent with past practice.
SECOND DEED OF UNDERTAKING
If at any time before Normandy is due to make the payment to us required by
the first deed of undertaking, there is a challenge before a court or the
Takeovers Panel concerning Normandy making the payment: (a) we will not enforce
or seek to enforce Normandy's obligation to make the payment (or seek to
recover the payment under
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Normandy's security bond) until the challenge is finally determined; and (b)
if, when a challenge to Normandy's making the payment (whether it is brought
before or after Normandy has made the payment to us) is finally determined,
Normandy is restrained from making the payment (or any part of the payment), or
if the making of the payment is determined to be illegal or unlawful (other
than for any purpose by a director or officer of Normandy to obtain improper
personal financial benefits), then we will not seek to recover the payment (or,
if applicable, part of the payment) or damages in lieu of the payment against
Normandy or any of its directors or officers, we will not seek to exercise our
rights under Normandy's security bond, and, if the challenge was brought after
Normandy has made the payment to us, we will refund the payment to Normandy.
We will not seek payment or recovery from Normandy, and will refund
Normandy's payment, under the circumstances outlined above as long as Normandy,
in consultation with us, takes all necessary actions to vigorously defend
against the challenge before the court or the Takeovers Panel, seeks to join us
at our cost as a party to any proceeding in which the challenge is made or
brought and, at our discretion, initiates all appeal rights from a decision by
a court or by the Takeovers Panel which has the effect or result of preventing
the payment from being made to us.
THIRD DEED OF UNDERTAKING
On December 10, 2001, the parties to the first and second deeds of
undertaking agreed to amend the definition of "competing takeover proposal" to
clarify that the amendment of the AngloGold bid announced on November 29, 2001
was a "competing takeover proposal," and the reference to Newmont's takeover
bid was amended to refer to the takeover bid announced by us on November 14,
2001 as amended by the announcement made by us on December 10, 2001. We also
agreed that we will not assert that the filing of any application to the
Takeovers Panel by AngloGold prior to December 10, 2001 constituted a breach of
any condition to our takeover bid for Normandy.
14.2 FRANCO-NEVADA LOCK-UP AGREEMENT
THE FOLLOWING IS A SUMMARY OF MATERIAL TERMS (NOT OTHERWISE DISCUSSED IN
THIS OFFER DOCUMENT) OF THE LOCK-UP AGREEMENT, DATED AS OF NOVEMBER 14, 2001,
BY AND AMONG US, FRANCO-NEVADA AND FRANCO-NEVADA MINING CORPORATION, INC. (FOR
PURPOSES OF THIS SECTION 14.2, FRANCO-NEVADA AND FRANCO-NEVADA MINING
CORPORATION, INC. ARE COLLECTIVELY REFERRED TO AS "FRANCO-NEVADA") RELATING TO
FRANCO-NEVADA'S 446,100,000 ORDINARY SHARES, WHICH REPRESENT A 19.79% INTEREST
IN NORMANDY, CALCULATED ON A FULLY-DILUTED BASIS (REFERRED TO IN THIS SECTION
14.2 AS "FRANCO-NEVADA'S NORMANDY SHARES").
(a) SALE OF SHARES. Franco-Nevada will not, and will not permit any person
over which it exercises influence or control to, contract to sell, sell or
otherwise transfer or dispose of Franco-Nevada's Normandy Shares (or any
interest, securities convertible into, or derivative of, or any voting rights
with respect to, any of those shares), other than (a) with our prior consent or
(b) pursuant to an Acquisition Transaction (defined below) under the
circumstances described in this section.
(b) NON-SOLICITATION. Franco-Nevada may not (and may not permit any of its
subsidiaries to), directly or indirectly, through any of its or its
subsidiaries' directors, officers, employees, insiders, professional advisors,
agents or other authorized representatives: (i) solicit, initiate, encourage or
facilitate (including by way of furnishing non-public information) any
inquiries or proposals regarding a competing takeover proposal; (ii)
participate in any discussions or negotiations regarding any competing takeover
proposal; (iii) approve or recommend any competing takeover proposal; or (iv)
accept or enter any agreement, arrangement or understanding related to any
competing takeover proposal, other than an Acquisition Transaction under the
circumstances described in this section. Further, Franco-Nevada shall
immediately cease or cause to be terminated any existing discussions or
negotiations with any person in respect of a competing proposal and shall not
waive or vary any terms or conditions of any confidentiality or standstill
agreement that it has with a person considering a competing proposal.
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(c) CALL NOTICE. At any time prior to Franco-Nevada making the payment
referred to in (d) below, we have the right to notify Franco-Nevada (to give
Franco-Nevada a "call notice") that we require it to sell Franco-Nevada's
Normandy shares to us or any entity designated by us (subject to the Treasurer
of Australia giving notice that it does not object to such acquisition, which
condition relates only to such number of the Franco-Nevada Normandy shares
which exceed, in number, 15% of Normandy's issued ordinary shares). The price
at which Franco-Nevada's Normandy shares are to be purchased is 0.0385 of a
Newmont common share (or of a common share of New Newmont that issues the
shares into which the original Newmont Shares are converted or for which they
are exchanged in connection with the transactions contemplated by the
Arrangement Plan) per Normandy ordinary share.
(d) NOTICE AND TERMINATION PAYMENT. If another party acquires a relevant
interest in at least 50.1% of the ordinary shares of Normandy calculated on a
fully diluted basis (an "acquisition transaction"), Franco- Nevada may at any
time give notice of its intention to tender the shares pursuant to the
acquisition transaction. Within four business days following receipt of
Franco-Nevada's tender notice, we may deliver a call notice to Franco-Nevada.
If we deliver the call notice and acquire Franco-Nevada's Normandy shares under
these circumstances, we may not tender those shares into the acquisition
transaction that gave rise to Franco-Nevada's entitlement to deliver the tender
notice. In addition, for a period of two years from the date of the acquisition
transaction, we may not, directly or indirectly, contract to sell, sell or
otherwise transfer or dispose of any of Franco-Nevada's Normandy shares (or any
interest, securities convertible into or derivative of) or any voting rights
with respect to, any of those shares, other than with Franco-Nevada's prior
written consent, provided that a transfer to a wholly owned subsidiary or New
Newmont that acknowledges that it is bound by the above restrictions will not
require such consent.
If we do not deliver a Call Notice within four business days following the
delivery of Franco-Nevada's tender notice, Franco-Nevada must pay us a
termination payment of US$20 million, after which time Franco-Nevada must
irrevocably tender Franco-Nevada's Normandy shares to the acquisition
transaction.
If, upon the occurrence of the acquisition transaction, Franco-Nevada does
not deliver a tender notice to Newmont within 15 days, Franco-Nevada must pay
us the US$20 million termination payment on that date. In addition, for two
years from the date of the acquisition transaction, Franco-Nevada must not
directly or indirectly, contract to sell, sell or otherwise transfer or dispose
of any of Franco-Nevada's Normandy shares (or any interest, securities
convertible into, or derivative of, or any voting rights with respect to, any
of the shares), other than with our prior written consent, provided that a
transfer to a wholly owned subsidiary that acknowledges that it is bound by the
above restrictions will not require such consent.
At any time prior to the occurrence of an acquisition transaction as
described above, if the number of Franco-Nevada's Normandy shares, together
with any other ordinary shares of Normandy tendered to our transaction, equals
at least 50.1% of the Normandy shares (calculated on a fully diluted basis),
and the conditions to our transaction capable of satisfaction prior to the
take-up of Normandy shares have been otherwise satisfied or waived, we may
require Franco-Nevada to tender the Franco-Nevada Normandy shares to our
transaction.
14.3 ARRANGEMENT AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS (NOT OTHERWISE DISCUSSED IN
THIS OFFER DOCUMENT) OF THE ARRANGEMENT AGREEMENT, DATED NOVEMBER 14, 2001, BY
AND BETWEEN US AND FRANCO-NEVADA MINING CORPORATION LIMITED.
(a) REPRESENTATIONS AND WARRANTIES. The arrangement agreement contains
various representations and warranties of Newmont with respect to Newmont and
our subsidiaries relating to, among other things: (a) our corporate
organization, existence and similar corporate matters; (b) our capitalization;
(c) the authorization, execution, delivery and enforceability of the
arrangement agreement; (d) the execution and delivery of the arrangement
agreement and consummation of the transaction not conflicting with or resulting
in a violation of, or
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default under, or giving rise to a right of consent, termination or
acceleration of any obligation under, or resulting in a lien on their
properties or assets under their articles or by-laws, any law, regulation,
order, judgment or decree and other agreements and documents, applicable to us;
(e) the reports, schedules, forms, statements and other documents filed by us
with the SEC, the compliance in all material respects thereof with the
requirements of the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, and the accuracy of the information contained
therein; (f) the absence since December 31, 2000 of any event, change, effect
or development which, individually or in the aggregate, has had or would
reasonably be expected to have a material adverse effect on us and our
subsidiaries, taken as a whole; (g) the absence of judgments, injunctions,
orders or decrees that have the effect of impairing the conduct of the business
of Newmont and any of our subsidiaries; (h) our title to our real property
interests; (i) our insurance coverage; (j) the absence of litigation that,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on Newmont and our subsidiaries, taken as a whole; and
(k) compliance with applicable laws.
The arrangement agreement also contains various representations and
warranties of Franco-Nevada with respect to Franco-Nevada and its subsidiaries
relating to, among other things, (a) their corporate organization, existence
and similar corporate matters; (b) their capitalization; (c) the authorization,
execution, delivery and enforceability of the arrangement agreement; (d) the
execution and delivery of the arrangement agreement and consummation of the
transaction not conflicting with or resulting in a violation or default under,
or giving rise to a right of consent, termination or acceleration of any
obligation under, or resulting in a lien on their property or assets under
their articles or by-laws, any law, regulation, order, judgment or decree and
other agreements and documents; (e) the reports, schedules, forms, statements
and other documents filed by Franco-Nevada with Canadian securities regulatory
authorities, the compliance in all material respects thereof with the
requirements of Canadian securities laws and the accuracy of the information
contained therein; (f) the absence since March 31, 2001 of any event, change,
effect or development which, individually or in the aggregate, has had or would
reasonably be expected to have a materially adverse effect on Franco-Nevada and
its subsidiaries, taken as a whole; (g) compliance with applicable laws; (h)
the absence of judgments, injunctions, orders or decrees that have the effect
of impairing the conduct of the business of Franco-Nevada and any of its
subsidiaries; (i) the filing of tax returns and the payment of taxes; (j) the
title of Franco-Nevada to its real property interests; (k) compliance with
environmental laws; (l) ownership of intellectual property; (m) employment
matters; (n) pension and employee benefits; (o) completeness and accuracy of
financial and corporate books and records; (p) insurance matters; (q) the
absence of litigation that, individually or in the aggregate, would reasonably
be expected to have a materially adverse effect on Franco-Nevada and its
subsidiaries, taken as a whole; (r) compliance with mine health and safety
legislation; (s) dispositions of assets or property since March 31, 2001; and
(t) there having been no material reduction in reserves or in the aggregate
amount of mineralized material since March 31, 2001.
(b) CONDUCT OF BUSINESS OF FRANCO-NEVADA. Prior to the effective time,
unless we otherwise agree in writing, Franco-Nevada is required, and is
required to cause each of its subsidiaries, to (i) conduct its business only
in, not take any action except in, and maintain its facilities in, the ordinary
course of business consistent with past practice, (ii) maintain and preserve
its business organization and its material rights and franchises, (iii) retain
the services of its officers and key employees, (iv) maintain relationships
with customers, suppliers, lessees, joint venture partners, licensees, lessors,
licensors and other third parties, and (v) maintain all of its operational
assets in their current condition (normal wear and tear excepted) to the end
that its goodwill and ongoing business are not impaired in any material
respect. Without limiting the generality of the foregoing, Franco-Nevada is
required (unless contemplated by the arrangement agreement or we otherwise
agree in writing) to:
(1) not do, permit any of its subsidiaries to do or permit to occur any
of the following (directly or indirectly):
(A) issue, grant, sell, transfer, pledge, lease, dispose of, encumber
or agree to issue, grant, sell, pledge, lease, dispose of or encumber:
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(i) any common shares or other securities entitling the holder to
rights in respect of the securities or assets of Franco-Nevada or its
subsidiaries, other than pursuant to rights to acquire such
securities existing at the date of the arrangement agreement, or
(ii) any property or assets of Franco-Nevada or any of its
subsidiaries, except in the ordinary course of business consistent
with past practice;
(B) amend or propose to amend its constitutional documents (including
articles or other organizational documents or by-laws);
(C) declare or make any dividend or other distribution (in cash,
securities or other property) in respect of any of its securities;
(D) redeem, purchase or offer to purchase any securities or enter
into any agreement, understanding or arrangement with respect to the
sale, voting, registration or repurchase of its capital stock;
(E) adjust, split, combine or reclassify its capital stock or merge,
consolidate or enter into a joint venture with any person;
(F) except in accordance with existing executed agreements of
purchase and sale, acquire or agree to acquire (by purchase,
amalgamation, merger or otherwise) any person or assets that
individually exceeds US$5 million or, in the aggregate, exceed US$10
million;
(G) make, or commit to make, any capital expenditures that,
individually exceed US$10 million or, in the aggregate, exceed US$25
million;
(H) amend or modify, or propose to amend or modify, its shareholder
rights plan;
(I) incur, create, assume, commit to incur, guarantee or otherwise
become liable or responsible for indebtedness for borrowed money, other
than:
(i) advances from subsidiaries of Franco-Nevada made in the
ordinary course of business consistent with past practice;
(ii) advances from subsidiaries of Franco-Nevada made to fund
expenditures permitted by the arrangement agreement; and
(iii) pursuant to existing operating lines of credit with third
party lenders;
(J) settle or compromise any suit, claim, action, proceeding,
hearing, notice of violation, demand letter or investigation involving
the possible payment or receipt of amounts that exceed, in the
aggregate, US$250,000;
(K) enter into, adopt or amend any employee benefit plan or
employment agreement, except as may be required by applicable law;
(L) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to any confidentiality agreement
to which Franco-Nevada is a party;
(M) take any action that could give rise to a right to severance
benefits pursuant to any employment, severance, termination, change in
control or similar agreements or arrangements;
(N) adopt or amend, or increase or accelerate the timing, payment or
vesting of benefits under or funding of, any bonus, profit sharing
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any current or former
employee, director or consultant;
(O) enter into any confidentiality agreements or arrangements other
than in the ordinary course of business consistent with past practice;
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(P) except as otherwise required by law, make any material tax
election, settle or compromise any material tax claim, file any tax
return (other than in a manner consistent with past practice) or change
any method of tax accounting;
(Q) take any action to exempt or make not subject to the provisions
of any take-over law or other law, which purports to limit or restrict
business combinations or the ability to acquire or vote shares, any
person (other than we or our subsidiaries) or any action taken thereby,
which person or action would have otherwise been subject to the
restrictive provisions thereof and not exempt therefrom;
(R) make any changes to existing accounting practices, except as the
auditors of Franco-Nevada advise in writing are required by applicable
law or generally accepted accounting principles, or write up, write down
or write off the book value of any assets in amount that, in aggregate,
exceed US$500,000 except for depreciation and amortization in accordance
with generally accepted accounting principles; or
(S) enter into or modify any employment, severance, collective
bargaining or similar agreements or arrangements with, or take any
action with respect to or grant any salary increases, bonuses, benefits,
severance or termination pay to, any current or former officers,
directors or other employees or consultants;
(2) use its best efforts to cause its current insurance (or re-insurance)
policies not to be cancelled or terminated or any other coverage under those
policies to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies underwritten by insurance and re-insurance
companies of nationally recognized standing providing coverage equal to or
greater than the coverage under the cancelled, terminated or lapsed policies
for substantially similar premiums are in full force and effect;
(3) not do or permit any action that would, or could reasonably be
expected to, render any of its representations or warranties in the
arrangement agreement untrue or inaccurate in a manner that would, or could
reasonably be expected to, be materially adverse to Franco-Nevada and its
subsidiaries, taken as a whole;
(4) promptly notify us orally and in writing of any change in the
ordinary course of its business, operations or properties and of any
material complaints, investigations or hearings (or communications
indicating that the same may be contemplated) that, individually is, or in
the aggregate are, or could reasonably be expected to be materially adverse
to Franco-Nevada and its subsidiaries, taken as a whole;
(5) not implement any other change in its business, affairs,
capitalization or dividend policy that is, or in the aggregate are, or could
reasonably be expected to be materially adverse to Franco-Nevada and its
subsidiaries, taken as a whole; and
(6) not enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing matters.
(c) CONDUCT OF BUSINESS AND COVENANTS BY NEWMONT. Prior to the effective
time, unless Franco-Nevada otherwise agrees in writing, we are required, and
are required to cause each of our subsidiaries to, (i) conduct our business and
maintain our facilities in the ordinary course of business consistent with past
practice, (ii) maintain and preserve our business organization and our material
rights and franchises, (iii) retain the services of our officers and key
employees, (iv) maintain relationships with customers, suppliers, lessees,
joint venture partners, licensees, lessors, licensors and other third parties,
and (v) maintain all of our operational assets in their current condition
(normal wear and tear excepted) to the end that our goodwill and ongoing
business are not impaired in any material respect. Without limiting the
generality of the foregoing, we are required (unless contemplated by the
arrangement agreement or Franco-Nevada otherwise agrees in writing) to:
(1) not, nor permit any of our subsidiaries to, redeem, purchase or offer
to purchase any securities of our capital stock, or enter into any
agreement, understanding or arrangement with respect to the repurchase of
our capital stock (except for transactions among Newmont and our presently
existing or future direct or indirect wholly-owned subsidiaries);
157
(2) not make any amendment to our certificate of incorporation that
changes the fundamental attributes of our common stock;
(3) not make, declare or pay any dividend (other than quarterly dividends
not in excess of US$0.03 per share of our common stock and US$0.8125 per
share of preferred stock, with record and payment dates consistent with past
practice);
(4) not adjust, split, combine or reclassify our capital stock or merge
or consolidate with any person;
(5) not incur, create, assume, commit to incur, guarantee or otherwise
become liable or responsible for indebtedness for borrowed money that, in
the aggregate, exceed US$200 million, except in the ordinary course of
business consistent with past practice and other than:
(i) advances from our subsidiaries made to fund expenditures
permitted by the arrangement agreement; and
(ii) pursuant to existing operating or replacement lines of credit
with third party lenders;
(6) not do or permit any action that would, or could reasonably be
expected to, render any of its representations or warranties in the
arrangement agreement untrue or inaccurate in a manner that would, or could
reasonably be expected to, be materially adverse to us and our subsidiaries,
taken as a whole;
(7) promptly notify Franco-Nevada orally and in writing of any change in
the ordinary course of its business, operations or properties and of any
material complaints, investigations or hearings (or communications
indicating that the same may be contemplated) that, individually is, or in
the aggregate are, or could reasonably be expected to be, materially adverse
to us and our subsidiaries, taken as a whole;
(8) not enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the foregoing matters; and
(9) not implement any other change in its business, affairs,
capitalization or divided policy that is, or in the aggregate are, or could
reasonably be expected to be, materially adverse to us and our subsidiaries,
taken as a whole.
In addition, we must not (unless we first consult with Franco-Nevada) do,
permit any of its subsidiaries to do or permit to occur any of the following
(directly or indirectly), except in connection with the transaction and among
Newmont and our direct or indirect wholly-owned subsidiaries:
(1) issue, grant, sell, transfer, pledge, lease, dispose of, encumber or
agree to issue, grant, sell, pledge, lease, dispose of or encumber:
(A) any shares of our common stock or other securities entitling the
holder to rights in respect of the securities or assets of Newmont or
our subsidiaries, other than pursuant to existing rights to acquire such
securities; or
(B) any property or assets of Newmont or any of our subsidiaries,
except in the ordinary course of business consistent with past practice;
(2) except in accordance with existing executed agreements of purchase
and sale, acquire or agree to acquire (by purchase, amalgamation, merger or
otherwise) any person or assets that individually exceed US$50 million or,
in the aggregate, exceed US$100 million; or
(3) except as provided in our regular budget, make, or commit to make,
any capital expenditures that individually exceeds US$50 million.
Under the arrangement agreement, we agree to use our best efforts to:
(1) obtain all orders required from the applicable Canadian securities
regulatory authorities to permit the first resale of:
(A) the exchangeable shares issued pursuant to the arrangement; and
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(B) the Newmont shares issued from time to time upon exchange of the
exchangeable shares,
in each case without qualification with or approval of or the filing of any
prospectus (other than in the case of a control person for purposes of
Canadian securities laws);
(2) cause the exchangeable shares to be listed and posted for trading on
the TSE by the effective time and to take reasonable steps to maintain such
listings for so long as there are exchangeable shares outstanding (other
than securities held by Newmont or any of our affiliates);
(3) take reasonable steps to ensure that Newmont Canada has, at the
effective time and for so long as there are exchangeable shares outstanding
(other than exchangeable shares held by Newmont or any of our affiliates), a
"substantial Canadian presence" within the meaning of subsection 206(1.1) of
the Income Tax Act (or "ITA");
(4) take reasonable steps to cause the listing and admission to trading
on the NYSE of the shares of Newmont common stock to be issued at the
effective time and from time to time (i) upon exchange of the exchangeable
shares, and (ii) upon the exercise of the Franco-Nevada Options,
Franco-Nevada Class B Warrants and Franco-Nevada Class C Warrants; and
(5) take reasonable steps to ensure that Newmont Canada is, at the
effective time and for so long as there are exchangeable shares outstanding
(other than exchangeable shares held by Newmont or any of our affiliates), a
"taxable Canadian corporation" and not a "mutual fund corporation," each
within the meaning of the ITA.
(d) NON-SOLICITATION. Franco-Nevada has agreed that it will not, and will
not permit any of its subsidiaries to, directly or indirectly, through any
director, officer, employee, insider, professional advisor, agent or authorized
representative or otherwise, take any action that may in any way adversely
affect or reduce the successful completion of the transaction. Without limiting
the foregoing, Franco-Nevada has agreed that it will not, and will not permit
any of its subsidiaries, directly or indirectly, through any of the foregoing,
to solicit, initiate, encourage or facilitate (including by way of furnishing
non-public information) any inquiries or proposals regarding an alternative
transaction, participate in any discussions or negotiations regarding any
alternative transaction, approve or recommend any alternative transaction, or
accept or enter into any agreement, arrangement or understanding related to any
alternative transaction; provided, however, that, subject to Franco-Nevada's
obligation to give notice and our right to respond, nothing will prevent the
board of directors from (i) complying with its obligations under applicable
securities law to prepare and deliver a directors' circular in response to a
take-over bid, and (ii) considering, participating in discussions or
negotiations and entering into confidentiality agreements and providing
information regarding an unsolicited BONA FIDE written acquisition proposal
that does not result from a breach of the foregoing and that the board of
directors determines by formal resolution in good faith, after consultation
with its financial advisors and outside legal counsel, is a superior proposal,
but only to the extent that the board of directors has also determined by
formal resolution, in good faith after consultation with its outside counsel
that the failure to take such action would reasonably be expected to constitute
a breach of its fiduciary duties.
Franco-Nevada may accept, approve, recommend or enter into an agreement,
understanding or arrangement to implement a superior proposal if (i) it has
provided us with a copy of the documentation relating to the superior proposal,
and (ii) five business days have elapsed from the later of the date we received
written notice from the board of directors that it has resolved to accept,
approve, recommend or enter into a binding agreement to implement the superior
proposal, and the date we received all of the documentation relating to the
superior proposal.
During such five business day period, we will have the right, but not the
obligation, to offer to amend the terms of the arrangement agreement. The board
of directors will review any offer by us to amend the terms of the arrangement
agreement in good faith, in consultation with its financial advisors and
outside legal counsel, to determine whether the acquisition proposal to which
we are responding would be a superior proposal when
159
assessed against our amended proposal. If the board of directors does not so
determine, by formal resolution, it will enter into an amended agreement with
us reflecting our amended proposal. If the board of directors determines by
formal resolution that the acquisition proposal is nonetheless a superior
proposal and Franco-Nevada has made the payment to us described in "Termination
and Termination Fees" below, Franco-Nevada may approve, recommend, accept or
enter into an agreement, understanding or arrangement to implement the superior
proposal, provided that in no event is the board of directors permitted to take
any action that may obligate Franco-Nevada or any other person to seek to
interfere with the completion of the transactions or impose any "break-up,"
"hello" or other fees or options or rights to acquire assets or securities, or
any other obligations that would survive completion of the transaction, or
Franco-Nevada or any of its subsidiaries, property or assets.
(e) CONDITIONS TO THE TRANSACTION. The obligations of Franco-Nevada and us
to consummate the transaction are subject to the satisfaction of certain mutual
conditions, including (i) approval of the requisite resolutions by
Franco-Nevada shareholders at the Franco-Nevada shareholders' meetings, (ii)
approval of the arrangement by the Superior Court of Justice of the Province of
Ontario (the "Ontario Superior Court"), (iii) approval by our shareholders of
the issuance of the shares of common stock to complete the arrangement and the
acquisition of Normandy, (iv) listing of the shares of common stock of Newmont
and the exchangeable shares issuable to Franco-Nevada shareholders pursuant to
the arrangement on the NYSE and the TSE, respectively, (v) the acquisition by
us and our associates of a "relevant interest" (as defined below) in at least
50.1% of the Normandy shares, calculated on a fully-diluted basis (see "Newmont
Bid") and (vi) receipt of all necessary regulatory approvals. As defined in the
Australian Corporations Act 2001, a person will have a relevant interest in
securities if such person (i) is the holder of the securities, (ii) has the
power to exercise, or control the exercise of, the right to vote attached to
the securities, or (iii) has the power to dispose of, or control the exercise
of a power to dispose of, the securities.
The obligations of Franco-Nevada to complete the transaction are subject to
the satisfaction of certain conditions in its favor, including the
representations and warranties of Newmont under the arrangement agreement being
true and correct in all material respects and there not having occurred any
event, change, effect or development that individually or in the aggregate, has
had or is reasonably likely to have, a materially adverse effect on Newmont and
our subsidiaries, taken as a whole.
Our obligations to complete the transaction are subject to the satisfaction
of certain conditions in its favor including the representations and warranties
of Franco-Nevada under the arrangement agreement being true and correct in all
material respects, there not having been delivered and not withdrawn notices of
dissent with respect to the requisite Franco-Nevada shareholder resolutions in
respect of more than 4,000,000 Franco-Nevada common shares, and there not
having occurred any event, change, effect or development that individually or
in the aggregate, has had or is reasonably likely to have, a materially adverse
effect on Franco-Nevada and its subsidiaries taken as a whole.
(f) AMENDMENT AND WAIVER. The arrangement agreement, including the plan of
arrangement, may be amended by written agreement of the parties at any time
before or after the Franco-Nevada shareholder meeting, but not later than the
effective date and any such amendment may, subject to applicable law or the
interim order of the Ontario Superior Court, without limitation (i) change the
time for performance of any of the obligations or acts of the parties, (ii)
waive any inaccuracies in or modify any representation contained in the
arrangement agreement or any document to be delivered pursuant to the
arrangement agreement, (iii) waive compliance with or modify any of the
covenants contained in the arrangement agreement or waive or modify performance
of any of the obligations of the parties, and/or (iv) waive compliance with or
modify any condition precedent contained in the arrangement agreement. If
Franco-Nevada or Newmont, as the case may be, proposes any amendment or
amendments to the arrangement agreement or the plan of arrangement, the other
must consider that amendment and if it and its security holders are not
prejudiced by reason of any such amendment, it will cooperate so that that
amendment can be effected subject to applicable law and the rights of the
security holders.
Franco-Nevada and we will use all efforts to obtain the approvals of the
Ontario Superior Court and the Franco-Nevada shareholders in respect of any
amendments to the arrangement agreement, including the plan of arrangement, to
the extent required by applicable law.
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(g) TERMINATION AND TERMINATION FEES. The arrangement agreement may be
terminated at any time prior to the effective time by mutual written agreement
of Franco-Nevada and Newmont, or by either Franco-Nevada or Newmont, subject to
the other party's right to cure in certain circumstances, if the conditions to
the arrangement have not been waived or satisfied on or before October 31,
2002. Franco-Nevada may terminate the arrangement at any time if our
shareholders do not approve all matters necessary to consummate the transaction
or if a person other than Newmont or a related entity of Newmont
unconditionally acquires not less than 50.1% of the Normandy shares, calculated
on a fully diluted basis. Newmont may terminate the arrangement agreement if at
any time:
(A) the Franco-Nevada board of directors (i) does not recommend or
withdraws or modifies in a manner adverse to Newmont or refuses to affirm
its recommendation of the arrangement, or (ii) approves, recommends, accepts
or enters into any agreement, undertaking or arrangement in respect of an
alternative transaction;
(B) the Franco-Nevada shareholders meeting is cancelled, adjourned or
delayed, except as expressly contemplated by the arrangement agreement or
agreed to by us in writing;
(C) the shareholders do not cast (or do not cause to be cast) sufficient
votes at the Franco-Nevada shareholders meeting to permit completion of the
arrangement; or
(D) a person other than Newmont or an affiliate of Newmont
unconditionally acquires not less than 50.1% of the Normandy shares
calculated on a fully diluted basis.
Provided that we have not failed to perform any covenant required to be
performed by us pursuant to the arrangement agreement (or such failure is
not materially adverse to Franco-Nevada and its subsidiaries taken as a
whole) and no representation or warranty made by us contained in the
arrangement agreement is untrue in any material respect, if we exercise our
right of termination pursuant to: (a) clauses (A), (B) or (C) above (where,
in the case of clause (C), at the time of the Franco-Nevada shareholders
meeting a BONA FIDE acquisition proposal that has been made has not been
withdrawn), Franco-Nevada will immediately pay to us US$100 million in
immediately available funds to an account designated by us; or (b) clause
(iii) above, where, at the time of the Franco-Nevada shareholders meeting, a
BONA FIDE acquisition proposal that has been made has been withdrawn or no
such proposal has been made, Franco-Nevada will immediately pay to us US$20
million in immediately available funds to an account designated by us. In
addition, with respect to paragraph (b), if, at any time within 12 months
after the date of such payment, Franco-Nevada approves, recommends, accepts,
enters into or consummates an acquisition proposal, Franco-Nevada will pay
to us US$80 million in immediately available funds to an account designated
by us upon consummation of that acquisition proposal. Franco-Nevada will not
be obligated to make payments exceeding US$100 million pursuant to the
foregoing provisions.
If (i) the Franco-Nevada shareholders approve the transaction and our
shareholders do not approve the transaction, (ii) Franco-Nevada has not failed
to perform any covenant required to be performed by it pursuant to the
arrangement agreement (or such failure is not materially adverse to
Franco-Nevada and its subsidiaries or Newmont and our subsidiaries, in each
case taken as a whole), (iii) no representation or warranty made by
Franco-Nevada is untrue in any material respect, and (iv) Franco-Nevada
exercises its right to terminate the arrangement agreement, we will pay to
Franco-Nevada US$10 million in immediately available funds to an account
designated by Franco-Nevada, for its out-of-pocket expenses.
14.4 OTHER AGREEMENTS
CHAMPION DE CRESPIGNY ESCROW AGREEMENT
In connection with Mr. Champion de Crespigny's proposed appointment to the
board of directors of Newmont, it has been proposed that Mr. Champion de
Crespigny will be requested to agree to a voluntary escrow of Newmont CDIs
which are issued to him under the offer for a maximum period of two years from
the issue date.
161
Mr. Champion de Crespigny disclosed in Normandy's target statement in
response to the AngloGold bid that he and his associates held 71,076,161
ordinary shares of Normandy.
SCHULICH AND LASSONDE LOCK-UP AND ESCROW AGREEMENTS
Seymour Schulich, Chairman of the Board and Co-Chief Executive Officer of
Franco-Nevada, and his affiliates own 10,200,492 common shares of Franco-Nevada
and Pierre Lassonde, President and Co-Chief Executive Officer of Franco-Nevada,
and his affiliates own 3,651,167 common shares of Franco-Nevada (and
Franco-Nevada Options to purchase 667,200 common shares), representing, in the
aggregate, approximately 8.7% of the common shares of Franco-Nevada issued and
outstanding. Pursuant to the lock-up agreements, each of Mr. Schulich and Mr.
Lassonde has agreed that all of his common shares of Franco-Nevada (including
common shares acquired by him after the date of the lock-up agreements) will be
voted in favor of the plan of arrangement and that he will not vote any of such
common shares in favor of any alternative transaction. Each of Mr. Schulich and
Mr. Lassonde irrevocably agrees among other things, that he will not, and will
not permit any person over which he exercises influence or control to, contract
to sell, sell or otherwise transfer or dispose of any of his common shares of
Franco-Nevada (or any interest, securities convertible into or any voting
rights with respect to any of his common shares of Franco-Nevada), other than
pursuant to the arrangement or with Newmont's prior written consent. The
lock-up Agreements further provide that each of Mr. Schulich and Mr. Lassonde:
(a) will not permit any person over which he exercises influence or control,
directly or indirectly (including, if applicable, through its directors,
officers, employees, insiders, professional advisors, agents or other
authorized representatives) to take any action that may in any way
adversely affect or reduce the likelihood of the successful completion
of the plan of arrangement; and
(b) will not (and will not permit any of its subsidiaries to), directly or
indirectly, through any of its or its subsidiaries' directors, officers,
employees, insiders, professional advisors, agents or other authorized
representatives:
(i) solicit, initiate, encourage or facilitate (including by way of
furnishing non-public information) any inquiries or proposals
regarding an alternative transaction;
(ii) participate in any discussions or negotiations regarding any
alternative transaction;
(iii) approve or recommend any alternative transaction; or
(iv) accept or enter any agreement, arrangement or understanding related
to any alternative transaction.
Pursuant to the escrow agreements each of Mr. Schulich and Mr. Lassonde has
deposited or agreed to deposit in escrow the certificate(s) representing the
common shares of Franco-Nevada referred to in the lock-up agreements (and, in
the case of Mr. Lassonde, the certificate(s) representing common shares of
Franco-Nevada issued upon exercise of his Franco-Nevada stock options). The
common shares of Franco-Nevada deposited in escrow will be released, subject to
accelerated release in certain events, three months following the termination
of the escrow agreements. On the effective date of the acquisition of
Franco-Nevada, 30% of the exchangeable shares received in exchange for the
escrowed common shares of Franco-Nevada will be released and the balance will
be released as to 30% on the first anniversary of the effective date, and as to
20% on each of the second and third anniversaries of the effective date.
14.5 CERTAIN RELATIONSHIPS
JOINT VENTURE BETWEEN NEWMONT AND NORMANDY
Newmont and Normandy each have a 50% interest in the Pajingo joint venture
as successors to a joint venture agreement between Posgold Operations Pty Ltd
and Battle Mountain (Australia) Inc. Under the joint
162
venture agreement, Normandy manages mine operations and exploration. For these
services, Normandy receives a management fee of approximately A$1.2 million per
annum from Newmont.
NEWMONT PROPERTIES SUBJECT TO FRANCO-NEVADA ROYALTIES
Newmont owns and in some cases actively conducts operations on a number of
properties in Nevada which are subject to the payment of a production royalty
to Franco-Nevada. The following properties are currently producing and provided
Franco-Nevada with the royalty payment indicated over the period of October 1,
2000 through September 30, 2001:
. The Deepstar Mine, for which Franco-Nevada received US$579,795 in payments
based on a variable royalty of 5.75%-6% NSR.
. The Deep Post Mine, for which Franco-Nevada receives a variable royalty of
5.5%-6% NSR. The BLLS 5-0 Stockpile is subject to a royalty of 4.62% NSR.
The combined royalty from Deep Post and BLLS 5-0 Stockpile production was
US$867,737.
. The Maggie Creek claims, for which Franco-Nevada received US$154,872 in
payments based on a variable royalty of 3.072%-4.9% NSR.
. The Good Hope patents and Nevada King claims, for which Franco-Nevada
received US$14,739 in payments based on a royalty of 8% NSR.
Non-producing properties owned by Newmont that are subject to Franco-Nevada
royalties include: the Barr claims (2% NSR), Carlin Valley claims and adjacent
lands (3.6% NSR), Chicago claims (5% NSR), Golden Boy claims (3% NSR), Joe and
Don claims (5% NSR), London claims (5% NSR), a part of the Lone Tree Mine (1%
NSR), Micron claims (3% NSR), and Getchell Section 13 lands (2% NSR). Effective
December 4, 2001, Newmont and Getchell Gold Corporation entered into an
agreement under which Newmont will process a 150,000 ton ore stockpile, which
is subject to a 2% NSR royalty in favor of Franco-Nevada. In addition,
Franco-Nevada has 0.5%-4% NSR interest covering parts of Newmont's Holloway
camp in Ontario, Canada, currently non-producing, pursuant to which
arrangements Franco-Nevada receives annual advanced royalty payments of $25,000.
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15 ADDITIONAL INFORMATION
15.1 SECURITY STRUCTURE OF NORMANDY
To our knowledge, as at November 30, 2001, Normandy has on issue the
following securities:
. 2,232,768,401 ordinary shares of Normandy; and
. 21,544,057 Normandy options.
Franco-Nevada and one of its subsidiaries, which together own 446,100,000
ordinary shares of Normandy, representing 19.79% of the ordinary shares of
Normandy, calculated on a fully-diluted basis, have granted to us the right,
exercisable at our discretion, to acquire their block of ordinary shares of
Normandy at the exchange ratio of our bid for Normandy. Consequently,
immediately before the lodgment of this offer document with ASIC on December
20, 2001, we had a relevant interest in 446,100,000 ordinary shares of
Normandy. Details of that relevant interest are set out in section 14.2. Delta
Acquisition LLC is an associate of Newmont, and thus has voting power in the
446,100,000 Normandy shares. Subject thereto, we did not have a relevant
interest in any other ordinary shares of Normandy or Normandy options at that
time.
Our voting power in Normandy is 19.99% (represented by the 446,100,000
ordinary shares of Normandy referred to above) as at the date of this offer
document and immediately before the offer will be sent to Normandy shareholders.
15.2 NORMANDY OPTIONS
As at November 30, 2001, there were 21,544,057 Normandy options,
convertible into 21,597,982 shares, all of which were issued pursuant to the
Normandy Executive Share Incentive Plan or the Employee Share Bonus Plan. The
offer extends to all ordinary shares of Normandy which are issued prior to the
end of the offer period as a result of Normandy options being exercised.
If at the end of the offer period there are Normandy options which have not
been exercised, then, subject to us being permitted to do so under the
Corporations Act, we intend to seek to acquire compulsorily, under the
provisions of the Corporations Act, any Normandy options which have not been
exercised.
15.3 NORMANDY SECURITIES COVERED BY BID
Offers will be made under the Australian offer document to all holders of
Normandy shares other than those who at the offer date have registered
addresses recorded in the Normandy register of members in either the United
States or Canada.
Offers will also extend to Normandy shares which are issued during the
period commencing on the offer date and ending at the end of the offer period
as a result of the exercise of Normandy options in accordance with their terms.
Offers will be made under the United States offer document to holders of
Normandy shares who, at the offer date, have registered addresses recorded in
Normandy's register of members in either the United States or Canada.
Details of the structure of the offers are provided in section 5.
15.4 SOURCES OF CONSIDERATION
(a) Cash Consideration
The consideration for the acquisition of the Normandy shares to which the
offers relate will be satisfied in part by the payment of cash.
164
Assuming that all Normandy options are exercised prior to the commencement
of or during the offer period, and acceptances are received in respect of such
Normandy shares, the total amount of cash that we may become obliged to pay to
offerees under the offers is approximately A$902,000,000.
The cash consideration for the offers referred to above and funds to satisfy
our other obligations relating to the offers will be provided under a loan
facility which Delta Acquisition LLC has entered into with Newmont (the "Delta
Facility"). Delta Acquisition LLC is an indirect wholly owned subsidiary of
Newmont. The terms of the Delta Facility are set out in a letter of offer from
Newmont dated December 18, 2001 which has been accepted by Delta Acquisition
LLC. The terms of the Delta Facility are as follows:
. the amount of the Delta Facility is A$902,000,000;
. the funds provided under the Delta Facility are for the purpose of
acquiring the Normandy shares under the offer and paying transaction costs
associated with the offer;
. the basic terms (such as events of default and interest payable) of the
Delta Facility are identical to the terms of the Revolving Credit
Facilities described below;
. the Delta Facility is unsecured; and
. there are no conditions precedent which need to be satisfied by Delta
Acquisition LLC to draw-down under the Delta Facility.
The funds which are to be advanced by Newmont under the Delta Facility will be
provided under banking facilities (the "Revolving Credit Facilities") which
Newmont has entered into with the Chase Manhattan Bank, as agent. The terms of
the Revolving Credit Facilities are set out in two agreements, dated as of
October 10, 2001. The terms of the Revolving Credit Facilities are as follows:
. The amount of the Revolving Credit Facility is US$600,000,000
(US$400,000,000 under the 5 year revolving credit facility and
US$200,000,000 under a 364 Day Facility).
. The funds provided under the Revolving Credit Facilities are for general
corporate purposes.
. Interest rates under the facility are variable, can be fixed for up to six
months at Newmont's option and are subject to adjustment if changes in
Newmont's long term credit rating occur.
. The Revolving Credit Facilities are unsecured. Under the terms of the
Revolving Credit Facilities, there is a negative pledge of the assets of
Newmont as well as two financial covenants: Net debt/capitalization may
not exceed 62.5% and the ratio of Net debt/EBITDA may not exceed 4.0 to
1.0. There are also limitations on Newmont undergoing fundamental business
changes and incurring liens.
. There are no conditions precedent that need to be satisfied by Newmont for
it to draw-down under the Revolving Credit Facilities.
. The events of default are customary events of default for facilities of
this nature, including failure to make repayments of principal and
interest, failure to comply with covenants and insolvency proceedings.
. The representations and warranties to be given on draw-down are the usual
form of representations and warranties, such as valid incorporation and
the absence of default.
. The Revolving Credit Facilities are undrawn.
(b) Shares
We have agreed to issue or procure the issue of sufficient shares of our
common stock to satisfy the consideration payable to Normandy shareholders.
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15.5 PURCHASES DURING PREVIOUS FOUR MONTHS
We acquired a relevant interest in 446,100,000 Normandy Shares on November
14, 2001. Further details of this acquisition are set out in section 14.2 of
this offer document.
Subject to the foregoing, neither we nor any of our associates has provided,
or agreed to provide, consideration for Normandy shares under a purchase or
agreement made during four months before the date of the offers.
15.6 BENEFITS TO NORMANDY SHAREHOLDERS
Except to the extent and as referred to elsewhere in this offer document,
neither we nor any of our associates has, during the period of four months
before the date of the offers, given or offered to give or agreed to give a
benefit to another person which was likely to induce the other person, or an
associate of the person to:
(a) accept an offer; or
(b) dispose of any Normandy shares,
and the benefit is not offered to holders of Normandy shares under the offers.
15.7 MARKET PRICE AND DIVIDEND DATA
Newmont common stock is listed on the NYSE under the symbol "NEM", Normandy
ordinary shares are listed on the ASX under the symbol "NDY", Normandy ADRs are
listed on the TSE under the symbol "NDY", and Franco-Nevada's common shares are
listed in the TSE under the symbol "FN". The following table shows, for the
calendar quarters indicated, based on published financial sources, the high and
low last reported closing prices per share of each company's security as
reported and the per share cash dividends declared for such securities.
NEWMONT NORMANDY
COMMON STOCK ORDINARY SHARES
--------------------------- ---------------------------
CALENDAR YEAR HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------------- -------- -------- --------- ------ ------ -------------
1999:
First quarter......... US$20.63 US$16.63 US$0.03 A$1.55 A$1.26 A$0.025
Second quarter........ 26.06 16.75 0.03 1.51 0.96 (50% franked)
Third quarter......... 27.81 16.44 0.03 1.40 0.99 0.035
Fourth quarter........ 29.75 20.56 0.03 1.41 1.03 (50% franked)
2000:
First quarter......... 25.06 19.38 0.03 1.11 0.84 0.025
Second quarter........ 27.75 21.19 0.03 0.94 0.83 (42% franked)
Third quarter......... 21.50 16.38 0.03 1.10 0.89 0.035
Fourth quarter........ 18.19 13.00 0.03 1.03 0.89 (44% franked)
2001:
First quarter......... 18.85 14.09 0.03 0.99 0.88 0.025
Second quarter........ 24.05 15.38 0.03 1.24 0.88 (44% franked)
Third quarter......... 23.90 18.24 0.03 1.38 1.04 (cancelled)
Fourth quarter........ 24.83 18.90 0.03 1.85 1.31
2002:
First quarter (through
January 4, 2002).... 19.09 18.82 -- 1.86 1.83 --
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NORMANDY FRANCO-NEVADA
ADRS COMMON SHARES
- ------------------------- -------------------------
CALENDAR YEAR HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------------- ------- ------- --------- ------- ------- ---------
1999:
First quarter......... C$14.75 C$11.75 US$0.1323 C$31.00 C$23.05 C$0.21
Second quarter........ 14.25 10.00 -- 29.95 21.50 --
Third quarter......... 14.20 10.00 0.1945 35.75 19.75 --
Fourth quarter........ 14.00 10.00 -- 32.75 22.15 --
2000:
First quarter......... 10.75 7.25 0.1276 23.20 13.40 0.30
Second quarter........ 8.50 7.00 -- 20.50 14.20 --
Third quarter......... 9.25 7.90 0.1575 17.20 13.95 --
Fourth quarter........ 8.80 7.25 -- 18.70 12.40 --
2001:
First quarter......... 8.00 7.25 0.1029 19.30 15.25 0.35
Second quarter........ 10.00 7.00 -- 22.00 15.50 --
Third quarter......... 10.93 8.40 23.05 19.01 --
Fourth quarter........ 14.75 10.00 -- 24.67 21.00 --
2002:
First quarter (through
January 4, 2002).... 15.50 15.00 -- 23.72 23.45 --
On January 2, 2002, which was the last trading day in the United States
prior to our announcement of our intention to commence this offer, the closing
price of our common stock was US$19.09 per share, the closing price of Normandy
ordinary shares was A$1.83 per share, the closing price of Normandy ADRs was
C$15.00 per share and the closing price of Franco-Nevada common shares was
C$23.45 per share. On . , 2001, the most recent practicable date prior to the
mailing of this document to you, the closing price of Newmont common stock was
US$. per share, the closing price of Normandy ordinary shares was A$. per
share, the closing price of Normandy ADRs was C$. per share and the closing
price of Franco-Nevada common shares was C$. per share.
We encourage you to obtain current market quotations for Newmont common
stock, Normandy ordinary shares, Normandy ADRs and Franco-Nevada common shares.
Newmont intends to file an application with the NYSE to list on the exchange
the shares of Newmont common stock that Normandy and Franco-Nevada shareholders
receive in the transactions. Newmont intends to file an application with the
ASX to list on the exchange the Newmont CDIs that Normandy shareholders receive
in the bid.
On November 15, 2001, the board of directors of Newmont declared a dividend
on Newmont common stock of $0.03 per share, payable on December 21, 2001 to
holders of record on December 10, 2001.
In the arrangement agreement, Newmont agreed that, until the plan of
arrangement was completed or the arrangement agreement was terminated, Newmont
would not make, declare or pay any dividends or distributions on any share of
Newmont common stock, except for regular quarterly dividends of $0.03 per share.
In the arrangement agreement, Franco-Nevada agreed that, until the plan of
arrangement is completed or the arrangement agreement is terminated,
Franco-Nevada would not make, declare or pay any dividends or distributions on
Franco-Nevada common shares.
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15.8 SELECTED EXCHANGE RATE DATA
In this offer document, currency amounts are expressed in U.S. dollars,
Canadian dollars or Australian dollars. The following tables set forth, for the
periods indicated, the period-end, average, high and low noon buying rates as
reported by the Federal Reserve Bank of New York for Australian dollars per
US$1.00, and Canadian dollars per US$1.00, based on the noon buying rate
expressed in U.S. dollars per Australian dollar or US dollars per Canadian
dollars, as the case may be.
PERIOD-END AVERAGE
RATE (1) RATE (2) HIGH LOW
---------- -------- -------- --------
RECENT MONTHLY DATA
AUSTRALIAN DOLLAR/U.S. DOLLAR (3)
January 2002 (through January 4).... A$1.9253 A$1.9372 A$1.9436 A$1.9253
December 2001....................... 1.9543 1.9463 1.9814 1.9227
November 2001....................... 1.9220 1.9361 1.9701 1.9168
October 2001........................ 1.9881 1.9833 2.0313 1.9459
September 2001...................... 2.0218 1.9952 2.0657 1.9120
August 2001......................... 1.8950 1.9062 1.9596 1.8650
July 2001........................... 1.9685 1.9650 1.9810 1.9372
June 2001........................... 1.9608 1.9305 1.9755 1.8954
May 2001............................ 1.9732 1.9234 1.9732 1.8904
April 2001.......................... 1.9623 1.9936 2.0713 1.9312
March 2001.......................... 2.0488 1.9877 2.0488 1.8896
February 2001....................... 1.9055 1.8734 1.9183 1.8051
January 2001........................ 1.8248 1.8012 1.8409 1.7507
INTERIM PERIOD DATA
AUSTRALIAN DOLLAR/U.S. DOLLAR (3)
Nine Months ended September 30, 2001 A$2.0218 A$1.9272 A$2.0713 A$1.7507
ANNUAL DATA
AUSTRALIAN DOLLAR/U.S. DOLLAR (2)
2001................................ A$1.9543 A$1.9342 A$2.0713 A$1.7507
2000................................ 1.7986 1.7197 1.9562 1.4954
1999................................ 1.5244 1.5494 1.6184 1.4899
1998................................ 1.6332 1.5896 1.8018 1.4560
1997................................ 1.5349 1.3446 1.5408 1.2534
1996................................ 1.2588 1.2775 1.3665 1.2225
RECENT MONTHLY DATA
CANADIAN DOLLAR/U.S. DOLLAR
January 2002 (through January 4).... C$1.5977 C$1.5974 C$1.5977 C$1.5970
December 2001....................... 1.5925 1.5788 1.5990 1.5635
November 2001....................... 1.5717 1.5922 1.6023 1.5717
October 2001........................ 1.5905 1.5717 1.5905 1.5582
September 2001...................... 1.5797 1.5686 1.5797 1.5535
August 2001......................... 1.5478 1.5399 1.5490 1.5275
July 2001........................... 1.5310 1.5308 1.5450 1.5102
June 2001........................... 1.5175 1.5245 1.5347 1.5142
May 2001............................ 1.5461 1.5411 1.5541 1.5310
April 2001.......................... 1.5360 1.5578 1.5790 1.5360
March 2001.......................... 1.5784 1.5587 1.5784 1.5388
February 2001....................... 1.5320 1.5216 1.5399 1.4933
January 2001........................ 1.4995 1.5032 1.5162 1.4944
INTERIM PERIOD DATA
CANADIAN DOLLAR/U.S. DOLLAR
Nine Months ended September 30, 2001 C$1.5797 C$1.5378 C$1.5797 C$1.4933
ANNUAL DATA
CANADIAN DOLLAR/US DOLLARS (2)
2001................................ C$1.5925 C$1.5485 C$1.6023 C$1.4933
2000................................ 1.4995 1.4855 1.5600 1.4350
1999................................ 1.4440 1.4858 1.5302 1.4440
1998................................ 1.5375 1.4836 1.5770 1.4075
1997................................ 1.4288 1.3850 1.4398 1.3357
1996................................ 1.3697 1.3638 1.3822 1.3310
168
--------
(1) The period-end rate is the noon buying rate on the last business day of the
applicable period.
(2) The average of the noon buying rates for Australian dollars or Canadian
dollars, as the case may be, is calculated by taking the simple average of
the daily noon buying rates, as published by the Federal Reserve Bank of
New York, over the relevant period.
(3) Originally published by the Federal Reserve Bank of New York as U.S.
dollar/Australian dollar and presented above as Australian dollar/U.S.
dollar.
15.9 DISSENTER'S OR APPRAISAL RIGHTS
There are no dissenter's or appraisal rights available to Normandy
shareholders or Normandy ADS holders. This means that you will not have the
right to contest the fairness of the consideration that you will receive under
the offer.
In addition, we will become entitled to compulsorily acquire the remaining,
outstanding ordinary shares of Normandy (including shares represented by
Normandy ADSs) in accordance with the provisions of the Corporations Act for
the same consideration as under the offer in circumstances in which we have
become entitled to 90% or more of all ordinary shares of Normandy (including
shares represented by Normandy ADSs) under the offer. You may have a right to
object to that process. If we do not exercise that right of compulsory
acquisition (which we intend to do), then those Normandy shareholders whose
ordinary shares of Normandy (including shares represented by Normandy ADSs)
have not been acquired pursuant to the offer will have the right under the
Corporations Act to oblige us to acquire their ordinary shares of Normandy or
Normandy ADSs for the same consideration as under the offer.
15.10 ACCOUNTING TREATMENT
Under U.S. GAAP, we will account for the acquisition of Normandy and
Franco-Nevada using the purchase method of accounting.
15.11 MODIFICATIONS TO THE CORPORATIONS ACT
We have been granted various modifications to, and exemptions from, the
Corporations Act by ASIC, the effect of which is:
(a) to clarify that holders of ordinary shares of Normandy who are located
in the United States or Canada can only receive our common stock, not
Newmont CDIs, and the holders of ordinary shares of Normandy in
Australia or elsewhere can only receive Newmont CDIs under the offer;
(b) to clarify that "foreign holders" for the purposes of subsection 619(3)
does not include holders in the United States or Canada;
(c) to allow us to include, as a condition to the offer, that Newmont
shareholders approve the issue of our common stock under the offer;
(d) to allow the bidder's statement to incorporate by reference the
preliminary registration statement relating to the offer made to
Normandy shareholders who are located in the United States and Canada;
(e) to clarify that ADSs will be taken to be in the same class as ordinary
shares of Normandy which they represent;
(f) to allow us to include in the bidder's statement certain statements
based on announcements lodged by Stillwater Mining Company, Echo Bay
Mines Limited, Gold Fields of South Africa Limited, Barrick Gold
Corporation, Homestake Mining Company, Placer Dome Incorporated,
Franco-Nevada Mining Corporation and Aber Diamond Corporation with
certain securities exchanges without obtaining a specific consent from
those companies;
(g) to allow the offer document to be distributed to Normandy's U.S. and
Canadian shareholders and ADS holders by pre-paid ordinary post or
courier originating in the United States;
169
(h) to provide a procedure, further details of which are set out in the
bidder's statement, for the bidder's statement, the preliminary
registration statement and the registration statement to be approved by
us;
(i) to allow us at the time we lodge the bidder's statement to lodge with
ASIC the draft registration statement, provided that the bidder's
statement and the preliminary registration statement must be dated the
date they are lodged with the SEC;
(j) to require the bidder's statement to contain a summarized disclosure of
additional information which is contained in the preliminary
registration statement and to facilitate Normandy shareholders who
require either a copy of the preliminary registration statement or the
final registration statement to be provided a copy, free of charge,
during the offer period;
(k) to require us to lodge with ASIC the U.S. registration statement which
is declared effective by the SEC in relation to the offer of our common
stock to U.S. and Canadian shareholders of Normandy and to provide
disclosure to Normandy shareholders of any variations between that
document and the preliminary registration statement;
(l) to implement a procedure in relation to lodgement, service and dispatch
of the registration statement relating to the offer of our common stock
to U.S. and Canadian shareholders of Normandy at a different time from
the time when the bidder's statement is lodged with ASIC, served on
Normandy and dispatched to Normandy shareholders, other than those
located in the United States and Canada;
(m) to allow the offer under the bidder's statement to vary from the offer
made to U.S. and Canadian shareholders under the registration statement
in a number of respects; including in relation to the date of the offers
and the procedure for ADS holders to accept the offers; and
(n) to approve the appointment of JPMorgan Securities Australia Limited ACN
003 245 234 as the nominee for the purposes of section 619(3) of the
Corporations Act.
Copies of the ASIC instruments granting exemptions and modifications in
relation to the offer are available from ASIC and will be provided free of
charge by us to any Normandy shareholder who requests a copy during the offer
period.
15.12 STATEMENTS FROM FRANCO-NEVADA
On December 11, 2001, in a release to the TSE, the President and Co-Chief
Executive Officer of Franco-Nevada said, in relation to the offer to be made by
Newmont that:
"AS A SHAREHOLDER, DIRECTOR AND OFFICER OF FRANCO-NEVADA, I AM COMMITTED
TO THIS TRANSACTION. IT HAS THE FULL APPROVAL OF OUR BOARD AND OUR KEY
SHAREHOLDERS. WE HAVE COMPLETE CONFIDENCE THAT THE SHAREHOLDERS OF
FRANCO-NEVADA, WHO HAVE OVERWHELMINGLY ENDORSED THE OTHER INITIATIVES
PROPOSED BY THE FRANCO-NEVADA BOARD OVER THE PAST 18 YEARS, WILL SHOW
SIMILAR SUPPORT. BASED ON OUR CONVERSATIONS WITH SHAREHOLDERS OF NEWMONT,
NORMANDY AND FRANCO-NEVADA, WE BELIEVE THEIR SUPPORT OF THIS TRANSACTION IS
VERY SOLID."
In a press release dated January 3, 2002, the Chairman and Co-Chief
Executive Officer of Franco-Nevada said, in relation to Newmont's revised
offer, that:
"WE REMAIN FULLY COMMITTED TO THESE TRANSACTIONS AS WE BELIEVE THEY WILL
RESULT IN THE CREATION OF THE PREMIER GLOBAL GOLD COMPANY WITH SUPERIOR
SHARE PRICE APPRECIATION POTENTIAL. WE CONTINUE TO UNEQUIVOCALLY RECOMMEND
THE TRANSACTIONS TO FRANCO-NEVADA SHAREHOLDERS."
"AS THE LARGEST SHAREHOLDER OF NORMANDY (FRANCO-NEVADA OWNS 19.8 PERCENT
OF NORMANDY), WE HAVE REAL CONCERNS ABOUT THE RISKS INHERENT IN ANGLO-GOLD'S
ANNOUNCEMENT LAST WEEK. THOSE RISKS AND THE RELATED UNCERTAINTY OF THE VALUE
OF ANGLOGOLD WOULD CAUSE US TO BE VERY RELUCTANT HOLDERS OF ITS SHARES. AT
THE SAME TIME, WE DON'T SEE HOW THE MARKET FOR ANGLOGOLD SHARES, WHICH IS
VERY THIN, CAN SUPPORT THE DISPOSITION OF THOSE SHARES BY ARBITRAGEURS AND
OTHERS WHO SHARE OUR VIEWS."
170
15.13 FRANCO-NEVADA SHAREHOLDERS MEETING
Franco-Nevada has called a special meeting of Franco-Nevada shareholders, to
be held on January 30, 2002, for the purpose of voting on Newmont's acquisition
of Franco-Nevada. On December 27, 2001, Franco-Nevada dispatched its Management
Information Circular in relation to the special meeting.
15.14 TAKEOVER PANEL PROCEEDINGS
AngloGold made an application to the Takeovers Panel for certain orders in
relation to our proposed bid for Normandy, on the basis that we may give
Franco-Nevada and its shareholders benefits, which are not offered to other
Normandy shareholders, arising out of the agreements which are referred to in
section 14.
On December 12, 2001, the Takeovers Panel announced that it had declined
AngloGold's application for a declaration of unacceptable circumstance in
relation to our proposed bid for Normandy.
On December 13, 2001, AngloGold lodged an application for review of the
Takeover Panel's decision. As at the date of this offer document, the
application for review had not been determined.
15.15 DELTA ACQUISITION LLC APPROVAL OF BIDDER'S STATEMENT
Delta Acquisition LLC is a limited liability company organized in Delaware.
It is wholly owned by Delta Holdco Corp., which is a wholly owned subsidiary of
Newmont.
Unlike a company incorporated in Australia, Delta does not have directors.
Rather, Delta Holdco Corp. is its sole member and it has the power to manage
Delta's affairs.
Mr. Wayne Murdy, the President and Chief Executive Officer of Newmont, is
also the President and Chief Executive Officer of Delta Holdco Corp., and he
has delegated authority, in that capacity, to act on behalf of Delta Holdco
Corp. in managing the affairs of Delta Acquisition LLC.
Delta Holdco Corp. has also delegated the management of the affairs of Delta
Acquisition LLC to each of the following executives of Newmont: Mr. Bruce D.
Hansen, Senior Vice-President and Chief Financial Officer, Mr. Britt Banks,
Vice President, General Counsel and Secretary, Ms. Linda Wheeler,
Vice-President and Controller and Mr. Donald Karras, Vice-President, Tax.
No other person has authority to manage the affairs of Delta Acquisition LLC.
Each person mentioned above has been involved in the preparation of the
bidder's statement and the registration statement, which has been lodged with
the SEC, and they take responsibility for it.
The bidder's statement and the registration statement have been approved by
a unanimous resolution of:
. Mr. Murdy, with delegated authority to act on behalf of Delta Holdco
Corp.; and
. Messrs. Hansen, Banks and Karras and Ms. Wheeler with delegated
authority, as set out above.
Mr. Murdy has been authorized by Delta Holdco Corp. and Messrs, Hansen,
Banks and Karras and Ms. Wheeler to sign the bidder's statement on behalf of
Delta Acquisition LLC.
15.16 EXPIRATION DATE
No ordinary shares of Newmont or Newmont CDIs will be issued on the basis of
this offer document more than 13 months after the date of this offer document.
171
15.17 APPROVAL OF BIDDER'S STATEMENT
The bidder's statement was approved by a unanimous resolution of the
authorized officers of Delta Acquisition LLC.
15.18 DISCLOSURE OF FEES, BENEFITS AND INTERESTS
Aside from:
(a) the fees paid to Delta Acquisition LLC and our directors, described
below;
(b) the interest of Mr. Champion de Crespigny in the Pajingo Joint Venture
disclosed in section 14.5; and
(c) the indemnity each director and officer is given by Newmont and New
Newmont under their respective by-laws and certificates of incorporation
against any liability, costs and expenses incurred by the director or
officer in his capacity as director or officer of Newmont or New
Newmont, as the case may be, to the extent permitted by law.
No one has paid or agreed to pay any fees, or provided or agreed to provide
any benefit to:
(a) a director or proposed director of Delta Acquisition LLC or Newmont to
induce that person to become or to qualify as a director of Delta
Acquisition LLC or Newmont;
(b) a director or proposed director of Delta Acquisition LLC or Newmont for
services provided by that person in connection with:
(i) the formation or promotion of Delta Acquisition LLC or Newmont; or
(ii) the offer of Newmont CDIs under the offer.
Directors who are neither officers nor employees of Newmont or any of our
subsidiaries are entitled to receive US$25,000 per annum for serving as
directors. All directors are entitled to receive an attendance fee of US$1,000
per meeting of the board of directors. Each director who is neither an officer
nor an employee of Newmont or any of its subsidiaries is entitled to receive an
attendance fee of US$750 per meeting of a committee of which he is a member and
US$1,000 per meeting in the case of the Chairman of the committee.
In addition, pursuant to our 2000 Non-Employee Directors Stock Plan
directors who are neither officers nor employees of Newmont or any of our
subsidiaries receive the equivalent of US$25,000 of shares of our common stock
annually on the first business day following their election or re-election at
our annual meeting, unless the director elects not to receive such a stock
award.
If a person who is neither an officer nor employee of Newmont or any of our
subsidiaries becomes a director in any calendar year after the date of our
annual meeting held in that calendar year, that person will receive the
equivalent of US$25,000 of shares of our common stock on the first business day
following that person's election as a director of Newmont, unless that person
elects not to receive such a stock award.
Shares awarded under the Directors Stock Plan may not be sold, transferred,
pledged, assigned or otherwise encumbered or disposed of by the director until
the earliest of (i) the expiration of five years after the date of receipt of
those shares by the director, (ii) the date the director ceases to be a
director by reason of death or disability or (iii) the later of (a) the date
the director ceases to be a director for any reason other than death or
disability or (b) the expiration of six months after the date of receipt of
those shares by the director. However, a director may sell, transfer or assign
shares awarded under the Directors Stock Plan to, or instruct us to issue such
shares directly to, a member of the director's immediate family or a trust or
certain other entities solely for the benefit of, or owned by, the director or
any such immediate family members.
Each director who is neither an officer nor employee of Newmont or any of
our subsidiaries is entitled to elect to receive stock options under the
Directors Stock Plan in place of his or her annual cash retainer. A director
172
who makes such an election receives options shortly following the regular May
and November board of directors meetings to purchase a number of shares of our
common stock determined by dividing US$12,500 by the fair market value of our
common stock on the option grant date and multiplying the result by three. Each
such director may also elect to receive stock options under the Directors Stock
Plan in place of the annual stock award described in the preceding paragraph. A
director who makes such an election receives options shortly following the
regular board of directors meeting occurring in May to purchase three times the
number of shares of our common stock that would have comprised the director's
stock award if no such election had been made. The options described in this
paragraph have an exercise price equal to the fair market value of the our
common stock on the grant date of the option. No options were granted in 2000.
In addition to the standard compensation arrangement described above, Robert
J. Miller also received compensation pursuant to a consulting agreement entered
into between Newmont International Services Limited, a wholly owned subsidiary
of Newmont ("Newmont International"), and Mr. Miller. The consulting agreement
provides that Mr. Miller advises Newmont International on federal governmental
affairs issues relating to Newmont International's interests and mining
operations (and those of its affiliates) within the United States and consult
with members of Congress, various governmental agencies and the Administration
as requested by Newmont International from time to time. For these services,
Mr. Miller received a fee of US$120,000 in 2000.
Our retirement policy for directors provides that no director may stand for
re-election to the board of directors after reaching age 72. All employee
directors retire from the board of directors when they retire from employment
with Newmont. The board of directors at its discretion may, in unusual
circumstances, and for a limited period, ask a member of the board of directors
to stand for re-election after the prescribed retirement date. On retirement
from the board of directors at any time after attaining age 65, a director who
was serving on the board of directors on 27 January 1999 and who is not
entitled to a pension under our Pension Plan (i.e., a director who has not been
an officer or employee of Newmont or any of our subsidiaries) and who has
served for at least ten consecutive years as a director of Newmont is entitled
to be paid an annual sum of US$25,000 and an amount equal to the yearly fee
paid to him in his capacity as a director during his final year of service on
the board of directors of Newmont, in each case, for life.
No person has paid or agreed to pay any amount and no person has given or
agreed to give any benefit to any person named in this offer document as
performing a function in a professional, advisory or other capacity in
connection with the preparation or distribution of this offer document, for
services provided by that person in connection with the formation or promotion
of Delta Acquisition LLC or the offer of Newmont CDIs other than as set out
below.
15.19 SUPPLEMENTARY STATEMENT
We will issue a supplementary statement if we become aware before the date
the Newmont CDIs are quoted, that:
(a) a material statement in this offer document is false or misleading;
(b) there is a material omission from this offer document;
(c) there has been a significant change affecting a matter in this offer
document; or
(d) a significant new matter has arisen and it would have been required to
be included in this offer document had it arisen before the date of this
offer document,
that is material to a holder of Normandy shares or Normandy ADSs.
15.20 CAPITAL RAISING
We have not raised any capital for the three months before the date of this
offer document and will not need to raise any capital for 3 months after the
date of this offer document.
173
15.21 OTHER MATERIAL INFORMATION
There is no other information that:
(a) is material to the making of a decision by a holder of Normandy shares
whether to accept an offer; and
(b) is known to Delta Acquisition LLC; and
(c) does not relate to the value of Newmont's common stock,
other than:
(i) as set out or referred to elsewhere in this offer document; or
(ii) as set out or referred to below; or
(iii) information which it would be unreasonable to require Delta
Acquisition LLC to disclose because the information has previously
been disclosed to the holders of Normandy shares.
15.22 EXPERTS
The audited financial statements of Newmont Mining Corporation as of
December 31, 2000 and 1999 and for each of the three years ended December 31,
2000 as contained in Annex A of this offer document and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
The audited financial statements of Franco-Nevada Mining Corporation Limited
as of March 31, 2001 and 2000 and for each of the three years ended March 31,
2001 as contained in Annex C of this offer document and elsewhere in the
registration statement have been audited by PricewaterhouseCoopers LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in auditing and accounting.
174
ANNEX A--NEWMONT FINANCIAL INFORMATION
This Annex A contains:
(i) Newmont Form 8-K, filed on May 9, 2001
(ii) Newmont Form 10-Q for the Quarterly Period ended September 30, 2001,
filed on October 29, 2001
A-1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
MAY 9, 2001
NEWMONT MINING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 1-1153 13-2526632
(STATE OR OTHER JURISDICTION) (COMMISSION FILE NO.) (I.R.S. EMPLOYER OF
OF INCORPORATION) 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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
A-2
ITEM 5. OTHER EVENTS
Newmont Mining Corporation ("Newmont") is filing a copy of its restated
consolidated financial statements for the years ended December 31, 2000, 1999
and 1998, together with the report thereon of Arthur Andersen LLP and with the
related "Management's Discussion and Analysis of Consolidated Results of
Operations and Financial Condition". The restatement gives effect to the merger
between Newmont and Battle Mountain Gold Company, which occurred on January 10,
2001 and which was accounted for as a pooling of interests.
This information was included, supplementally, in Newmont's Annual Report on
Form 10-K for the year ended December 31, 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following provides information that management believes is relevant to
an assessment and understanding of the consolidated results of operations and
financial condition of Newmont and its subsidiaries (collectively, Newmont).
The discussion should be read in conjunction with the consolidated financial
statements and accompanying Notes below. The consolidated financial statements
give effect to the merger with Battle Mountain Gold Company described in Note 1
that is being accounted for as a pooling of interests.
SUMMARY
Newmont recorded a net loss to common shares before the cumulative effect of
a change in accounting principle of $89.8 million ($0.47 per share) for the
year ended December 31, 2000, compared with net losses of $102.0 million ($0.53
per share) and $608.6 million ($3.32 per share) for 1999 and 1998,
respectively. After accounting changes for revenue recognition in 2000 and for
start-up costs in 1998, net losses to common shares were $102.3 million ($0.53
per share) and $641.5 million ($3.50 per share), respectively, with the
cumulative effect of such changes totaling $12.6 million ($0.06 per share) and
$32.9 million ($0.18 per share), respectively, net of tax and minority interest.
Results for 2000 included after-tax noncash charges of $44.4 million ($0.23
per share) for asset write-downs primarily on Battle Mountain properties, $27.4
million ($0.14 per share) for expenses associated with an acquisition
settlement, $23.9 million ($0.12 per share) for losses on Lihir securities,
$12.4 million ($0.06 per share) for amortization of put option premiums and
$4.0 million ($0.02 per share) for foreign currency exchange losses. Also
included were after-tax charges of $6.9 million ($0.04 per share) for merger
expenses and a noncash unrealized mark-to-market gain on call option contracts
of $17.4 million ($0.09 per share).
For 1999, results included after-tax noncash charges for impairment of the
equity investment in Lihir of $46.8 million ($0.24 per share, also net of
minority interest), for asset write-downs of $38.3 million ($0.20 per share),
for an unrealized mark-to-market loss on call options of $29.1 million ($0.15
per share), for amortization of put option premiums of $12.0 million ($0.06 per
share), partially offset by gains from the sale of exploration properties of
$13.6 million ($0.07 per share) and by foreign currency exchange gains of $5.3
million ($0.03 per share).
Results in 1998 included after-tax noncash charges of $529.6 million ($2.89
per share) for the write-down of assets, $90.0 million ($0.49 per share) for
impairment of the equity investment in Lihir and $8.1 million ($0.04) for
foreign currency exchange losses.
As a largely unhedged company, Newmont's realized gold price of $281, $284
and $307 per equity ounce sold in 2000, 1999 and 1998, respectively, closely
tracked the declining spot market price. In this environment, Newmont's focus
has been to maximize cash flow through cost efficiencies and disciplined
capital spending to achieve debt reduction. Newmont's Gold Medal Performance, a
company-wide employee-driven effort to systematically reduce costs and improve
productivity and cash flow by implementing best practices, drives this focus
and in 2001 will be extended to each Battle Mountain operation. Since 1998,
total cash costs of production were reduced $9 to $170 an ounce and total
production costs declined $22 to $229 an ounce. Cash flow from
A-3
operating activities increased to $567.8 million in 2000, from $451.2 million
in each of 1999 and 1998. Long-term debt was reduced to $1,199.8 million at
December 31, 2000, from $1,246.8 million at December 31, 1999.
Gold sold in 2000 increased to 5.73 million equity ounces from 4.95 million
equity ounces in each of 1999 and 1998. Production in 2001 is expected to be
approximately 5.4 million equity ounces at a total cash cost of approximately
$180 per ounce.
Gold reserves at December 31, 2000 totaled 66.3 million contained equity
ounces compared with 66.5 million ounces at December 31, 1999. Reserve
calculations for 2000 were based on a long-term price assumption of $300 per
ounce versus $325 in 1999, with the exception of the Phoenix development
project in Nevada where reserves were calculated using $250 per ounce. A
long-term gold price of $275 per ounce could lower reserves approximately 7%,
while a $325 per ounce price could increase reserves approximately 4%.
In 2000, copper production was 293 million equity pounds at Batu Hijau. Cash
costs of production in 2000 were $0.57 per equity pound, after gold sales
credits, and the average realized price was $0.82 per pound. Construction of
the mine was completed during the fourth quarter of 1999, with production of
27.5 million pounds in December 1999. Copper production in 2001 is expected to
be between 300 million and 340 million equity pounds. With proven and probable
reserves of 10 billion contained pounds of copper (5.6 billion equity pounds)
and 11.7 million contained ounces of gold (6.6 million equity ounces), Batu
Hijau has a projected mine life in excess of 20 years.
BATTLE MOUNTAIN MERGER
On January 10, 2001, Newmont completed a merger with Battle Mountain Gold
Company pursuant to an agreement and plan of merger, dated June 21, 2000, under
which each share of common stock of Battle Mountain and each exchangeable share
of Battle Mountain Canada Ltd. (a wholly-owned subsidiary of Battle Mountain)
was converted into the right to receive 0.105 share of NMC, or approximately
24.1 million shares. Newmont also exchanged 2.3 million shares of newly issued
$3.25 convertible preferred stock for all outstanding shares of Battle Mountain
$3.25 convertible preferred stock. The merger is being accounted for as a
pooling of interests, and as such, consolidated financial statements will
include Battle Mountain's financial data as if Battle Mountain had always been
part of Newmont.
Battle Mountain has operations in Canada and Bolivia, the Phoenix project in
Nevada, an interest in a joint venture operation in Australia and an investment
in the Lihir mine in Papua New Guinea. Initial synergies of $20 million to $25
million annually, pre-tax, are expected from consolidation of administrative
and exploration staffs, purchasing economies and application of Gold Medal
Performance. The Phoenix project adds to Newmont's domestic reserve base and
will provide an opportunity for additional synergies in future years from
utilization of existing nearby processing facilities.
MARKET CONDITIONS AND RISKS
METAL PRICE
Changes in the market price of gold significantly affect Newmont's
profitability and cash flow. Gold prices can fluctuate widely due to numerous
factors, such as demand; forward selling by producers; central bank sales,
purchases and lending; investor sentiment and production levels. Based on
estimates of 2001 production and expenses, a $10-per-ounce change in the gold
price would result in an increase or decrease of approximately $50 million in
cash flow from operations and approximately $30 million (about $0.15 per share)
in net income excluding unrealized mark-to-market gains or losses on call
option contracts. Changes in the market price of copper also affect Newmont's
profitability and cash flow from its equity investment in Batu Hijau. Copper is
traded on established international exchanges and copper prices generally
reflect market supply and demand, but can also be influenced by speculative
trading in the commodity or by currency exchange rates. Based on estimates of
2001 production and expenses, a $0.10-per-pound change in the copper price
would result in an increase or decrease in net income of approximately $20
million (about $0.10 per share).
A-4
Newmont has generally sold its gold production at market prices; however, it
had forward sales contracts (1) for 125 thousand ounces in each of 2000, 1999
and 1998 from its Minahasa mine in Indonesia at an average price of $454 per
ounce and (2) for 34 thousand ounces in 2000 from its Golden Giant operations
at an average price of $316 per ounce.
Following a decline in spot market prices to $253 per ounce in July 1999,
Newmont entered into two put and call option contracts to provide a measure of
price protection. As described in Note 10, Newmont purchased near-term put
option contracts for 2.85 million ounces of gold, with a strike price of $270
per ounce. This purchase was paid for by selling call option contracts for 2.35
million ounces, with strike prices between $350 and $392 per ounce, expiring in
2004 through 2009. Gold subject to call option contracts represents
approximately 4% of proven and probable gold reserves at December 31, 2000. The
call options are marked to market at each quarter-end and the resulting gains
or losses may fluctuate significantly, primarily depending upon gold market
prices and volatility.
Newmont is not required to place collateral with respect to its commodity
instruments and there are no margin calls associated with such contracts.
Credit risk is minimized by dealing only with major financial
institutions/counterparties.
At December 31, 2000 the following commodity instruments were outstanding:
OUNCES FAIR VALUE
--------- -------------
(IN MILLIONS)
Combination, matched put and call options, expiring 2001-2004 285,819 $ 2.7
Flat forward sales contracts, 2001-2004...................... 95,319 2.0
Written call option contracts (liability), expiring 2004-2009 2,350,000 (55.6)
A $1.00 increase in the gold price would result in a $0.59 and $0.98 per
ounce decrease in the fair value of the combination options contracts and flat
forward contracts, respectively, and a $0.42 per ounce increase in the fair
value of the liability associated with call option contracts as of December 31,
2000, assuming all other factors are constant.
FOREIGN CURRENCY
In addition to the U.S., Newmont operates in Canada, Peru, Bolivia,
Uzbekistan and Indonesia and has an interest in a joint venture in Australia.
Gold produced at these operations is sold in the international markets for U.S.
dollars. The cost and debt structures at these operations are primarily U.S.
dollar-denominated, except for Canadian and Australian operations where such
structures are primarily denominated in local currencies. To the extent there
are fluctuations in local currency exchange rates against the U.S. dollar, the
devaluation of a local currency is generally economically neutral or beneficial
to the operation since local salaries and supply contracts will decrease
against the U.S. dollar revenue stream. Foreign currency exchange rate losses
related to Canadian and Australian operations were $6.1 million and $12.4
million in 2000 and 1998, respectively, and gains were $8.2 million in 1999.
Indonesia has experienced significant fluctuations in its currency, the
rupiah. The functional currency for Newmont's Indonesian projects is the U.S.
dollar; however, certain receivables, primarily refunds of Value Added Tax, are
rupiah-denominated. During 2000, 1999 and 1998, $3.9 million, $2.6 million and
$3.6 million, respectively, were expensed for exchange rate adjustments.
INTEREST RATES
At December 31, 2000, Newmont's long-term debt of $1,199.8 million included
$296.1 million of variable-rate debt with an average interest rate of 7.1%, and
fixed-rate debt of $903.7 million, with an average interest rate of 7.4% and an
estimated fair value of $907.5 million. Newmont's public debt has an
investment-grade credit rating from both Moody's Investors Service (Baa3) and
Standard & Poor's Ratings Services (BBB).
A-5
RESULTS OF OPERATIONS
TOTAL CASH COST PER
EQUITY OZS. SOLD (000) EQUITY OZ.
------------------------ -------------------
2000 1999 1998 2000 1999 1998
------- ------- ------- ---- ---- ----
North American operations:
Nevada operations................... 3,047.9 2,498.7 2,806.4 $203 $211 $209
Mesquite, California................ 130.3 164.6 154.0 221 167 176
La Herradura, Mexico................ 50.5 40.2 12.9 131 159 115
Golden Giant, Canada................ 406.6 356.0 365.9 151 145 122
Holloway, Canada.................... 83.4 92.7 80.3 204 198 216
South American operations:
Yanacocha, Peru..................... 901.2 850.3 685.9 88 103 95
Kori Kollo, Bolivia................. 247.7 256.1 295.3 204 190 165
Zarafshan-Newmont, Uzbekistan.......... 251.4 271.5 187.3 129 161 207
Vera/Nancy, Australia.................. 112.1 65.9 47.2 98 124 136
Minahasa, Indonesia.................... 354.2 343.9 261.0 133 103 127
Batu Hijau, Indonesia.................. 178.4 6.3 n/a n/a n/a n/a
Other.................................. -- -- 58.1 n/a n/a 253
Less prepaid forward ozs. Delivered. (35.9) -- --
------- ------- -------
Total/Weighted average.......... 5,727.8 4,946.2 4,954.3 $170 $173 $179
======= ======= =======
Total cash costs include charges for mining ore and waste associated with
current period gold production, processing ore through milling and leaching
facilities, production taxes, royalties and other cash costs.
NORTH AMERICAN OPERATIONS
Newmont's Nevada operations (along the Carlin Trend near Elko and in the
Winnemucca region, where Twin Creeks and the Lone Tree Complex are located)
include production from nine open-pit and four underground mines. Oxide ores
are processed by milling or heap leaching, depending upon ore grade. The Carlin
roaster and Winnemucca region autoclaves process higher-grade refractory ores.
The Lone Tree flotation plant processes lower-grade refractory ores. A
developed linear program is utilized to determine the best mix of ores for each
processing plant to maximize recoveries and economic returns.
Nevada production of 3.0 million ounces in 2000 was 22% higher than in 1999,
reflecting one million more ore tons from its Deep Post open pit mine.
Approximately 200 million tons of material were mined from surface open pits in
2000, down 10% and 27% from 1999 and 1998, respectively. Refractory ore
treatment facilities, with higher processing costs than oxide ore mills,
generated 68% of Nevada's production in 2000, increasing from 54% and 42% in
1999 and 1998, respectively. Nonetheless, total cash costs decreased to $203
per ounce in 2000, primarily from processing higher-grade Deep Post ore. With
the depletion of the Deep Post surface deposit, production in 2001 is estimated
between 2.5 million and 2.7 million ounces. As a result of lower production and
higher energy costs, and with gold from refractory ores comprising
approximately 70% of Nevada's 2001 production, total cash costs per ounce are
expected to increase to approximately $225 per ounce.
Production from the Deep Post underground mine is expected to commence in
the second quarter of 2001. While permitting and metallurgical work will
continue on the Phoenix project, no capital will be allocated for mine
construction during 2001 under the current market gold price environment.
Gold production at the Mesquite heap-leach mine in southern California
decreased 21% to 130.3 thousand ounces in 2000 with 8% less ore placed on the
leach pads and lower recovery rates. Total cash costs per ounce increased 32%
to $221 per ounce. Production in 2001, the final year of mining, is expected to
decline to approximately 80 thousand ounces, with total cash costs of
approximately $200 per ounce. As discussed below, $14.8 million of Mesquite's
assets were written off in 2000 as a result of continued low gold prices.
At La Herradura, a 44%-owned joint venture with Minera Penoles, S.A. de
C.V., the operator of the heap-leach operation in Sonora, Mexico, Newmont's
equity share of 2000 production totaled 50.5 thousand ounces at a
A-6
total cash cost of $131 per ounce. Production in 2001 is expected at
approximately 60 thousand equity ounces at a total cash cost of $160 per ounce.
Production sold from the Golden Giant underground mine in Ontario, Canada
was 407 thousand ounces at a total cash cost of $151 per ounce compared with
356 thousand at $145 per ounce and 366 thousand ounces at $122 per ounce in
1999 and 1998, respectively. The mine has experienced lower average ore grades
over the past three years and in 2001, production is expected to be
approximately 300 thousand ounces at $180 per ounce.
The Holloway underground mine in Ontario, Canada is an 84.65%-owned joint
venture with Teddy Bear Valley Mines. In 2000, sales totaled 83 thousand equity
ounces at a total cash cost of $204 per ounce and is expected to increase to
approximately 110 thousand equity ounces at $215 per ounce in 2001.
OVERSEAS OPERATIONS
Minera Yanacocha in Peru, a 51.35%-owned joint venture with Compania de
Minas Buenaventura, S.A.A., includes four open pit mines, three leach pads and
two gold recovery plants. In 2000, Yanacocha achieved record production of 1.76
million ounces (901 thousand equity ounces), a 6% increase from 1999 and 31%
more than in 1998. Total cash costs of $88 per ounce, are comparatively low
because of low waste-to-ore ratios and porous ore that yields high gold
recoveries without crushing prior to heap leaching.
Production at Yanacocha has grown annually through the discovery and
development of reserves and increased mining and processing capacity. During
2000, approximately 132 million tons of material were mined (83 million ore
tons and 49 million waste tons), a 25% increase from 1999 and 89% more tonnage
than in 1998. In late 1999, Yanacocha terminated its contract mining agreement
and improved productivity and efficiency by conducting mine operations with its
own employees. In 2001, production is expected to exceed 2 million ounces (1
million equity ounces) with the start-up of the La Quinua mine. Total cash
costs are expected to increase to approximately $110 per ounce as processing of
La Quinua ore will require crushing and agglomeration before heap leaching.
As described in Note 15, Newmont acquired an additional 13.35% interest in
Minera Yanacocha in 1997. The acquisition was contested by a former partner,
but resolved in Newmont's favor in 1998 with a decision of the Peruvian Supreme
Court. In spite of this final decision, the former partner filed with the
International Centre for Settlement of Investment Disputes a request for
arbitration against the Republic of Peru, alleging that the Peruvian courts had
wrongfully deprived it of its shares in Yanacocha. In late 2000, this
long-standing dispute was settled among all parties. Newmont issued 2.6 million
shares of NMC common stock, with a value of $40 million, in conjunction with
the settlement and all pending litigation and arbitration claims, including
claims against the government of Peru, were dismissed. Resolution of this
matter permitted a unitization of regional properties into Minera Yanacocha in
late 2000. These properties were formerly held separately by Newmont and
Buenaventura. The unitization will permit a more synergistic approach to
development and operation of all properties in the Yanacocha region.
The Kori Kollo open-pit mine in Bolivia is held by Empresa Minera Inti Raymi
S.A., in which Newmont has an 88% interest and Zeland Mines, S.A. has a 12%
interest. Production sold in 2000 was 248 thousand equity ounces, down from 256
thousand and 295 thousand ounces in 1999 and 1998, respectively, reflecting
lower average ore grades. Total cash costs increased to $204 per ounce. For
2001, production is expected at approximately 245 thousand equity ounces with
cash costs of $230 per ounce.
The Zarafshan-Newmont Joint Venture, in the Central Asian Republic of
Uzbekistan, is a 50/50 joint venture between Newmont and two Uzbekistan
governmental entities. Zarafshan-Newmont produces gold by crushing and heap
leaching low-grade oxide ore from existing stockpiles at the government-owned
Muruntau mine. Gold production in 2000 totaled 502.8 thousand ounces (251.4
thousand equity ounces) compared with 542.9 thousand ounces (271.5 thousand
equity ounces) in 1999 and 374.6 thousand ounces (187.3 thousand equity ounces)
in 1998. Total cash costs per ounce decreased to $129 per ounce from $161 in
1999 and from $207 in 1998. Production in 2001 is expected to be approximately
400 thousand ounces (200 thousand equity
A-7
ounces), reflecting varying grades associated with ore placements throughout
the year and lower recoveries, with total cash costs increasing to
approximately $160 per ounce primarily as a result of lower production. Leach
pad expansion construction is underway following the signing of an amended ore
supply agreement under which the joint venture will purchase 150 million metric
tons of ore from the Uzbek government at an average grade of 1.44 grams per
metric ton. This agreement extends the operation's life to at least 2013.
At Vera/Nancy, a 50%-owned joint venture with Normandy Mining Limited, the
operator of the underground mine in Queensland, Australia, Newmont's equity
share of 2000 production totaled 112 thousand ounces at a total cash cost of
$98 per ounce. Increased production from 1999 and 1998 resulted from completion
of a mill expansion project in 1999. Production is 2001 is expected at
approximately 125 thousand equity ounces with cash costs of $100 per ounce.
At Minahasa, in Indonesia, where Newmont has an 80% interest but receives
100% of the gold production until recouping the bulk of its investment
including interest, production rose to 354.2 thousand ounces. Higher total cash
costs of $133 per ounce primarily reflected expenses for community development
activities and from plant disruptions caused by small protestor group
demonstrations for intermittent periods during the second and third quarters of
2000. Production in 2001 is expected at approximately 320 thousand ounces, with
total cash costs of approximately $135 per ounce.
The Batu Hijau copper/gold mine in Indonesia completed its first full year
of production following start-up in the fourth quarter of 1999. Newmont holds
an indirect 45% equity interest in the mine, but receives 56.25% of production
until recouping the bulk of its investment. Production in 2000 totaled 520.8
million pounds of copper (292.9 million equity pounds) and 320.1 thousand
ounces of gold (180.1 thousand equity ounces). In 1999, production totaled 52.6
million pounds of copper (29.6 million equity pounds) and 28.7 thousand ounces
of gold (16.1 thousand equity ounces). Concentrate sales in 2000 included 294.2
million equity pounds of copper and 178.4 thousand equity ounces of gold. In
1999, sales totaled 10.2 million equity pounds of copper and 6.3 thousand
equity ounces of gold. Total cash costs, after gold sales credits, of $0.57 per
pound in 2000 compared to $0.82 per pound in 1999. Production in 2001 is
expected at between 550 million to 600 million pounds of copper (300 million to
340 million equity pounds) and between 400 thousand and 440 thousand ounces of
gold (225 thousand to 250 thousand equity ounces). Total cash production costs
are expected to be approximately $0.45 per pound, after gold sales credits.
FINANCIAL RESULTS
Consolidated sales include 100% of Yanacocha and Kori Kollo production and
Newmont's ownership share of production elsewhere, except for Batu Hijau, which
is accounted for as an equity investment. Variances in sales revenue are
illustrated in the following table:
2000 1999 1998
-------- -------- --------
Consolidated sales (in millions)....... $1,809.5 $1,627.1 $1,730.5
Consolidated production ozs. sold (000) 6,437.0 5,780.3 5,644.4
Average price received per ounce....... $ 281 $ 284 $ 307
Average market price received per ounce $ 279 $ 280 $ 294
2000 VS 1999 1999 VS 1998
------------ ------------
Increase (decrease) in consolidated sales due to (in millions):
Consolidated production..................................... $191.2 $ 33.6
Average gold price received................................. (8.8) (137.0)
------ -------
Total................................................... $182.4 $(103.4)
====== =======
Realized gold prices higher than average market gold prices resulted from
sales under commodity hedging instruments of 3% of equity production in 2000,
5% in 1999 and 15% in 1998.
Dividends, interest and other for 2000 included interest income of $10.5
million, down from $15.4 million and $18.5 million in 1999 and 1998,
respectively, reflecting lower interest rates and cash balances during the
A-8
year. Also included were a foreign currency exchange loss of $6.1 million, a
gain of $8.2 million and a loss of $12.4 million in 2000, 1999 and 1998,
respectively. In 1999, $21 million was included for the sale of two exploration
properties and in 1998, $8.3 million was included for recoveries from business
interruption insurance related to processing facilities in Nevada.
Costs applicable to sales include total cash costs and provisions for
estimated final reclamation expenses related to consolidated production. The
increase in costs, primarily related to higher production levels at Nevada, was
partially offset by cost-reduction efforts at all locations.
2000 1999 1998
-------- ------ ------
Costs applicable to sales (in millions):
North American operations:
Nevada operations................ $ 625.6 $534.1 $599.9
Mesquite......................... 29.4 27.5 27.9
La Herradura..................... 6.8 6.4 1.5
Golden Giant..................... 62.1 55.7 46.2
Holloway......................... 19.5 19.7 17.2
South American operations:
Yanacocha........................ 160.4 183.8 136.5
Kori Kollo....................... 67.1 68.1 71.9
Vera/Nancy........................... 11.6 8.4 6.7
Zarafshan-Newmont.................... 33.0 44.1 39.0
Minahasa............................. 53.3 36.1 33.8
Other................................ (1.6) (2.2) 7.6
-------- ------ ------
Total......................... $1,067.2 $981.7 $988.2
======== ====== ======
Certain mining costs associated with deposits that have diverse grade and
waste-to-ore ratios over the mine life are capitalized. In 2000, 1999 and 1998,
such costs were capitalized for certain deposits at the Nevada operations ($25
million in both 2000 and 1999 and $29.5 million in 1998) and at Minahasa ($3.6
million in 1998). These costs are charged to operating expenses as the related
gold is sold. Reduced mining rates led to lower capitalized mining costs in
1999 and 2000. During 2000, all previously capitalized mining costs associated
with the mined-out Deep Post surface deposit were fully amortized.
Depreciation, depletion and amortization increased in 2000 primarily as a
result of increased gold production in Nevada and Yanacocha. The decrease in
1999 primarily resulted from the 1998 asset write-down described below. In
2001, such expense is expected to be approximately $330 million.
2000 1999 1998
------ ------ ------
Depreciation, depletion and amortization (in millions):
North American operations:
Nevada operations............................... $160.6 $123.8 $174.0
Mesquite........................................ 9.9 7.0 19.1
La Herradura.................................... 3.2 2.0 0.6
Golden Giant.................................... 26.5 23.2 24.1
Holloway........................................ 10.9 12.2 9.0
South American operations:
Yanacocha....................................... 73.1 66.8 59.6
Kori Kollo...................................... 24.0 25.6 40.8
Vera/Nancy.......................................... 4.4 2.8 1.5
Zarafshan-Newmont................................... 13.4 11.2 11.3
Minahasa............................................ 25.0 23.0 20.1
Other............................................... 8.4 6.2 8.6
------ ------ ------
Total........................................ $359.5 $303.8 $368.7
====== ====== ======
A-9
Exploration and research expenses in 2000 were $77.4 million, compared with
$74.2 million in 1999 and $93.1 million in 1998. In 2001, these expenses are
targeted at approximately $65 million. However, such expenses will be
re-evaluated throughout 2001 depending on gold market prices and opportunities.
Interest expense, net of amounts capitalized was $94.6 million, $77.7
million and $96.6 million in 2000, 1999 and 1998, respectively. Net interest
expense in 2000 increased because of lower capitalized interest for Newmont's
investment in Batu Hijau. In 2001, interest expense is expected to increase
about 6%.
Expenses for acquisition settlement of $42.2 million in 2000 related to the
resolution of a dispute regarding Newmont's purchase of an additional 13.35%
interest in Minera Yanacocha as described in Note 15 and in the "Overseas
Operations" section above.
Write-down of assets in 2000 of $58.4 million pre-tax related to Holloway
($30.8 million), Mesquite ($14.8 million), Kori Kollo ($5.6 million), the
Mezcala property in Mexico ($6.5 million) and to inventory at the Battle
Mountain Complex ($0.7 million). As described in Note 16, asset impairments
represent carrying value in excess of fair value, with fair value determined
using discounted future cash flow analyses. Such cash flows are based on
estimated recoverable ounces, future production and capital costs and gold
price assumptions. For 2000, gold price assumptions were $285 per ounce in 2001
and $300 per ounce thereafter. The Holloway write-down reduced fixed assets by
$30.8 million. The Mesquite write-down reduced leach pad inventory by $9.7
million, capitalized mining by $1.4 million and fixed assets by $3.7 million.
The Kori Kollo write-down reduced inventory by $4.9 million and fixed assets by
$0.7 million. The write-downs had no impact on the scope of the these
operations and will reduce future pre-tax Costs applicable to sales by $16.0
million and Depreciation, depletion and amortization by $35.2 million based on
remaining production as of December 31, 2000, with no impact on future cash
flows. The acquisition cost of the Mezcala property was written off as no
future cash flows from the property were anticipated as of December 31, 2000.
In 1999, Battle Mountain's Crown Jewel project in Washington was written-off
($35.9 million) and Nevada stockpile inventories were written down ($3.5
million). The Crown Jewel write-down related to mine development costs and
represented the remaining carrying value as a result of permitting
uncertainties arising from a January 2000 decision from the Washington
Pollution Control Hearings Board that reversed its water rights permits and
vacated its Clean Water Act certification.
In 1998, the asset write-down of $719.8 million ($529.6 million, net of tax)
was based on average gold price estimates of $300 per ounce in 1999 and 2000,
$325 in 2001, and $350 thereafter. The 1998 write down related to Property,
plant and mine development ($625.0 million), Inventories ($80.0 million) and
Other long-term assets ($14.8 million). The write-down included $587.6 million
for Nevada operations, $49.9 million for Kori Kollo, $40.3 million for Crown
Jewel, $13.4 million for acquisition costs related to certain exploration
properties, $10.8 million for Reona at the Battle Mountain Complex in Nevada
and $17.8 million for other investments (including $7.2 million at Mesquite).
The 1998 write-down had no impact on the scope of ongoing operations and
reduced future pre-tax Costs applicable to sales by $185 million and
Depreciation, depletion and amortization by approximately $520 million based on
remaining production as of December 31, 1998, with no impact on future cash
flows.
Other expenses in 2000, 1999 and 1998 included $12.3 million, $7.9 million
and $9.5 million, respectively, for environmental obligations associated with
former mining activities. The year 2000 also included $13.2 million to increase
the remediation liability for San Luis, Colorado and $10.0 million for costs
associated with a mercury spill at Yanacocha, both described below. In 1999,
$9.5 million was included for San Luis and $5.4 million for costs associated
with terminating the contract mining agreement at Yanacocha. In the first
quarter of 2001, merger and restructuring expenses, including transaction
costs, exploration office closures and overall staff reductions, are expected
to total approximately $50 million pre-tax.
Loss on marketable securities of Lihir reflected a noncash write down of
$23.9 million as of December 31, 2000, resulting from an other than temporary
decline in market value based on the length of time and the extent to which
such value had been less than cost basis. As described in Note 1, Lihir Gold
operates a gold mine in Papua New Guinea and prior to 2000 the investment was
accounted for on an equity basis.
A-10
A noncash Unrealized mark-to-market gain on call options in 2000 of $26.8
million ($17.4 million, net of tax) and loss in 1999 of $44.8 million ($29.1
million, net of tax) reflected the change in fair value of the contracts as of
the end of each period. A decrease in fair value represents an unrealized loss
to the counterparty holding these contracts and a corresponding unrealized gain
to Newmont. The change in fair value primarily resulted from volatility in the
gold spot market during the respective periods. Over the life of the contracts,
these net gains or losses will be restored to income.
Income tax expense of $1.2 million in 2000, with an effective tax rate of
6%, included benefits of tax depletion and a reduction in deferred tax
liabilities associated with undistributed earnings of foreign subsidiaries,
partially offset by an increase in the valuation allowance related to deferred
tax assets. In 1999, income tax expense was $21.8 million, with an effective
tax rate of 37%. The $167.0 million income tax benefit in 1998 was primarily
attributable to the asset write-down.
Equity loss and impairment of affiliates included $9.9 million, $10.7
million and $9.2 related to start-up losses at Batu Hijau in 2000, 1999 and
1998, respectively, which commenced production in the fourth quarter of 1999.
Also included were impairments for the equity investment in Lihir Gold of $76.2
million and $90.0 million in 1999 and 1998, respectively.
Effective January 1, 2000, Newmont changed its method of accounting, in
accordance with the U.S. Securities and Exchange Commission Staff Accounting
Bulletin No. 101, to recognize revenue when third-party refined gold is
delivered to the customer rather than upon the completion of the production
process, or when gold was poured into dore at the mine. As discussed in Note
19, the cumulative effect of the accounting change was a $12.6 million charge
to net income, net of tax and minority interest, and included $3.2 million for
Minahasa, $2.2 million for Yanacocha, $1.6 million for Zarafshan-Newmont and
$1.4 million for Nevada, $3.9 million for Canada, $0.2 million for Kori Kollo
and $0.1 million for Vera/Nancy.
Effective January 1, 1998, Newmont adopted the American Institute of
Certified Public Accountants Statement of Position 98-5 requiring that certain
start-up costs be expensed rather than capitalized. As discussed in Note 19,
such costs incurred and capitalized prior to January 1, 1998 were expensed. The
cumulative effect of the accounting change was $32.9 million, net of tax and
minority interest, and included approximately $18 million for Batu Hijau and
$11 million for Nevada operations.
LIQUIDITY AND CAPITAL RESOURCES
For the year 2000, cash flow from operating activities of $567.8 million and
repayments from joint ventures and affiliates of $21.6 million funded capital
expenditures of $420.9 million, advances to Batu Hijau of $100.4 million, net
debt repayments of $36.6 million and dividends of $27.6 million. Newmont
expects to generate approximately 10% to 15% less cash from operations in 2001
(with gold price realizations comparable to 2000) as a result of lower combined
production, anticipated 5% to 7% higher cash costs and merger/restructuring
expenses. These cash flows are expected to sufficiently fund planned capital
expenditures, dividends and consolidated debt reduction.
INVESTING ACTIVITIES
BATU HIJAU
As discussed above and in Note 5, Newmont has an indirect 45% interest in
the Batu Hijau mine in Indonesia and its partner, an affiliate of Sumitomo
Corporation, has an indirect 35% interest. Because Newmont and Sumitomo carried
the interest of the 20% Indonesian partner, Newmont recognizes 56.25% of Batu
Hijau's income until recouping the bulk of its investment. At December 31, 2000
and 1999, Newmont's investment in Batu Hijau was $527.6 million and $438.3
million, respectively.
During 2000, Newmont advanced $100.4 million to Batu Hijau, but expects no
further contributions in 2001. Third-party project loans of $1.0 billion were
fully utilized as of December 31, 2000. These loans were guaranteed by Newmont
and Sumitomo, 56.25% and 43.75%, respectively, until project completion tests
were
A-11
met in October 2000 when the loans became non-recourse. Newmont and Sumitomo
have a contingent obligation to provide a $125 million support facility on a
pro-rata basis, if required. Debt repayments of $43.5 million semi-annually
will commence in May 2001.
CAPITAL EXPENDITURES
Capital expenditures increased in 2000 from 1999 and 1998 primarily for
expansion of the Yanacocha mine, the unitization of Peruvian properties and the
development of the Deep Post underground mine in Nevada.
2000 1999 1998
------ ------ ------
Capital expenditures (in millions):
North American operations:
Nevada operations................... $ 90.6 $ 65.0 $103.3
Mesquite............................ 4.2 1.2 6.7
La Herradura........................ 6.5 5.2 9.7
Golden Giant........................ 14.9 9.7 8.7
Holloway............................ 5.5 3.9 3.6
South American operations:
Yanacocha (100%).................... 276.9 126.3 82.5
Kori Kollo.......................... 7.8 7.0 3.3
Vera/Nancy............................. 4.9 10.2 8.2
Zarafshan-Newmont...................... 4.3 3.2 0.9
Minahasa............................... 2.2 10.8 6.4
Other projects and capitalized interest 3.1 27.7 29.2
------ ------ ------
Total........................... $420.9 $270.2 $262.5
====== ====== ======
In 2000, capital expenditures in Nevada included deferred mine development
($27.5 million, primarily for the Deep Post underground mine), capitalized
mining costs ($25.0 million), development of the Phoenix project ($9.8
million), mining equipment ($10.1 million) and other replacement capital.
Yanacocha capital expenditures included the La Quinua mine ($144.2 million),
unitization of regional properties ($45.7 million), leach pad expansion ($30.8
million), mine development ($30.0 million) and other replacement capital.
During 1999, capital expenditures in Nevada included capitalized mining
costs ($25.0 million), deferred mine development ($15.1 million), development
of the Phoenix project ($12.8 million), refractory leach pads ($5.8 million)
and other ongoing capital requirements. Yanacocha capital expenditures included
costs to convert to owner mining ($58.3 million), leach pad expansion ($41.2
million) and development drilling and mine development ($18.0 million).
In 1998, capital expenditures in Nevada included capitalized mining costs
($29.5 million), refractory leach pads ($22.0 million), process equipment
($14.6 million) and Phoenix project development costs ($7.7 million).
Yanacocha's expenditures included $47.8 million for mine/facility expansion and
$16.4 million for development drilling.
Capital spending in 2001 is expected to be between $325 million and $375
million; including approximately $240 million at Yanacocha (primarily for leach
pad expansion and construction of the crusher and agglomeration equipment for
the La Quinua mine), $60 million in Nevada (primarily for development of the
Deep Post underground mine and capitalized mining), $20 million at
Zarafshan-Newmont (primarily for leach pad expansion and a new conveyor system)
and $20 million at all other sites for replacement capital.
OTHER
In 2000, Battle Mountain received shares of Lihir Gold as a result of its
merger with Niugini Mining as described in Note 1, a portion of which were in
exchange for Niugini's $54.7 million in cash. In 1998, Newmont invested $75.9
million for the acquisition of an additional interest in Minera Yanacocha. In
1999, Newmont's
A-12
affiliates received $14.1 million from the sale of two exploration properties,
$11.9 million from the sale of an investment in First Toronto Investments
Limited and an $11.0 million liquidating dividend related to the sale of the
New World project in Montana. In 1998, $34.9 million was received from the sale
of the New World project.
FINANCING ACTIVITIES
Newmont has a $1.0 billion revolving credit facility with a consortium of
banks that expires in June 2002. At December 31, 2000, $147 million was
outstanding under this facility. The interest rate is variable and was 6.9% at
December 31, 2000. In December 1999, Yanacocha entered into a $100 million
credit facility with the International Finance Corporation for the development
of its La Quinua mine. The interest rate is variable and was 8.3% at December
31, 2000, with $45 million outstanding.
In December 2000, Zarafshan-Newmont completed a $30 million additional
facility, expiring in 2007, with the European Bank for Reconstruction and
Development that will be used to expand leach pad capacity. The interest rate
on this facility will be based on the three-month LIBOR plus 3.25%. No
borrowings were outstanding as of December 31, 2000. In July 1999, long-term
debt was reduced $135 million with initial proceeds from a prepaid forward sale
contract described in Note 9.
Battle Mountain Canada had $87.1 million outstanding at December 31, 2000
under a loan agreement with the Canadian Imperial Bank of Commerce. In
conjunction with this agreement, $40 million of restricted cash was set aside
for repayment of a portion of the loan and $30 million was to be repaid upon
the sale of Lihir Gold stock. In January 2001, subsequent to the merger with
Battle Mountain, Newmont repaid this loan with the restricted cash and with
borrowings from its revolving credit facility.
Scheduled minimum long-term debt repayments are $57.1 million in 2001, as of
December 31, 2000; however, certain Battle Mountain debt was prepaid in January
2001 as described in Note 8.
Newmont expects to fund maturities of its debt through operating cash flow
and/or by refinancing the debt as it becomes due.
In conjunction with the Battle Mountain merger in January 2001, Newmont
issued 24.1 million shares of NMC common stock and 2.3 million shares of $3.25
convertible preferred NMC stock. The preferred stock is convertible into shares
of NMC common stock at any time at a conversion ratio of 0.5 share of NMC
common stock. Holders of NMC convertible preferred stock are entitled to
receive, when, as and if declared by Newmont's board of directors, an annual
cash dividend of $3.25 per share, or $7.5 million for all shares, payable in
equal quarterly installments.
A-13
OTHER
In October 1998, NMC acquired the 6.25% minority interest of Newmont Gold
Company (NGC) by merging an NMC subsidiary into NGC and issuing 10.7 million
shares of NMC common stock to NGC minority interest stockholders. The merger
was accounted for at historic cost, with the exception of the minority
interest, which was accounted for using purchase accounting. The excess
purchase price over NMC's carrying value of its minority interest
(approximately $207 million) was allocated to assets and liabilities of NGC and
Stockholders' equity increased $259 million.
DEVELOPMENTS IN INDONESIA
Newmont operates the Minahasa mine on the island of Sulawesi and the Batu
Hijau mine on the island of Sumbawa. Both are in remote locations and have been
largely unaffected by civil unrest coinciding with the recent period of
political and social change in Indonesia. Both mines operate under Contracts of
Work issued by the central government. Indonesia's government has publicly
expressed its intention to uphold existing Contracts of Work. In early 2000, a
regional court issued a provisional judgment to shut down the Minahasa mine
pending resolution of a court case involving taxes on overburden. This matter
was resolved in April 2000 when the regional authority agreed that such taxes
were not applicable and withdrew its claim. Minahasa agreed to pay
approximately $500 thousand related to materials used to build a local road as
part of its community development program. During the second and third quarters
of 2000, small groups of protestors demonstrated near the mine, shutting down
production for intermittent periods. Protestors were led by former landowners
seeking additional compensation for property sold to Minahasa over six years
ago. Minahasa had previously reviewed the compensation process and determined
that its procedures were proper. Compensation amounts had been set by the
Indonesian government. Newmont continues to work with the local government and
community leaders during this period of change.
ENVIRONMENTAL
Included in 2000 capital expenditures was approximately $4 million to comply
with environmental regulations. Expenditures of $8 million are anticipated in
2001. Ongoing costs to comply with environmental regulations have not been a
significant component of cash operating costs. Estimated future reclamation
costs relating to currently producing mines are accrued over each mine life and
at December 31, 2000, $108.9 million had been accrued.
Newmont spent $18.7 million, $20.3 million and $10.9 million in 2000, 1999
and 1998, respectively, for environmental obligations related to former mining
sites discussed in Note 20, and expects to spend approximately $13 million in
2001. In 2000 and 1999, the remediation liability associated with the San Luis
property in Colorado was increased $13.2 million and $9.5 million,
respectively. The San Luis open-pit gold mine was operated by Battle Mountain
and was closed in 1996. At December 31, 2000, $63.5 million was accrued for
total estimated future costs associated with all such obligations. It is
reasonably possible that the ultimate liability may be as much as 40% greater
or lower than the amount accrued at December 31, 2000. Environmental
obligations are continuously monitored and reviewed and, although Newmont
believes that its reserves are adequate, as additional facts become known,
further provisions may be required.
In June 2000, a transport contractor of Minera Yanacocha spilled
approximately 151 kilograms of mercury near the town of Choropampa, Peru, which
is located 53 miles southwest of the mine. Mercury is a byproduct of gold
mining and was sold to a Lima firm for use in medical instrumentation and
industrial applications. A comprehensive health and environmental remediation
program was undertaken by Minera Yanacocha. In August 2000, Minera Yanacocha
paid under protest a fine of 1.74 million soles (approximately US$500 thousand)
to the Peruvian government. Minera Yanacocha entered into agreements with three
of the communities impacted by this incident to provide a variety of public
works as compensation for the disruption and inconvenience caused by the
incident. Estimated costs of $10.0 million for these improvements, other
remediation efforts, personal
A-14
compensation and the fine were included in Other expense in 2000. The Company
cannot reasonably predict the likelihood of any additional expenditures related
to this matter.
SAFE HARBOR STATEMENT
The foregoing discussion and analysis, as well as certain information
contained elsewhere in this report, contain "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
and are intended to be covered by the safe harbor created thereby. These
forward-looking statements involve certain risks and uncertainties. Actual
results may differ materially from those contemplated by these forward-looking
statements. Forward-looking statements involve certain factors that are subject
to change including, but not limited to, the price of gold and copper; interest
and currency exchange rates; geological and metallurgical assumptions;
operating performance of equipment, processes and facilities; labor relations;
timing of receipt of necessary governmental permits or approvals; weather and
other acts of God; domestic and foreign laws or regulations, particularly
relating to the environment and mining; domestic and international economic and
political conditions; the ability of joint venture partners to meet their
obligations; the ability of Newmont to obtain or maintain necessary financing;
and other risks and hazards associated with mining operations. More detailed
information regarding Newmont, its operations and factors that could materially
affect its financial position and results of operations are included in NMC's
Annual Report on Form 10-K as well as other filings with the Securities and
Exchange Commission. Many of these factors are beyond Newmont's ability to
control or predict. Readers are cautioned not to put undue reliance on
forward-looking statements, which relate only as of the date of this document.
All subsequent written and oral forward-looking statements attributable to
Newmont or any person acting on its behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
Newmont does not undertake any obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the
date of the document or to reflect the occurrence of unanticipated events,
except as may be required under applicable securities law.
A-15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders of Newmont Mining Corporation:
We have audited the accompanying consolidated balance sheets of Newmont
Mining Corporation (a Delaware corporation) and subsidiaries (the "Company") as
of December 31, 2000 and 1999, and the related consolidated statements of
operations and comprehensive income (loss), changes in stockholders' equity and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Newmont Mining Corporation
and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted
in the United States.
As explained in Notes 2 and 18 to the consolidated financial statements, the
Company changed its method of accounting for revenue recognition and start-up
costs, effective January 1, 2000 and 1998, respectively.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 20, 2001.
A-16
NEWMONT MINING CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31,
----------------------------------
2000 1999 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE)
Sales and other income
Sales............................................................. $1,809,450 $1,627,083 $1,730,479
Dividends, interest and other income.............................. 10,281 47,985 19,857
---------- ---------- ----------
1,819,731 1,675,068 1,750,336
---------- ---------- ----------
Costs and expenses
Costs applicable to sales......................................... 1,067,241 981,713 988,192
Depreciation depletion and amortization........................... 359,453 303,777 368,675
Exploration and research.......................................... 77,377 74,213 93,140
General and administrative........................................ 61,930 67,896 63,838
Interest, net of amounts capitalized.............................. 94,567 77,654 96,618
Expenses for acquisition settlement............................... 42,181 -- --
Write-down of assets.............................................. 58,415 39,484 719,827
Merger expenses................................................... 6,897 -- --
Other............................................................. 34,606 25,980 11,060
---------- ---------- ----------
1,802,667 1,570,717 2,341,350
---------- ---------- ----------
Operating income (loss).............................................. 17,064 104,351 (591,014)
Unrealized mark-to-market gain (loss) on call options................ 26,796 (44,821) --
Loss on marketable securities of Lihir............................... (23,863) -- --
---------- ---------- ----------
Pre-tax income (loss) before minority interest, equity loss and
cumulative effect of changes in accounting principles.............. 19,997 59,530 (591,014)
Income tax (expense) benefit......................................... (1,206) (21,777) 167,045
Minority interest in income of affiliates............................ (91,170) (40,691) (67,179)
Minority interest in Newmont Gold Company............................ -- -- (4,093)
Equity loss and impairment of affiliates............................. (9,923) (91,627) (105,902)
---------- ---------- ----------
Net loss before cumulative effect of changes in accounting principles (82,302) (94,565) (601,143)
Cumulative effect of changes in accounting principles, net........... (12,572) -- (32,924)
---------- ---------- ----------
Net loss............................................................. (94,874) (94,565) (634,067)
Preferred stock dividends............................................ (7,475) (7,475) (7,475)
---------- ---------- ----------
Net loss applicable to common shares................................. $ (102,349) $ (102,040) $ (641,542)
========== ========== ==========
Other comprehensive income (loss).................................... (526) (3,988) 1,409
---------- ---------- ----------
Comprehensive loss................................................... $ (102,875) $ (106,028) $ (640,133)
========== ========== ==========
Net loss before cumulative effect of changes in accounting principles
per common share, basic and diluted................................ $ (0.47) $ (0.53) $ (3.32)
Cumulative effect of changes in accounting principles per common
share, basic and diluted........................................... (0.06) -- (0.18)
---------- ---------- ----------
Net loss per common share, basic and diluted......................... $ (0.53) $ (0.53) $ (3.50)
========== ========== ==========
Basic and diluted weighted average common shares outstanding......... 192,218 191,602 183,139
========== ========== ==========
The accompanying notes are an integral part of these statements.
A-17
NEWMONT MINING CORPORATION
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31,
----------------------
2000 1999
---------- ----------
(IN THOUSANDS, EXCEPT
SHARES AND PER SHARE)
ASSETS
Cash and cash equivalents.................................. $ 77,558 $ 122,832
Restricted cash............................................ 406 --
Short- term investments.................................... 7,084 9,414
Accounts receivable........................................ 29,281 50,886
Put option premiums........................................ -- 19,148
Inventories................................................ 361,040 353,728
Prepaid taxes.............................................. 46,307 48,623
Marketable securities of Lihir............................. 37,879 --
Current portion of deferred income tax assets.............. 9,624 10,226
Other current assets....................................... 42,989 36,103
---------- ----------
Current assets.......................................... 612,168 650,960
Property, plant and mine development, net.................. 2,190,504 2,271,989
Investment in Batu Hijau................................... 527,568 438,318
Other investments.......................................... 12,814 78,989
Long-term inventory........................................ 163,782 171,206
Deferred income tax assets................................. 294,939 201,139
Restricted cash............................................ 41,968 40,000
Other long-term assets..................................... 73,023 99,315
---------- ----------
Total assets............................................ $3,916,766 $3,951,916
========== ==========
LIABILITIES
Short-term borrowings...................................... $ 10,000 $ --
Current portion of long-term debt.......................... 40,447 25,843
Debt due upon disposal of Lihir securities................. 30,000 30,000
Accounts payable........................................... 87,757 53,926
Current portion of deferred income tax liabilities......... 10,223 29,520
Other accrued liabilities.................................. 220,175 223,367
---------- ----------
Current liabilities..................................... 398,602 362,656
Long-term debt............................................. 1,129,390 1,191,023
Deferred revenue from sale of future production............ 137,198 137,198
Reclamation and remediation liabilities.................... 160,548 134,228
Fair value of written call options......................... 55,638 82,434
Deferred income tax liabilities............................ 104,649 98,855
Other long-term liabilities................................ 239,384 183,703
---------- ----------
Total liabilities....................................... 2,225,409 2,190,097
---------- ----------
Commitments and contingencies (See Note 10 and 21)
Minority interest in affiliates............................ 191,314 191,496
---------- ----------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $5.00 par value, 2.3 million
authorized and issued..................................... 110,578 110,578
Common stock--$1.60 par value; 250 million shares
authorized; 185.1 million and 181.6 million shares issued,
less 157 thousand and 242 thousand treasury shares,
respectively.............................................. 295,928 290,285
Additional paid-in capital................................. 1,380,419 1,353,467
Accumulated other comprehensive loss....................... (25,788) (25,262)
Retained deficit........................................... (261,094) (158,745)
---------- ----------
Total stockholders' equity.............................. 1,500,043 1,570,323
---------- ----------
Total liabilities and stockholders' equity.............. $3,916,766 $3,951,916
========== ==========
The accompanying notes are an integral part of these statements.
A-18
NEWMONT MINING CORPORATION
STATEMENTS OF CONSOLIDATED CHANGES IN STOCKHOLDERS' EQUITY
ACCUMULATED
CONVERTIBLE COMMON STOCK ADDITIONAL OTHER RETAINED
PREFERRED ---------------- PAID-IN COMPREHENSIVE EARNINGS
AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) (DEFICIT)
----------- ------- -------- ---------- ------------- ---------
(IN THOUSANDS)
Balance at December 31, 1997........................ $110,578 169,271 $270,832 $1,153,203 $(22,683) $ 584,821
Common stock issued for acquisition of minority
interest of Newmont Gold Company................ -- 10,694 17,111 242,225 -- --
Shares issued under retirement savings plans..... -- 6 9 278 -- --
Shares issued under stock compensation plans..... -- 52 83 1,538 -- --
Shares exchanged................................. -- 625 999 (999) -- --
Net loss......................................... -- -- -- -- -- (634,067)
Common stock dividends........................... -- -- -- (30,596) -- --
Preferred stock dividends........................ -- -- -- -- -- (7,475)
Other............................................ -- -- -- -- 1,409 16
-------- ------- -------- ---------- -------- ---------
Balance at December 31, 1998........................ 110,578 180,648 289,034 1,365,649 (21,274) (56,705)
Shares issued under retirement savings plans..... -- 384 614 7,186 -- --
Shares issued under stock compensation plans..... -- 69 110 1,230 -- --
Shares exchanged................................. -- 329 527 (527) -- --
Net loss......................................... -- -- -- -- -- (94,565)
Common stock dividends........................... -- -- -- (20,097) -- --
Preferred stock dividends........................ -- -- -- -- -- (7,475)
Other............................................ -- -- -- 26 (3,988) --
-------- ------- -------- ---------- -------- ---------
Balance at December 31, 1999........................ 110,578 181,430 290,285 1,353,467 (25,262) (158,745)
Shares issued under retirement savings plans..... -- 408 825 9,547 -- --
Shares issued under stock compensation plans..... -- 216 193 2,195 -- --
Shares exchanged................................. -- 263 420 (420) -- --
Shares issued for acquisition settlement......... -- 2,628 4,205 35,795 -- --
Net loss......................................... -- -- -- -- -- (94,874)
Common stock dividends........................... -- -- -- (20,165) -- --
Preferred stock dividends........................ -- -- -- -- -- (7,475)
Other............................................ -- -- -- -- (526) --
-------- ------- -------- ---------- -------- ---------
Balance at December 31, 2000........................ $110,578 185,945 $295,928 $1,380,419 $(25,788) $(261,094)
======== ======= ======== ========== ======== =========
The accompanying notes are an integral part of these statements.
A-19
NEWMONT MINING CORPORTION
STATEMENTS OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net loss......................................................................... $ (94,874) $ (94,565) $(634,067)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization...................................... 359,453 303,777 368,675
Amortization of capitalized mining costs...................................... 103,079 38,334 63,820
Deferred tax benefit.......................................................... (69,234) (62,895) (228,211)
Unrealized mark-to-market (gain) loss on call options......................... (26,796) 44,821 --
Loss on marketable securities of Lihir........................................ 23,863 -- --
Stock issued for acquisition settlement....................................... 40,000 -- --
Write-down of assets.......................................................... 58,415 39,384 719,827
Amortization of put option premiums........................................... 19,149 18,465 --
Cumulative effect of change in accounting principle........................... 12,572 -- 32,924
Foreign currency exchange loss (gain)......................................... 6,177 (8,214) 12,375
Minority interest, net of dividends........................................... 61,366 1,857 34,523
Undistributed losses of affiliated company.................................... 9,923 91,627 105,902
(Gain) loss on asset sales and other.......................................... (3,015) (24,502) 3,379
(Increase) decrease in operating assets:
Accounts receivable........................................................... (8,337) 32,482 26,920
Inventories................................................................... (21,249) (21,733) (10,077)
Other assets.................................................................. (20,256) (1,947) (4,581)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities................................ 54,676 57,323 (43,522)
Other liabilities............................................................. 62,857 37,001 3,292
--------- --------- ---------
Net cash provided by operating activities.................................. 567,769 451,215 451,179
--------- --------- ---------
INVESTING ACTIVITIES
Additions to property, plant and mine development................................ (420,939) (270,240) (262,525)
Advances to affiliated company................................................... (100,389) (158,878) (147,229)
Repayments from joint ventures and affiliates.................................... 21,562 19,873 --
Proceeds from sale of future production.......................................... -- 137,198 --
Cash effect of affiliate merger/additional interest acquired..................... (54,700) -- (75,868)
Proceeds from asset sales and other.............................................. 10,480 42,689 40,281
--------- --------- ---------
Net cash used in investing activities...................................... (543,986) (229,358) (445,341)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from short-term debt.................................................... 10,000 (14,850) 9,948
Repayments of short-term debt.................................................... -- -- (25,771)
Proceeds from long-term debt..................................................... 497,000 177,000 135,000
Repayments of long-term debt..................................................... (543,631) (431,744) (153,318)
Dividends paid on common and preferred stock..................................... (27,640) (27,572) (38,071)
Decrease (increase) in restricted cash........................................... (2,146) (31,045) 10,183
Other............................................................................ 1,035 (1,017) (1,443)
--------- --------- ---------
Net cash used in financing activities...................................... (65,382) (329,228) (63,472)
--------- --------- ---------
Effect of exchange rate changes on cash............................................. (3,675) (5,795) (2,400)
--------- --------- ---------
Net change in cash and cash equivalents............................................. (45,274) (113,166) (60,034)
Cash and cash equivalents at beginning of year...................................... 122,832 235,998 296,032
--------- --------- ---------
Cash and cash equivalents at end of year............................................ $ 77,558 $ 122,832 $ 235,998
========= ========= =========
See Note 17 for cash flow information.
The accompanying notes are an integral part of these statements.
A-20
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 THE COMPANY
Newmont Mining Corporation and its subsidiaries (collectively, "NMC" or the
"Company") is a worldwide company engaged in the production of gold,
exploration for gold and acquisition of gold properties. The Company also has
an interest in a copper/gold mine that commenced production in late 1999. Prior
to October 1998, NMC conducted its operations through its subsidiary, Newmont
Gold Company ("NGC"). These consolidated financial statements give effect to
the NMC/Battle Mountain merger described below.
BATTLE MOUNTAIN MERGER
On January 10, 2001, the Company completed a merger with Battle Mountain
Gold Company ("Battle Mountain") pursuant to an agreement and plan of merger,
dated as of June 21, 2000, under which each share of common stock of Battle
Mountain and each exchangeable share of Battle Mountain Canada Ltd. (a
wholly-owned subsidiary of Battle Mountain) was converted into the right to
receive 0.105 shares of NMC, approximately 24.1 million shares. The Company
also exchanged 2.3 million shares of newly issued $3.25 convertible preferred
stock for all outstanding shares of Battle Mountain $3.25 convertible preferred
stock. The merger was accounted for as a pooling of interests, and as such, the
consolidated financial statements include Battle Mountain's financial data as
if Battle Mountain had always been part of NMC.
The Company expects one-time merger expenses to total approximately $35
million, of which $20 million relates to investment advisory and professional
fees and $15 million to employee benefit and severance costs. The majority of
such expenses will be charged to income in 2001. As of December 31, 2000, the
Company incurred $6.9 million of such expenses.
The following table sets forth results of operations of the previously
separate companies for the periods before the combination:
YEARS ENDED DECEMBER 31,
----------------------------
2000 1999 1998
-------- -------- --------
Sales
Pre-merger:
NMC.................................... $1,554.9 $1,398.9 $1,453.9
Battle Mountain........................ $ 254.5 $ 228.2 $ 276.6
-------- -------- --------
Post-merger: $1,809.4 $1,627.1 $1,730.5
======== ======== ========
Net income (loss) applicable to common shares:
Pre-merger:
NMC.................................... $ (18.9) $ 24.8 $ (393.4)
Battle Mountain........................ $ (83.4) $ (126.8) $ (248.1)
-------- -------- --------
Post-merger: $ (102.3) $ (102.0) $ (641.5)
======== ======== ========
NIUGINI MINING AND LIHIR GOLD MERGER
Battle Mountain held a 50.45% interest in Niugini Mining and, through this
interest at December 31, 1999 and 1998, held a 7.52% and 8.65% interest,
respectively, in Lihir Gold that operates a gold mine in Papua New Guinea. In
February 2000, Lihir Gold merged with Niugini Mining whereby Niugini Mining
shareholders received one share of Lihir Gold for each share of Niugini Mining,
together with one additional share of Lihir Gold for each A$1.45 of Niugini
Mining's net cash balance of $54.7 million. As a result of the merger, Battle
A-21
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Mountain received 111.3 million shares of Lihir Gold, representing a 9.74%
interest reflected in Marketable securities of Lihir as a cost investment
available for sale. Battle Mountain had been pursuing options to dispose of its
interest in Niugini Mining since December 1998. Prior to 2000, Niugini Mining
was consolidated into the Company's results and its interest in Lihir Gold was
accounted for as an equity investment. As of December 31, 2000, Lihir
securities were written down $23.9 million as an other than temporary loss
resulting from the length of time and extent to which their market value had
been less than their cost basis.
NGC MERGER
Prior to October 1998, NMC owned 93.75% of the common stock of NGC. In
October 1998, NMC acquired the remaining 6.25% interest of NGC through the
merger of a wholly-owned subsidiary of NMC into NGC. The merger was accounted
for at historic cost, with the exception of the minority interest, which was
accounted for as a purchase. The purchase price was based on the $24.25 per
share value of the 10.7 million shares of NMC common stock issued to NGC
stockholders. The excess purchase price over the carrying value of such
minority interest (including transaction costs of $1.0 million and related
deferred taxes of $53.6 million) was $206.9 million and was allocated to NGC's
assets and liabilities based on their respective fair market values ($122.0
million to Investment in Batu Hijau and $84.9 million to Property, plant and
mine development primarily for Yanacocha). The Company's stockholders' equity
increased $259.3 million as a result of this transaction.
OPERATIONS
The Company's sales result from operations in the United States, Canada,
Mexico, Peru, Bolivia, Uzbekistan, Indonesia and Australia. Gold mining
requires the use of specialized facilities and technology. The Company relies
heavily on such facilities to maintain its production levels. Also, the cash
flow and profitability of the Company's current operations are significantly
affected by the market price of gold and copper. These commodity prices can
fluctuate widely and are affected by numerous factors beyond the Company's
control.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Newmont Mining
Corporation and the more-than-50%-owned subsidiaries that it controls. The
Company also includes its pro-rata share of assets, liabilities and operations
for unincorporated joint ventures in which it has an interest. All significant
intercompany balances and transactions have been eliminated. The functional
currency for all subsidiaries is the U. S. dollar, except for Canadian and
Australian operations where the functional currency is the local currency.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all cash balances and highly liquid
investments with an original maturity of three months or less. Because of the
short maturity of these investments, the carrying amounts approximate their
fair value. Cash and cash equivalents are invested in United States Treasury
bills and high-quality commercial paper and time deposits.
INVESTMENTS
Short-term investments are carried at cost, which approximates market, and
include Eurodollar, government and corporate obligations rated AA or higher.
A-22
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Investments in incorporated entities in which the Company's ownership is
greater than 20% and less than 50%, or which the Company does not control, are
accounted for by the equity method and are included in long-term assets. Income
or loss from such investments is included in Equity loss and impairment of
affiliates. Other investments in nonmarketable securities in which the
Company's ownership interest is less than 20% and in which the Company has no
significant influence are recorded at cost in long-term assets. Unrealized
gains or losses on these investments are included in Other comprehensive income
(loss), while realized gains or losses are included in net income. Investments
in marketable securities held for sale are marked to market at each period end.
When declines in value on such securities are deemed temporary, losses are
reflected in Other comprehensive loss, and if deemed other than temporary,
losses are reflected in net income (loss).
INVENTORIES
Precious metals, ore and in-process inventories, and materials and supplies
are stated at the lower of average cost or net realizable value. Prior to the
change in accounting method for revenue recognition discussed below, precious
metals inventory was stated at market value.
PROPERTY, PLANT AND MINE DEVELOPMENT
Expenditures for new facilities or expenditures that extend the useful lives
of existing facilities are capitalized and depreciated using the straight-line
method at rates sufficient to depreciate such costs over the estimated
productive lives of such facilities. Productive lives range from 2 to 21 years,
but do not exceed the estimated mine life based on proven and probable reserves.
The Company adopted AICPA Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities" ("SOP 98-5") effective January 1, 1998. Under
this accounting method, certain costs, such as organization, training and
pre-feasibility expenses incurred in the start-up phase of a project are
expensed as incurred (See Note 19).
Mineral exploration costs are expensed as incurred. When it has been
determined that a mineral property can be economically developed as a result of
establishing proven and probable reserves, the costs incurred to develop such
property, including costs to further delineate the ore body and remove
overburden to initially expose the ore body, are capitalized. Such costs, and
estimated future development costs, are amortized using the unit-of- production
method over the estimated life of the ore body based on proven and probable
reserves. Ongoing development expenditures to maintain production are generally
charged to operations as incurred.
Significant payments related to the acquisition of land and mineral rights
are capitalized. If a mineable ore body is discovered, such costs are amortized
when production begins using the unit-of-production method based on proven and
probable reserves. If no mineable ore body is discovered, such costs are
expensed in the period in which it is determined the property has no future
economic value.
Interest expense allocable to the cost of developing mining properties and
to constructing new facilities is capitalized until assets are ready for their
intended use.
Gains or losses from normal sales or retirements of assets are included in
other income or expense.
ASSET IMPAIRMENT
The Company reviews and evaluates its long-lived assets for impairment when
events or changes in circumstances indicate that the related carrying amounts
may not be recoverable. An impairment loss is measured
A-23
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
as the amount by which asset carrying value exceeds fair value. Fair value is
determined using estimated future cash flow analysis. An impairment is
considered to exist if total estimated future cash flows on an undiscounted
basis are less than the carrying amount of the asset. An impairment loss is
measured and recorded based on discounted estimated future cash flows. Future
cash flows include estimates of recoverable ounces, gold prices (considering
current and historical prices, price trends and related factors), production
levels, capital and reclamation costs, all based on detailed engineering
life-of-mine plans. In estimating future cash flows, assets are grouped at the
lowest level for which there are identifiable cash flows that are largely
independent of cash flows from other asset groups. Generally, all assets at a
particular mine are used together to generate cash flow. At the Nevada
operations, with a number of ore types and processing facilities, assets are
grouped according to the processing facility at which ores will be processed.
Assumptions underlying future cash flow estimates are subject to risks and
uncertainties. Any differences between significant assumptions and market
conditions and/or the Company's performance could have a material effect on the
Company's financial position and results of operations (See Note 16).
REVENUE RECOGNITION
The Company changed its accounting method for revenue recognition in
accordance with the U.S. Securities and Exchange Commission Staff Accounting
Bulletin No. 101, such that revenue is recognized upon delivery of third-party
refined gold to the customer. Previously, revenue was recognized when the
production process was complete or when gold was poured in dore form at the
mine (See Note 18). Initial proceeds from prepaid forward sales contracts are
recorded as deferred revenue and are recognized in income when the related gold
is delivered.
MINING COSTS
In general, mining costs are charged to operations as incurred. However,
certain of the Company's deposits have diverse grade and waste-to-ore ratios
over the mine's life. Mining costs for these deposits, to the extent they do
not relate to current gold production, are capitalized and then charged to
operations when the applicable gold is produced.
RECLAMATION AND REMEDIATION COSTS
Estimated future reclamation costs are based principally on legal and
regulatory requirements. Such costs related to active mines are accrued and
charged over the expected operating lives of the mines using the
unit-of-production method. Future remediation costs for inactive mines are
accrued based on management's best estimate at the end of each period of the
undiscounted costs expected to be incurred at a site. Such cost estimates
include, where applicable, ongoing care, maintenance and monitoring costs.
Changes in estimates are reflected in earnings in the period an estimate is
revised.
INCOME AND MINING TAXES
The Company accounts for income taxes using the liability method,
recognizing certain temporary differences between the financial reporting basis
of the Company's liabilities and assets and the related income tax basis for
such liabilities and assets. This method generates a net deferred income tax
liability or net deferred income tax asset for the Company as of the end of the
year, as measured by the statutory tax rates in effect as enacted. The Company
derives its deferred income tax charge or benefit by recording the change in
the net deferred income tax liability or net deferred income tax asset balance
for the year. Mining taxes represent Canadian provincial taxes levied on mining
operations and are classified as income taxes since such taxes are based on a
percentage of mining profits.
The Company's deferred income tax assets include certain future tax
benefits. The Company records a valuation allowance against any portion of
those deferred income tax assets that it believes will more likely than not
fail to be realized.
A-24
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY
Assets and liabilities of foreign affiliates in Canada and Australia are
translated at exchange rates in effect at each period end. Revenues and
expenses are translated at the average exchange rate for the period.
Accumulated currency translation adjustments are included in Other
comprehensive income (loss). Foreign currency transaction gains or losses are
included in net income.
COMMODITY INSTRUMENTS
On a limited basis the Company has entered into commodity contracts to
protect the selling price for certain anticipated gold production. The Company
does not acquire, hold or issue commodity instruments for trading or
speculative purposes.
Put option contracts purchased by the Company provide the right, but not the
obligation, to sell a specified number of ounces of gold at a specified strike
price. Put options qualify for deferral accounting such that gains or losses on
the contracts are recognized as the designated production is delivered or as
the options expire. The initial fair value of put options is recorded as Put
option premiums and is amortized over the term of the options.
Call option contracts sold by the Company provide the contract holder the
right, but not the obligation, to buy a specified number of ounces of gold at a
specified strike price. The call option contracts are recorded at fair value
and are marked to market at each reporting date.
Certain combination, time-matched written call and purchased put options
(known as "collars") together provide a minimum and maximum potential price for
contract ounces of gold. Premiums paid or received are included in sales income
in the period such collars expire.
Forward sales contracts enable the Company to deliver to a counterparty a
specified number of ounces of gold at a specified price and date. Gains and
losses realized on these contracts, as well as any cost or revenue associated
therewith, are recognized in sales when the related gold is delivered.
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments and hedging activity. SFAS No.
133 is effective January 1, 2001. SFAS No. 133 requires recognition of all
derivative instruments on the balance sheet as either assets or liabilities and
measurement at fair value. Changes in the derivative's fair value will be
recognized currently in earnings unless specific hedge accounting criteria are
met. Gains and losses on derivative hedging instruments must be recorded in
either other comprehensive income (loss) or current earnings (loss), depending
on the nature of the instrument. Upon adoption of the statement, a net
derivative asset of $2.6 million will be recorded, with unrealized gains of
$1.7 million to other comprehensive income and an increase of $0.9 million to
Deferred income tax liabilities. Call option contracts will continue to be
marked to market in current earnings.
EARNINGS PER COMMON SHARE
Earnings or loss per share are presented for basic and diluted net income
(loss) and, if applicable, for net income or loss before the cumulative effect
of a change in accounting principle. Basic earnings per share is computed by
dividing net income or loss (the numerator) by the weighted-average number of
outstanding common shares, including Battle Mountain Canada exchangeable
shares, (the denominator) for the period. The computation of diluted earnings
per share includes the same numerator, but the denominator is increased to
include the number of additional common shares that would have been outstanding
if potentially dilutive common shares had been issued (such as the common share
equivalents for employee stock options).
A-25
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
COMPREHENSIVE INCOME
In addition to net income, comprehensive income includes all changes in
equity during a period (such as adjustments to minimum pension liabilities,
foreign currency translation adjustments and cumulative unrecognized changes in
fair value of marketable securities held for sale or other investments), except
those resulting from investments by and distributions to owners. Beginning
January 2001 with the adoption of SFAS 133, the effective portion of changes in
fair value of derivative instruments that qualify as cash flow hedges will also
be included in comprehensive income.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual amounts
could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform to the 2000
presentation.
NOTE 3 INVENTORIES
AT DECEMBER 31,
-----------------
2000 1999
-------- --------
(IN THOUSANDS)
Current:
Ore and in-process inventories.................. $241,181 $190,576
Precious metals................................. 23,452 61,116
Materials and supplies.......................... 95,395 100,786
Other........................................... 1,012 1,250
-------- --------
$361,040 $353,728
======== ========
Ore-in-stockpiles (included in Long-term inventory) $163,782 $171,206
======== ========
NOTE 4 PROPERTY, PLANT AND MINE DEVELOPMENT
AT DECEMBER 31,
------------------------
2000 1999
----------- -----------
(IN THOUSANDS)
Land and mining claims.............................. $ 326,023 $ 295,784
Buildings and equipment............................. 3,089,978 3,019,934
Mine development.................................... 927,516 797,418
Construction-in-progress............................ 304,846 254,196
----------- -----------
4,648,363 4,367,332
Accumulated depreciation, depletion and amortization (2,582,191) (2,294,201)
Capitalized mining costs............................ 124,332 198,858
----------- -----------
$ 2,190,504 $ 2,271,989
=========== ===========
A-26
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5 INVESTMENT IN BATU HIJAU
The Company and an affiliate of Sumitomo Corporation ("Sumitomo") are
partners in the Nusa Tenggara Partnership ("NTP") that holds 80% of P.T.
Newmont Nusa Tenggara ("PTNNT"), the owner of the Batu Hijau copper/gold mine
in Indonesia. Production began in the fourth quarter of 1999 and the projected
mine life is in excess of 20 years. The development cost of Batu Hijau was
approximately $1.83 billion.
The Company and Sumitomo have an indirect 45% and 35% interest,
respectively, in PTNNT. The remaining 20% interest is held by an unrelated
Indonesian company. Because the Company and Sumitomo have carried the
investment of the 20% owner, until recouping the bulk of its construction
investment, including interest, the Company recognizes 56.25% of Batu Hijau's
income (loss).
The Company accounts for its investment in Batu Hijau as an equity
investment due to each partner's significant participating rights in the
business and the unanimous approval required for major partnership decisions.
At December 31, 2000 and 1999, such investment was $527.6 million and $438.3
million, respectively, based on U.S. generally accepted accounting principles.
Differences between 56.25% of the NTP's net assets and the Company's investment
include (i) $220 million for the fair market value adjustment recorded by NTP
in conjunction with the Company's initial contribution, (ii) $48 million for
intercompany charges, (iii) $122 million for the fair market value adjustment
recorded by the Company in conjunction with the NGC minority interest
acquisition and (iv) $148 million for contributions recorded by the Company
that were classified as debt by NTP. Certain of these amounts are amortized or
depreciated on a unit-of-production basis. The Company's investment also
reflects $42 million for exploration expenditures incurred prior to the
formation of NTP. (See Note 17 for a description of the the Company's equity
loss in Batu Hijau. Batu Hijau's Net income (loss) reflects the elimination of
interest between PTNNT and NTP).
Project development was funded by $1.0 billion from third party loans
(Senior Debt) and $0.83 billion from the Company and Sumitomo. The Senior Debt
was guaranteed by the Company and Sumitomo, 56.25% and 43.75%, respectively,
until project completion tests were met in October 2000, at which time the debt
became non-recourse. Repayment of borrowings under the Senior Debt will be in
semi- annual installments of $43.5 million from May 2001 through November 2010.
The semi-annual installments will be reduced to $22.1 million from May 2011
through November 2013. The interest rate is based on blended fixed and floating
rates. The weighted average interest rates were 6.6% and 6.4% during 2000 and
1999, respectively, and 7.0% and 6.6% at December 31, 2000 and 1999,
respectively.
Following is summarized financial information for NTP based on U.S.
generally accepted accounting principles (in thousands):
YEARS ENDED DECEMBER 31,
--------------------------
2000 1999 1998
-------- ------- --------
Sales and other income.......................................... $431,893 $15,224 $ 93
Income (loss) before cumulative effect of a change in accounting
principle..................................................... $(70,761) $11,846 $(19,284)
Net income (loss)............................................... $(70,761) $11,846 $(69,410)
A-27
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AT DECEMBER 31,
---------------------
2000 1999
---------- ----------
Current assets........................................... $ 209,011 $ 137,542
Property, plant and mine development, net................ $2,020,386 $1,956,515
Other assets............................................. $ 135,674 $ 154,604
Debt and related interest to partners and affiliates..... $ 283,504 $ 195,478
Other current liabilities................................ $ 198,455 $ 207,645
Long-term debt--third parties (including current portion) $1,000,000 $1,000,000
Other liabilities........................................ $ 2,013 $ 132
NOTE 6 OTHER ACCRUED LIABILITIES
AT DECEMBER 31,
-----------------
2000 1999
-------- --------
(IN THOUSANDS)
Payroll and related benefits $ 66,386 $ 60,531
Interest.................... 29,989 30,408
Deferred revenue............ 14,850 --
Reclamation and remediation. 14,412 13,529
Taxes other than income..... 9,249 4,004
Income and mining taxes..... 11,372 51,085
Royalties................... 1,624 6,737
Severance benefits.......... 743 1,489
Other....................... 71,550 55,584
-------- --------
$220,175 $223,367
======== ========
NOTE 7 INCOME TAXES
The Company's income tax (expense) benefit consisted of (in thousands):
YEARS ENDED DECEMBER 31,
----------------------------
2000 1999 1998
-------- -------- --------
Current:
Domestic................ $(31,774) $ (7,072) $ --
Foreign................. (59,131) (75,428) (59,444)
-------- -------- --------
(90,905) (82,500) (59,444)
-------- -------- --------
Deferred:
Domestic................ 33,501 69,693 234,509
Foreign................. 56,198 (8,970) (8,020)
-------- -------- --------
89,699 60,723 226,489
-------- -------- --------
Total tax (expense) benefit $ (1,206) $(21,777) $167,045
======== ======== ========
A-28
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's income tax (expense) benefit differed from the amounts
computed by applying the United States corporate income tax statutory rate for
the following reasons (in thousands):
YEARS ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
-------- -------- ---------
U.S. corporate income tax at statutory rate $ (6,999) $(20,835) $ 206,855
Percentage depletion....................... 13,616 11,353 29,793
Valuation allowance on deferred tax assets. (17,986) (30,925) (111,048)
Foreign tax credits........................ 1,834 7,631 9,105
Foreign losses............................. 19,297 18,959 41,848
Other...................................... (10,968) (7,960) (9,508)
-------- -------- ---------
Total tax (expense) benefit................ $ (1,206) $(21,777) $ 167,045
======== ======== =========
The Company's pretax income (loss) before minority interest, equity loss and
cumulative effect of a change in accounting principle consisted of (in
thousands):
YEARS ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
Domestic $(186,040) $(149,153) $(670,383)
Foreign. 206,037 208,683 79,369
--------- --------- ---------
$ 19,997 $ 59,330 $(591,014)
========= ========= =========
A-29
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Components of the Company's consolidated deferred income tax assets and
liabilities are as follows (in thousands):
AT DECEMBER 31,
--------------------
2000 1999
--------- ---------
Deferred tax assets:
Exploration costs............................................................... $ 76,266 $ 58,085
Depreciation.................................................................... 43,922 36,877
Depletion of the cost of land and mining claims................................. 230,824 235,318
Alternative minimum tax credit carry forward.................................... 51,214 45,540
Capitalized inventory costs..................................................... 22,360 19,665
Remediation and reclamation costs............................................... 23,915 32,079
Mine development costs.......................................................... 4,826 (16,698)
Net operating loss carry forwards............................................... 52,182 40,725
Retiree benefit costs........................................................... 19,341 18,263
Sale/leaseback transaction, net................................................. 2,761 6,184
Relocation/reorganization costs................................................. 625 1,215
Unrealized mark-to-market adjustments and amortization of put option premiums... 6,307 22,150
Other 1,795 (3,130)
--------- ---------
536,338 496,273
Valuation allowance for deferred tax assets..................................... (191,117) (174,108)
--------- ---------
Net deferred tax assets......................................................... 345,221 322,165
--------- ---------
Deferred tax liabilities:
Net undistributed earnings from subsidiaries.................................... (66,008) (146,094)
Capitalized mining costs........................................................ (40,550) (65,243)
Capitalized interest............................................................ (30,813) (24,849)
Other........................................................................... (18,159) (2,989)
--------- ---------
Deferred tax liabilities.................................................... (155,530) (239,175)
--------- ---------
Deferred tax assets, net of deferred tax liabilities............................ $ 189,691 $ 82,990
========= =========
Net deferred tax assets of $314.4 million and $222.8 million related to
domestic tax jurisdictions and net deferred tax liabilities of $115.5 million
and $83.7 million related to foreign tax jurisdictions at December 31, 2000 and
1999, respectively.
A-30
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8 DEBT
LONG-TERM DEBT
Long-term debt consisted of (in thousands):
AT DECEMBER 31,
----------------------
2000 1999
---------- ----------
Sale-leaseback of refractory ore treatment plant $ 327,125 $ 335,482
Credit facility................................. 147,000 210,000
Canadian Imperial Bank of Commerce loan......... 87,120 104,400
8/3//8% debentures, net......................... 199,916 199,902
8/5//8% notes................................... 150,000 150,000
6% convertible subordinated debentures.......... 99,980 99,980
Medium-term notes............................... 32,000 32,000
Project financings.............................. 156,696 115,102
---------- ----------
1,199,837 1,246,866
Current maturities.............................. (40,447) (25,843)
Debt due upon disposal of Lihir Gold securities. (30,000) (30,000)
---------- ----------
$1,129,390 $1,191,023
========== ==========
Scheduled minimum long-term debt repayments are $57.1 million in 2001,
$351.1 million in 2002, $105.7 million in 2003, $53.3 million in 2004, $312.6
million in 2005 and $320.0 million thereafter. These scheduled payments include
amounts associated with the Canadian Imperial Bank of Commerce loan, which was
paid-in-full following the NMC/Battle Mountain merger. The Company may
accelerate credit facility repayments, depending on available operating cash
flow.
Sale-Leaseback of the Refractory Ore Treatment Plant
In September 1994, the Company entered into a sale and leaseback agreement
for its refractory ore treatment plant located at Carlin, Nevada. The
transaction was accounted for as debt and the cost of the refractory ore
treatment plant was recorded as a depreciable asset. The lease term is 21 years
and aggregate future minimum lease payments, which include interest, as of
December 31, 2000 and 1999 were $519.4 million and $549.1 million,
respectively. Payments are $29.7 million annually over the next five years. The
lease includes purchase options during and at the end of the lease at
predetermined prices. The interest rate on this sale-leaseback transaction is
6.36%. Because this asset is specialized, it is not practicable to estimate the
fair value of this debt. In connection with this transaction, the Company
entered into certain interest rate hedging contracts that were settled for a
gain of $11 million, which is recognized as a reduction of interest expense
over the term of the lease. Including this gain, the effective interest rate on
the transaction is 6.15%.
Credit Facilities
In June 1997, the Company entered into a $1.0 billion revolving credit
facility with a consortium of banks. As of December 31, 2000, $147.0 million
was outstanding under the credit facility, which expires in June 2002. Interest
rates are variable, can be fixed for up to six months at the option of the
Company and are subject to adjustment if changes in the Company's long-term
debt ratings occur. As of December 31, 2000 and 1999, the interest rate was
6.9% and 6.7%, respectively, and the weighted average interest rate for such
years was 6.9% and 5.4%, respectively. An annual facility fee, currently 0.1%,
is required based on the lenders' total commitment. The fair value of amounts
outstanding under the credit facility at December 31, 2000 approximated the
related carrying amount.
A-31
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The credit facility contains certain covenants, including limitations on
aggregate consolidated indebtedness (including guarantees) to 60% of total
capitalization, requirements for $1.0 billion of minimum consolidated tangible
net worth and limitations on incurring liens, fundamental business changes and
transactions with affiliates.
Canadian Imperial Bank of Commerce (CIBC) Loan
Battle Mountain Canada entered into a $145.0 million loan agreement with
CIBC in 1997 in conjunction with its purchase of Niugini Mining from Battle
Mountain that was secured by Niugini Mining stock. As of December 31, 2000 and
1999, $87.1 million and $104.4 million was outstanding. In October 1999, the
loan was restructured into three "tranches". A $40.0 million tranche, due
December 31, 2003, was to be repaid from a $40.0 million collateral cash
account established at the time of restructuring (reflected in Restricted
cash). A $30.0 million tranche was due the earlier of the sale of Lihir Gold
stock or December 31, 2003, and a $34.4 million tranche was payable in 14 equal
quarterly installments beginning September 30, 2000. The interest rate was
variable and the weighted average interest rate was 7.6% and 7.1% for 2000 and
1999, respectively. The fair value of the amounts outstanding as of December
31, 2000 approximated the related carrying amount. In January 2001, subsequent
to the NMC/Battle Mountain merger, all tranches of the CIBC loan were repaid
with the $40.0 million collateral cash account and from the Company's Credit
Facilities.
8 5/8% Debentures
Unsecured debentures in an aggregate principal amount of $200 million
maturing July 1, 2005 bearing an annual interest rate of 8.375% were
outstanding at December 31, 2000 and 1999. The debentures were priced at
99.928% to yield 8.386% and are not redeemable prior to maturity. Interest is
payable semi-annually in January and July. The costs related to the issuance of
the debentures were capitalized and are amortized to interest expense over the
term of the debentures. Using prevailing interest rates on similar instruments,
the fair value of these debentures was approximately $202.6 million and $195.6
million at December 31, 2000 and 1999, respectively.
8 5/8% Notes
Unsecured notes with a principal amount of $150 million due April 1, 2002
bearing an annual interest rate of 8.625% were outstanding at December 31, 2000
and 1999. Interest is payable semi-annually in April and October and the notes
are not redeemable prior to maturity. Using interest rates prevailing on
similar instruments at December 31, 2000 and 1999, the estimated fair value of
this debt was $153.9 million and $150.6 million, respectively.
6% Convertible Subordinated Debentures
Unsecured debentures of Battle Mountain in an aggregate principal amount of
$100 million maturing 2005 bearing an annual interest rate of 6% were
outstanding at December 31, 2000 and 1999. Interest is payable annually in
January and the debentures were convertible into Battle Mountain stock at a
conversion price of $20.625 per share, subject to adjustment in certain events.
As a result of the NMC/Battle Mountain merger, the debentures are convertible
at the option of the holders into shares of NMC common stock at any time on or
after January 10, 2001 and prior to maturity, unless previously redeemed at the
option of the Company. The conversion rate is 25.45 shares of NMC for each
$5,000 principal amount of debentures converted. Approximately 509 thousand
shares of NMC common stock have been registered for issuance upon conversion of
these debentures. Using prevailing interest rates on similar instruments, the
fair value of these debentures was approximately $82.0 million and $80.0
million at December 31, 2000 and 1999, respectively.
A-32
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Medium-Term Notes
Unsecured notes totaling $32 million were outstanding as of December 31,
2000 and 1999, respectively, with a weighted average fixed interest rate of
7.68% and maturing on various dates beginning early 2003 to late 2004. Interest
is payable semi-annually in March and September and the notes are not
redeemable prior to maturity. Using interest rates prevailing on similar
instruments at December 31, 2000 and 1999, the estimated fair value of these
notes was $31.5 million and $31.0 million, respectively.
Project Financings
Minera Yanacocha
Minera Yanacocha issued debt through the sale of $100 million 8.4% 1997
Series A Trust Certificates ("Certificates") to various institutional
investors. At December 31, 2000 and 1999, $78 million and $88 million,
respectively, was outstanding under the financing. Interest on the Certificates
is fixed at 8.4% and repayments are required quarterly through 2004. The fair
value of the Certificates was $75.7 million and $81.0 million at December 31,
2000 and 1999, respectively.
Minera Yanacocha also had $1.7 million outstanding under loans with the
International Finance Corporation ("IFC") and with Deutsche Investitions und
Entwicklungsgesellschaft mbH ("DEG") at December 31, 1999. The IFC and DEG
loans matured in 2000. Weighted average interest rates on the IFC and DEG loans
were 9.0% as of and for the year ended December 31, 1999 and the fair value of
the fixed-rate portion of such loans approximated carrying value.
In December 1999, Minera Yanacocha entered into a $100 million credit
facility with the IFC for the development of its La Quinua project. At December
31, 2000, $45.0 million was outstanding and none was outstanding as of December
31, 1999. Interest rates are LIBOR plus 2.375% on the $20 million "A tranche"
and LIBOR plus 2.0% on the $80 million "B tranche". As of December 31, 2000,
the interest rate was 8.3% and the weighted average interest rate for 2000 was
8.3%. The fair value of amounts outstanding at December 31, 2000 approximated
the related carrying amount. Also in December 1999, Minera Yanacocha assumed
certain lease and purchase agreements for mining equipment. The net present
value of future minimum payments was $8.3 million and $11.4 million, at
December 31, 2000 and 1999, respectively, with an interest component of 11.1%
for both years.
All Minera Yanacocha debt (non-recourse to Newmont) is secured by certain
restricted funds and substantially all of Minera Yanacocha's property, plant
and equipment.
Minera Yanacocha has a $20 million line of credit with Banco de Credito del
Peru that expires in July 2004. The interest rate is LIBOR plus 2% and is
adjusted annually to current market rates. As of December 31, 2000 the amount
outstanding under this credit line was $8 million. The interest rate for the
period the loan was outstanding in 2000 and at December 31, 2000 was 8.6%.
Zarafshan-Newmont
The Company, through a wholly-owned subsidiary, is a 50% participant in the
Zarafshan-Newmont joint venture ("Zarafshan-Newmont") in the Republic of
Uzbekistan. The other 50% participants are two Uzbek government entities. As of
December 31, 2000 and 1999, Zarafshan-Newmont had $18.0 million outstanding
under a loan with the European Bank for Reconstruction and Development ("EBRD")
secured by the assets of the project. The loan is to be repaid in semi-annual
installments of $6.0 million beginning July 2001. The interest
A-33
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
rate is 4.25% over the three-month LIBOR. The weighted average interest rates
for 2000 and 1999 were 10.9% and 9.6%, respectively, and the interest rates at
December 31, 2000 and 1999 were 11.0% and 10.4%, respectively. The carrying
amount of the loan is estimated to approximate its fair market value. The
Company has guaranteed payment of certain amounts due under the loan, which
totaled $9.0 million at December 31, 2000 and 1999, and the Uzbek partners have
guaranteed payment of the balance.
In December 2000, Zarafshan-Newmont completed an additional $30 million loan
under the EBRD facility that will be used primarily for capital expansion. This
loan will be available through December 15, 2002 and will be repaid in eight
equal semi-annual payments of $3.75 million, beginning July 2003 and ending
January 2007. The interest rate will be based on the three-month LIBOR plus
3.25% and no amounts were outstanding at December 31, 2000. The assets of
Zarafshan-Newmont secure this loan, 50% of which is guaranteed by the Company
and 50% by the Uzbek partners.
Inti Raymi
In conjunction with the development of its Kori Kollo mine in Bolivia, Inti
Raymi arranged term credit facilities with various international lending
institutions. As of December 31, 2000 and 1999, $5.0 million was outstanding
under one such remaining credit facility. The loan is payable on March 1, 2002
and is convertible at any time at the holder's option into a 3.98% interest
ownership interest in Inti Raymi. The interest rate is fixed at 11%. Due to the
nature of this instrument, the fair value is not practicably determinable.
CAPITALIZED INTEREST
Capitalized interest was $5.5 million, $23.3 million and $13.7 million in
2000, 1999 and 1998, respectively.
NOTE 9 DEFERRED REVENUE FROM SALE OF FUTURE PRODUCTION
In July 1999, the Company entered into a prepaid forward sale contract for
approximately 483 thousand ounces of gold, with initial proceeds of $137.2
million, for delivery in June 2005, 2006 and 2007. Such proceeds were recorded
as deferred revenue and will be recognized in income when the related gold is
physically delivered. Any additional proceeds will be determined at each
delivery date based on the excess of the then existing market price (not to
exceed $380 per ounce) over $300 per ounce. The prepaid forward sale contract
also included semi-annual delivery requirements of approximately 17,950 ounces
beginning June 2000 through June 2007. Newmont entered into forward purchase
contracts at prices increasing from $263 per ounce in 2000 to $354 per ounce in
2007 to coincide with these delivery commitments.
NOTE 10 OPTION CONTRACTS AND COMMODITY INSTRUMENTS
OPTION CONTRACTS
In late July and early August 1999, the Company purchased put option
contracts for 2.85 million ounces of gold, with a strike price of $270 per
ounce. This purchase was paid for by selling call option contracts for 2.35
million ounces at the strike prices noted below. Put option contracts for one
million ounces were subject to termination if the market price reached $270 per
ounce at any time prior to such contracts' expiration date, which was August
2000 through July 2001. These put option contracts were thus terminated in
September 1999. Call options in 2004 and 2005 terminate if the market price is
$240 per ounce or lower at any time prior to expiration.
A-34
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 2000, the following contracts were outstanding:
SOLD CALL OPTIONS
-----------------
OZS PRICE
--------- -----
2004 250,000 $350
2005 250,000 $350
2008 1,000,000 $386
2009 850,000 $385
The put options qualified for deferral accounting such that gains and losses
on the contracts were recognized as the designated production was delivered or
as the options expired. The initial fair value of the options of $37.6 million
was recorded as Put option premiums and were amortized over the term of the
options. In 2000 and 1999, $19.1 million and $18.5 million, respectively, was
amortized in Sales, including the premiums associated with terminated put
options. The call option contracts, with an initial fair value of $37.6
million, are marked to market at each reporting date and on December 31, 2000
and 1999, had a fair value of $55.6 million and $82.4 million, respectively,
resulting in a noncash, unrealized gain of $26.8 million in 2000 and a loss of
$44.8 million in 1999. At December 31, 2000, a $1.00 increase in the gold price
would result in a $0.42 per ounce increase in the fair value of the call option
contracts.
COMMODITY INSTRUMENTS
Commodity instruments for certain Battle Mountain operations were
outstanding as of December 31, 2000:
2001 2002 2003 2004 TOTAL/AVERAGE
------- ------- ------- ------ -------------
Combination call and put options:
Written call options:
Ounces............................. 92,752 92,752 92,752 7,563 285,819
Average strike price per ounce..... $ 348 $ 348 $ 348 $ 359 $ 348
Purchased put options:
Ounces............................. 92,752 92,752 92,752 7,563 285,819
Average strike price per ounce..... $ 286 $ 286 $ 286 $ 296 $ 286
Flat forward contracts:
Ounces............................. 31,252 31,252 31,252 1,563 95,319
Average price per ounce............ $ 314 $ 314 $ 314 $ 323 $ 314
The Company is not required to place collateral with respect to its
commodity instruments and there are no margin calls associated with such
contracts. Credit risk is minimized by dealing only with major financial
institutions/counterparties. The combination call and put options contracts had
a fair value of $2.7 million and $3.2 million at December 31, 2000 and 1999,
respectively. The flat forward contracts had a fair value of $2.0 million and
negative $0.5 million at December 31, 2000 and 1999, respectively. A $1.00
increase in the gold price would result in a $0.59 per ounce and $0.98 per
ounce decrease in the fair value of the combination option contracts and flat
forward contracts, respectively, at December 31, 2000.
NOTE 11 STOCKHOLDERS' EQUITY
NMC COMMON STOCK. As discussed in Note 1, NMC issued 24.1 million shares in
exchange for Battle Mountain common stock and Battle Mountain exchangeable
shares in January 2001. In October 1998, NMC issued 10.7 million shares of
common stock in conjunction with the acquisition of NGC's minority interest.
The Company paid dividends of $0.12 per common share of NMC stock in each of
2000, 1999 and 1998.
CONVERTIBLE PREFERRED STOCK: At December 31, 2000 and 1999, 2.3 million
shares of Battle Mountain $3.25 convertible preferred stock were outstanding,
with a liquidation preference of $50 per share. In conjunction
A-35
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
with the NMC/Battle Mountain merger, NMC issued 2.3 million shares of $3.25
convertible preferred stock in exchange for Battle Mountain preferred stock.
The preferred stock is convertible into shares of NMC at any time at a
conversion ratio of 0.5 share of NMC common stock and is redeemable at the
option of the Company solely for shares of NMC common stock. Holders of NMC
convertible preferred stock are entitled to receive, when, as and if declared
by the Company's board of directors, an annual cash dividend of $3.35 per
share, payable in equal quarterly installments. The Company paid $7.5 million
in preferred stock dividends in each of 2000, 1999 and 1998.
STOCK RIGHTS. In September 2000, the Company paid a dividend of one series A
junior participating preferred stock purchase right ("PSPR") for each
outstanding share of NMC common stock. These rights replaced NMC's existing
PSPRs that expired in September 2000. The rights agreement works by imposing a
significant penalty upon any person or group which acquires 15% or more of
NMC's outstanding common stock without the approval of its board of directors.
Each PSPR entitles the holder to purchase from NMC one one-thousandth of a
share of NMC participating preferred stock for $100 (subject to adjustment)
once such rights become exercisable. Until exercised, holders of PSPRs have no
stockholder rights. The PSPRs become exercisable only if a defined acquiring
person has acquired 15% or more of NMC common stock or has begun a tender or
exchange offer that would result in such person owning 15% or more of NMC
common stock. If such events occur, PSPR holders (other than the acquiring
person) may, for $100, purchase shares of NMC common stock (or in certain
circumstances common stock of the acquiring company) with a market value of
$200, based on the market price of NMC common stock prior to such acquisition
(or the market price of the acquiring corporation's stock). NMC may redeem the
PSPRs for $0.01 each prior to an announcement that a defined acquiring person
exists.
NOTE 12 STOCK OPTIONS
EMPLOYEE STOCK OPTIONS
Under the Company's stock option plans, options to purchase shares of stock
have been granted to key employees at the fair market value of such shares on
the date of grant. The options under these plans vest over a two-year period
and, for certain options granted to key employees, over a four-year period, and
are exercisable over a period not exceeding ten years. At December 31, 2000,
4,871,658 shares were available for future grants under the Company's plans. In
conjunction with the Battle Mountain merger, 850 thousand shares of NMC common
stock were authorized for issuance in connection with outstanding Battle
Mountain stock options that were assumed by the Company.
The following table summarizes annual activity for all stock options for
each of the three years in the period ended December 31:
2000 1999 1998
--------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- -------- ----------- -------- ---------- --------
All Stock Options
Outstanding at beginning of year. 11,511,797 $30 6,559,745 $38 4,591,610 $46
Granted.......................... 1,502,325 $19 5,253,469 $19 2,376,716 $27
Exercised........................ (110,500) $25 (1,625) $22 (9,046) $28
Forfeited........................ (231,948) $37 (299,792) $36 (399,535) $44
----------- --- ----------- --- ---------- ---
Outstanding at end of year....... 12,671,674 $29 11,511,797 $30 6,559,745 $38
=========== === =========== === ========== ===
Options exercisable at year end.. 7,501,483 $33 4,233,780 $42 2,959,156 $49
=========== =========== ==========
Weighted average fair value of
options granted during the year $ 12.55 $ 11.90 $ 18.88
=========== =========== ==========
A-36
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 2000 with exercise prices equal to the fair market value on the
date of grant with no restrictions on exercisability after vesting (included in
the "All Stock Options" table):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ----------------------------
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
------------------------ ----------- ---------------- ---------------- ----------- ----------------
$13 to $19 3,754,725 8.3 years $17 1,468,125 $18
$20 to $24 2,754,804 8.3 years $21 1,474,979 $21
$25 to $29 1,944,774 7.9 years $27 982,609 $28
$30 to $35 647,547 6.0 years $32 592,283 $32
$36 to $44 1,551,272 4.9 years $39 1,412,546 $39
$45 to $59 785,919 4.6 years $53 785,919 $53
$60 to $63 729,279 7.8 years $62 518,308 $63
---------- ---------- --------- --- --------- ---
$13 to $63 12,168,320 7.4 years $29 7,234,769 $33
========== ========== ========= === ========= ===
Certain key executives were granted options that, although the exercise
price was equal to the fair market value on the date of grant, cannot be
exercised when otherwise vested unless the market price of NMC's common stock
is a defined amount above the option exercise price. In addition, the same
executives were granted options with exercise prices in excess of the fair
market value on the date of grant. Generally, these key executive options vest
over a period of one to five years and are exercisable over a ten-year period.
At December 31, 2000, 503,354 of these options were outstanding and 266,714
were exercisable. Information about these stock options outstanding (included
in the "All Stock Options" table) at December 31, 2000 is summarized below:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- -----------------------------
WEIGHTED WEIGHTED
RANGE OF WEIGHTEDAVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
---------- ----------- ---------------- -------- ----------- --------
Options with exercise prices in
excess of the fair market value on
the date of the grant............. $40 to $56 266,714 2.5 years $50 266,714 $ 50
Options that cannot be exercised
until the market price exceeds a
fixed amount above the exercise
price............................. $30 to $41 236,640 2.8 years $37 -- $ --
The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for stock options. Accordingly, because stock
option exercise prices equal the market value on the date of grant, no
compensation cost has been recognized for its stock options. Had compensation
cost for the options been determined based on market value at grant dates in
2000, 1999 and 1998, as prescribed by SFAS No. 123, the Company's net income
and earnings per share would have been the pro forma amounts indicated below
(in thousands, except per share):
YEARS ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
Net income (loss) applicable to common shares
As reported................................ $(102,349) $(102,040) $(641,542)
Pro forma.................................. $(129,719) $(129,086) $(658,243)
Net income (loss) per share, basic and diluted
As reported................................ $ (0.53) $ (0.53) $ (3.50)
Pro forma.................................. $ (0.67) $ (0.67) $ (3.59)
A-37
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For purposes of determining the pro forma amounts, the fair value of each
option grant was estimated on the date of the grant using the Black-Scholes
option-pricing model with the following assumptions for 2000, 1999 and 1998,
respectively: weighted average risk-free interest rates of 6.4%, 6.4% and 4.5%;
dividend yield of 0.6%, 0.6% 0.5%; expected lives of nine years, eight years
and six years; and volatility of 56%, 52% and 85%, respectively.
Compensation costs included in the pro forma amounts reflect only fair
values of options granted after January 1, 1995. These amounts may not be
indicative of actual results had the Company used fair-value-based accounting
for stock options.
OTHER STOCK-BASED COMPENSATION
In 1997, the Company adopted an intermediate term incentive plan ("ITIP")
under which restricted stock may be granted to certain key employees. These
shares are granted upon achievement of certain financial and operating
thresholds at fair market value on the grant date. ITIP stock grants are
subject to certain restrictions related to ownership and transferability that
currently lapse two years (for ownership) and five years (for transfer) from
the date of the grant. In 2000 and 1999, 95,814 and 62,800 shares of restricted
stock, respectively, were issued under ITIP, of which 126,170 shares remain
restricted at December 31, 2000. In 1998, the Company awarded 10,643 shares of
restricted stock to certain key executives, of which none remain restricted at
December 31, 2000. Compensation expense recorded for these grants was $2.4
million, $1.1 million and $1.2 million in 2000, 1999 and 1998, respectively.
NOTE 13 EMPLOYEE PENSION AND OTHER BENEFIT PLANS
PENSION PLANS
The Company's pension plans include: (1) six qualified non-contributory
defined benefit plans (for salaried employees and substantially all domestic
hourly employees); (2) five non-qualified supplemental plans (for salaried
employees whose benefits under the qualified plan are limited by federal
legislation); (3) two qualifed defined contribution plans (for salaried and
hourly Canadian employees); and (4) a non-qualified cash balance international
plan (for select employees who are not eligible to participate in the
U.S.-based plans because of citizenship). The vesting period for each plan is
five years of service. The plans' benefit formulas are based on an employee's
years of credited service and either (i) such employee's last five years
average pay (salaried plan), (ii) a percentage of annual pay (international
plan) or (iii) a flat dollar amount adjusted by a service-weighted multiplier
(hourly plan).
Pension costs are determined annually by independent actuaries and pension
contributions to the qualified plans are made based on funding standards
established under the Employee Retirement Income Security Act of 1974.
OTHER BENEFIT PLANS
The Company provides defined medical benefits to qualified retirees (and to
their eligible dependents) who were salaried employees and defined life
insurance benefits to qualified retirees who were salaried employees. In
general, participants become eligible for these benefits upon retirement
directly from the Company if they are at least 55 years old and the combination
of their age and years of service with the Company equals 75 or more.
Defined medical benefits cover most of the reasonable and customary charges
for hospital, surgical, diagnostic and physician services and prescription
drugs. Life insurance benefits are based on a percentage of final base annual
salary and decline over time after retirement commences.
A-38
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following tables provide a reconciliation of changes in the plans'
benefit obligations and assets' fair values over the two-year period ended
December 31, 2000 and a statement of the funded status as of December 31 of
both years (in thousands):
PENSION BENEFITS OTHER BENEFITS
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Change in Benefit Obligation:
Benefit obligation at beginning of year...... $181,743 $189,782 $ 49,322 $ 58,747
Service cost-benefits earned during the year. 7,530 9,358 2,570 4,053
Interest cost................................ 13,631 12,723 3,209 3,511
Amendments................................... 2,860 -- -- --
Actuarial loss (gain)........................ 5,406 (20,575) (8,573) (15,126)
Settlement (gain) loss....................... (333) -- -- --
Foreign currency exchange (gain) loss........ (289) 960 (36) 79
Settlement payments.......................... (12,431) -- -- --
Benefits paid................................ (8,771) (10,505) (1,430) (1,942)
-------- -------- -------- --------
Benefit obligation at end of year............ $189,346 $181,743 $ 45,062 $ 49,322
======== ======== ======== ========
Change in Fair Value of Assets:
Fair value of assets at beginning of year.... $182,666 $167,728 $ -- $ --
Adjustment to fair value of assets........... -- 4,587 -- --
Actual return (loss) on plan assets.......... (1,340) 15,911 -- --
Employer contributions....................... 3,802 4,152 -- --
Administrative expenses...................... (248) (247) -- --
Foreign currency exchange gain (loss)........ (567) 1,040 -- --
Settlement payments.......................... (12,293) -- 989 1,450
Benefits paid................................ (8,771) (10,505) (989) (1,450)
-------- -------- -------- --------
Fair value of assets at end of year.......... $163,249 $182,666 $ -- $ --
======== ======== ======== ========
Funded status................................ $(26,097) $ 923 $(45,062) $(49,322)
Unrecognized prior service cost.............. 11,499 6,612 1,528 1,676
Unrecognized net loss (gain)................. 2,754 (21,819) (25,372) (18,045)
Unrecognized net obligation.................. 143 50 -- --
-------- -------- -------- --------
Accrued cost................................. $(11,701) $(14,234) $(68,906) $(65,691)
======== ======== ======== ========
The Company's non-qualified pension plans and postretirement benefit plans
have Accumulated Benefit Obligations ("ABO") in excess of plan assets. The ABO
was $15.7 million and $12.9 million for supplemental pension plans, $2.2
million and $2.0 million for the international pension plans, and $45.1 million
and $49.3 million for postretirement benefit plans, at December 31, 2000 and
1999, respectively.
A-39
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table provides amounts recognized in the consolidated balance
sheets as of December 31 (in thousands):
PENSION BENEFITS OTHER BENEFITS
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Amounts recognized in the consolidated balance sheets:
Accrued benefit cost............................... $(21,923) $(23,179) $(68,906) $(65,691)
Intangible asset................................... 6,357 3,151 -- --
Accumulated other comprehensive income............. 3,865 5,794 -- --
-------- -------- -------- --------
Net amount recognized.............................. $(11,701) $(14,234) $(68,906) $(65,691)
======== ======== ======== ========
In accordance with the provisions of SFAS No. 87, an adjustment was required
to reflect a minimum liability for the supplemental pension plan in 2000, 1999
and 1998. As a result of such adjustment, an intangible asset was recorded and
(to the extent the minimum liability adjustment exceeded the unrecognized net
transition liability) Stockholders' equity was reduced $2.4 million, $3.5
million and $2.3 million (net of related deferred income tax benefits) at
December 31, 2000, 1999 and 1998, respectively.
The following table provides components of net periodic pension benefit cost
for the indicated fiscal years (in thousands):
PENSION BENEFITS OTHER BENEFITS
---------------------------- ----------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- ------ ------ ------
Components of net periodic pension benefit cost:
Service cost.................................... $ 7,530 $ 9,358 $ 8,665 $2,569 $4,022 $3,848
Interest cost................................... 13,631 12,723 11,805 3,209 3,511 3,476
Expected return on plan assets.................. (16,742) (14,824) (13,064) -- -- --
Recognition of net actuarial gain............... (691) (215) (281) (280) (165) (128)
Amortization of prior service cost.............. 729 730 796 148 148 278
Amortization of loss (gain)..................... 298 366 280 (993) (97) (12)
Amortization of net obligation (asset).......... (93) (204) (163) -- -- --
-------- -------- -------- ------ ------ ------
Total net periodic pension benefit cost..... $ 4,662 $ 7,934 $ 8,038 $4,653 $7,419 $7,462
======== ======== ======== ====== ====== ======
For the pension plans, prior-service costs are amortized on a straight-line
basis over the average remaining service period of active participants. Gains
and losses in excess of 10% of the greater of the benefit obligation and the
market-related value of assets are amortized over the average remaining service
period of active participants. Postretirement benefits other than pensions are
accrued during an employee's service to the Company.
Assumptions used in measuring the Company's benefit obligation were as
follows:
PENSION BENEFITS OTHER BENEFITS
---------------- --------------
2000 1999 2000 1999
----- ----- ----- -----
Weighted-average assumptions as of December 31:
Discount rate............................... 7.75% 7.75% 7.75% 7.75%
Expected return on plan assets.............. 9.25% 9.25% N/A N/A
Rate of compensation increase............... 4.00% 4.00% 4.00% 4.00%
A-40
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The assumed health care cost trend rate to measure the expected cost of
benefits was 7% for 2001, 6% for 2002 and 5% each year thereafter. Assumed
health care cost trend rates have a significant effect on amounts reported for
the health care plans. A 1% change in assumed health care cost trend rates
would have the following effects (in thousands):
1% INCREASE 1% DECREASE
----------- -----------
Effect on total of service and interest cost components of net periodic postretirement
health care benefit cost............................................................ $ 944 $ (797)
Effect on the health care component of the accumulated postretirement benefit
obligation.......................................................................... $6,047 $(5,260)
SAVINGS PLAN
The Company has four qualified defined contribution savings plans, two that
cover salaried employees and two that cover substantially all hourly employees.
In addition, the Company has a non-qualified supplemental savings plan for
salaried employees whose benefits under the qualified plan are limited by
federal regulations. When an employee meets eligibility requirements, the
Company matches 100% of employee contributions of up to 6% and 4% of base
salary for the salaried and hourly plans, respectively. The Company's matching
contributions under these plans were $9.9 million, $9.7 million and $9.7
million in 2000, 1999 and 1998, respectively.
NOTE 14 DIVIDENDS, INTEREST AND OTHER INCOME
YEARS ENDED
DECEMBER 31,
-------------------
2000 1999 1998
----- ----- ------
(IN MILLIONS)
Interest income................................ $10.5 $15.4 $ 18.5
Foreign currency exchange gain (loss), net..... (6.1) 8.2 (12.4)
Gain on sale of exploration properties......... 1.6 20.6 3.6
Recoveries from business interruption insurance -- -- 8.3
Other.......................................... 4.3 3.8 1.8
----- ----- ------
Total....................................... $10.3 $48.0 $ 19.8
===== ===== ======
NOTE 15 EXPENSES FOR ACQUISITION SETTLEMENT
In the third quarter of 2000, the Company resolved a long-standing legal
dispute regarding the acquisition of an additional interest in Minera
Yanacocha, a gold mining operation located in Peru. The Company issued $40
million of NMC common stock, 2.6 million shares, under terms of the settlement
and, charged $42.2 million, including expenses, to income.
Prior to 1997, the Company's interest in Minera Yanacocha was 38% and was
accounted for on an equity basis. Beginning in 1997, when the additional 13.35%
interest was deemed to be acquired, Minera Yanacocha was consolidated into the
Company's financial statements. The acquisition was disputed as described below.
In November 1993, the French government announced its intention to privatize
the mining assets of Bureau de Recherches Geologiques et Minieres, the
geological and mining bureau of the French government ("BRGM") and in September
1994, BRGM announced its intention to transfer its 24.7% interest in Minera
Yanacocha to a third party. The Company and Compania de Minas Buenaventura,
S.A.A. ("Buenaventura"), then 38.0% and 32.3% owners of Minera Yanacocha,
respectively, filed suit in Peru to seek enforcement of their preemptive
A-41
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
rights with respect to the proposed BRGM transfer. In September 1996, the trial
court ruled in favor of the Company and Buenaventura and held that the
preemptive rights were triggered in November 1993, and that the value of the
24.7% interest was $109.3 million. In June 1998, the Peruvian Supreme Court
issued a resolution upholding the decision.
In spite of the final decision of the Peruvian Supreme Court, in October
1998, BRGM, through its subsidiary Compagnie Miniere International Or S.A.
("Mine Or"), filed with the International Centre for Settlement of Investment
Disputes a request for arbitration against the Republic of Peru. The request
alleged that the decision of the Peruvian courts wrongfully deprived Mine Or of
its shares in Minera Yanacocha (which Mine Or valued at approximately $560
million) and sought restitution and damages from the Republic of Peru.
Under the settlement, all pending litigation and arbitration claims were
dismissed, including the BRGM's claims against the government of Peru.
NOTE 16 WRITE-DOWN OF ASSETS
In 2000, as a result of a prolonged period of low gold prices, the Company
reduced the carrying value of its long-lived assets by $58.4 million.
Specifically, the write-down related to the Holloway mine in Canada ($30.8
million), the short-lived Mesquite mine in California ($14.8 million), the Kori
Kollo mine in Bolivia ($5.6 million), the acquisition cost of the Mezcala
property in Mexico ($6.5 million) and the Battle Mountain Complex in Nevada
($0.7 million). The write- down reduced fixed assets by $30.8 million. Mesquite
write-down reduced leach pad inventory by $9.7 million, capitalized mining by
$1.4 million and fixed assets by $3.7 million. The Kori Kollo write-down
reduced inventory by $4.9 million and fixed assets by $0.7 million.
In 1999, the write-down of $39.5 million related to the Crown Jewel project
in Washington ($36.0 million) and to Nevada stockpile inventories ($3.5
million). The Crown Jewel write-down related to mine development costs and
represented the remaining carrying value of the property as a result of
permitting uncertainties resulting from a January 2000 decision from the
Washington Pollution Control Hearings Board decision that reversed its water
rights permits and vacated its Clean Water Act certification.
In 1998, the Company adjusted the carrying value of certain long-lived
assets to their estimated fair values resulting in an impairment loss of $719.8
million ($529.6 million net of tax). The write-down included $587.6 million for
Nevada operations, $49.9 million for Kori Kollo, $40.3 million for Crown Jewel,
$13.4 million for acquisition costs related to certain exploration properties,
$10.8 million for Reona at the Battle Mountain Complex in Nevada and $17.8
million for other investments (including $7.2 million at the Mesquite mine).
The 1998 write- down related to Property, plant and mine development ($625.0
million), Ore-in- stockpiles inventories ($67.0 million), Materials and
supplies inventory ($13.0 million) and Other long-term assets ($14.8 million).
NOTE 17 EQUITY IN LOSS OF AFFILIATES AND IMPAIRMENT
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
------ ------- --------
Equity loss in Batu Hijau $9,923 $10,675 $ 9,164
Equity loss in Lihir Gold -- 4,782 6,776
Lihir Gold impairment.... -- 76,170 89,962
------ ------- --------
Total................. $9,923 $91,627 $105,902
====== ======= ========
A-42
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Financial information relating to the Company's equity investment in Batu
Hijau was as follows (in millions):
YEARS ENDED DECEMBER 31,
---------------------------
2000 1999 1998
-------- -------- --------
Sales......................................................................... $ 431.3 $ 15.2 $ --
Interest income............................................................... $ 0.5 $ -- $ --
Interest expense.............................................................. $ 133.0 $ 17.1 $ 11.0
Depreciation and amortization................................................. $ 81.6 $ 8.8 $ 0.1
Net income (loss) before cumulative effect of a change in accounting Principle $ (98.6) $ 10.3 $ (26.8)
Cumulative effect of a change in accounting principle......................... $ -- $ -- $ (49.3)
Capital expenditures.......................................................... $ 158.8 $ 607.9 $ 826.3
Total assets at December 31,.................................................. $2,228.5 $2,107.6 $1,353.5
The equity loss in Batu Hijau was $9.9 million in 2000 (based on 56.25% of
Batu Hijau's net loss of $98.6 million plus $29.2 million of eliminated
intercompany interest, $12.5 million for eliminated management fees, and $3.9
million for other items). In 1999, the Company's equity loss was $10.7 million
(based on 56.25% of Batu Hijau's net income of $10.3 million plus $5.2 million
of eliminated intercompany interest, reduced by $20.6 million to reclassify
deferred tax benefits and increased by $1.2 million for other items) and in
1998, $9.2 million (based on 56.25% of the Batu Hijau loss after elimination of
$11 million intercompany interest).
As described in Note 1, Lihir Gold was accounted for as an equity investment
prior to 2000. The Company recorded $76.2 million and $90.0 million in 1999 and
1998, respectively, for impairment losses resulting from declines in Lihir
Gold's market value. Beginning in 2000, Lihir Gold stock was carried as
marketable equity securities held for sale and as of December 31, 2000 were
written down $23.9 million as an other than temporary loss resulting from the
length of time and extent to which their market value had been less than their
cost basis.
NOTE 18 ACCOUNTING CHANGES
As described in Note 2, the Company changed its method of accounting for
revenue recognition in the fourth quarter of 2000, effective January 1, 2000,
to record sales upon delivery of third-party refined gold to the customer.
Previously, revenue was recognized upon the completion of the production
process, or when gold was poured into dore at the mine site. The cumulative
effect of the change in accounting principle as of January 1, 2000 was $12.6
million, net of tax and minority interest.
The Company adopted SOP 98-5 effective January 1, 1998. The change resulted
in expensing certain costs incurred in the start-up phase of a project.
Previously capitalized start-up costs (incurred prior to January 1, 1998) of
$32.9 million (net of tax and minority interest) were reflected in the
cumulative effect of the change and included approximately $18 million for Batu
Hijau and $11 million for Nevada operations.
NOTE 19 SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities included the following cash
payments (in thousands):
YEARS ENDED DECEMBER 31,
------------------------
2000 1999 1998
------- ------- --------
Income taxes, net of refunds........ $86,608 $28,500 $ 57,278
Interest, net of amounts capitalized $91,510 $73,422 $102,748
A-43
In 2000, NMC issued 2.6 million shares of common stock in conjunction with
the acquisition settlement described in Note 15 that resulted in noncash
increases to Common stock ($4.2 million) and Additional paid-in capital ($35.8
million).
In 2000, Minera Yanacocha entered into certain leases that resulted in a
noncash increase to Property, plant and mine development and Long-term debt
($2.3 million).
In December 1999, Minera Yanacocha assumed certain equipment lease and
purchase agreements (see Note 8) that resulted in a noncash increase to
Property, plant and mine development20 and Long-term debt ($12.4 million).
In the third quarter of 1999, NMC entered into two put and call option
contracts described in Note 10. As a result, noncash increases to Put option
premiums and Fair value of written call options ($37.6 million) were recorded
for the initial fair value of these contracts.
In October 1998, NMC acquired the remaining 6.25% interest in NGC. As
described in Note 1, this transaction resulted in noncash increases to:
Stockholders' equity ($259 million), Investment in Batu Hijau ($122 million),
Property, plant and mine development ($85 million), Deferred income tax
liability ($54 million); and a noncash decrease to Minority interest ($107
million).
In 1998, the Company retired mostly fully depreciated property, plant and
mine development with an original cost of $50 million, which is not reflected
in the statements of consolidated cash flows.
NOTE 20 SEGMENT AND RELATED INFORMATION
The Company predominantly operates in a single industry as a worldwide
corporation engaged in gold production, exploration for gold and acquisition of
gold properties. The Company has operations in North America, South America,
Indonesia, Uzbekistan and Australia and its reportable segments are based on
thegeographic location of these operations. Earnings from operations do not
include general corporate expenses, interest (except project-specific interest)
or income taxes (except for equity investments).
Financial information relating to the Company's consolidated segments is as
follows (in millions):
NORTH SOUTH
YEAR ENDED DECEMBER 31, AMERICAN AMERICAN MINAHASA, ZARAFSHAN-NEWMONT,
2000 OPERATIONS OPERATIONS* INDONESIA UZBEKISTAN AUSTRALIA OTHER CONSOLIDATED
---- ---------- ----------- --------- ------------------ --------- ------- ------------
Sales....................... $1,011.1 $572.9 $120.9 $70.2 $31.5 $ 2.8 $1,809.4
Interest income............. $ -- $ 3.6 $ 0.1 $ -- $ -- $ 6.8 $ 10.5
Interest expense............ $ 0.3 $ 5.1 $ -- $ 1.7 $ -- $ 87.6 $ 94.6
Depreciation and
amortization............... $ 211.2 $ 97.1 $ 25.0 $13.3 $ 4.4 $ 8.4 $ 359.4
Pre-tax income (loss) before
minority interest, equity
loss and cumulative effect
of a change in accounting
principle.................. $ 22.7 $214.8 $ 45.5 $23.1 $15.5 $(301.6) $ 20.0
Cumulative effect of a
change in accounting
principle.................. $ (5.2) $ (5.2) $ (2.1) $(2.4) $(0.1) $ 2.4 $ (12.6)
Significant non-cash items:
Amortization of
capitalized mining....... $ 95.4 $ -- $ 7.7 $ -- $ -- $ -- $ 103.1
Write-down of assets...... $ 45.5 $ 5.6 $ -- $ -- $ -- $ 7.3 $ 58.4
Capital expenditures........ $ 121.7 $284.7 $ 2.2 $ 4.3 $ 4.9 $ 3.1 $ 420.9
Total assets at December 31,
2000....................... $1,849.7 $881.7 $ 96.8 $97.3 $30.8 $ 960.5 $3,916.8
--------
* Not reduced for minority interest
A-44
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NORTH SOUTH ZARAFSHAN-
AMERICAN AMERICAN MINAHASA, NEWMONT,
YEAR ENDED DECEMBER 31, 2000 OPERATIONS OPERATIONS* INDONESIA UZBEKISTAN AUSTRALIA OTHER CONSOLIDATED
---------------------------- ---------- ----------- --------- ---------- --------- ------- ------------
Sales................................ $ 865.8 $549.2 $118.3 $ 75.3 $18.5 $ -- $1,627.1
Interest income...................... $ -- $ 3.8 $ 0.1 $ -- $ -- $ 11.5 $ 15.4
Interest expense..................... $ 0.4 $ 7.5 $ -- $ 2.7 $ -- $ 67.1 $ 77.7
Depreciation and amortization........ $ 168.2 $ 92.4 $ 23.0 $ 11.2 $ 2.8 $ 6.2 $ 303.8
Pre-tax income (loss) before minority
interest and equity loss............ $ 49.0 $184.9 $ 58.5 $ 17.2 $ 7.3 $(257.4) $ 59.5
Significant non-cash items:
Amortization of capitalized mining. $ 30.6 $ -- $ 7.2 $ -- $ -- $ 0.5 $ 38.3
Write-down of assets............... $ 3.5 $ -- $ -- $ -- $ -- $ 35.9 $ 39.4
Capital expenditures................. $ 85.0 $133.3 $ 10.8 $ 3.2 $10.2 $ 27.7 $ 270.2
Total assets at December 31, 1999.... $1,998.7 $677.8 $132.6 $107.4 $36.0 $ 999.4 $3,951.9
--------
* Not reduced for minority interest
NORTH SOUTH ZARAFSHAN-
AMERICAN AMERICAN MINAHASA, NEWMONT,
YEAR ENDED DECEMBER 31, 1998 OPERATIONS OPERATIONS* INDONESIA UZBEKISTAN AUSTRALIA OTHER CONSOLIDATED
---------------------------- ---------- ----------- --------- ---------- --------- -------- ------------
Sales................................ $1,055.6 $496.4 $ 96.6 $ 55.1 $14.4 $ 12.4 $1,730.5
Interest income...................... $ -- $ 3.2 $ 0.2 $ -- $ -- $ 15.1 $ 18.5
Interest expense..................... $ 0.4 $ 9.0 $ -- $ 5.1 $ -- $ 82.1 $ 96.6
Depreciation and amortization........ $ 226.8 $100.4 $ 20.1 $ 11.3 $ 1.5 $ 8.6 $ 368.7
Pre-tax income (loss) before minority
interest, equity loss and cumulative
effect of a change in accounting
principle........................... $ (488.7) $118.4 $ 41.2 $ (0.5) $ 6.2 $ (267.6) $ (591.0)
Cumulative effect of a change in
accounting principle................ $ (10.6) $ -- $ (1.5) $ (2.5) $ -- $ (18.3) $ (32.9)
Significant non-cash items: $ --
Amortization of capitalized mining... $ 48.4 $ -- $ 4.2 $ -- $ -- $ 11.2 $ 63.8
Write-down of assets................. $ 606.6 $ 49.9 $ -- $ -- $ -- $ 63.3 $ 719.8
Capital expenditures................. $ 132.0 $ 85.8 $ 6.4 $ 0.9 $ 8.2 $ 29.2 $ 262.5
Total assets at December 31, 1998.... $2,078.6 $608.1 $147.2 $122.3 $24.8 $1,041.0 $4,022.0
--------
* Not reduced for minority interest
Revenues from export and domestic sales were as follows (in millions):
YEARS ENDED DECEMBER 31,
----------------------------
2000 1999 1998
-------- -------- --------
Europe....... $1,446.6 $1,350.8 $1,382.0
Canada....... 141.6 124.7 131.9
Bolivia...... 81.1 84.9 103.9
United States 6.6 5.0 21.2
Other........ 162.2 80.2 91.5
-------- -------- --------
Total..... $1,838.1* $1,645.6* $1,730.5
======== ======== ========
Excludes $9.6 million for gold delivery requirements associated with the
pre-paid forward sale contract in 2000, and $19.1 million and $18.5 million for
put option premium amortization in 2000 and 1999, respectively.
A-45
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-lived assets in the United States and other countries are as follows
(in millions):
AS OF DECEMBER 31
-----------------
2000 1999
-------- --------
United States $1,806.8 $1,890.9
Canada....... 119.2 163.8
Indonesia.... 590.7 569.8
Peru......... 619.5 414.8
Bolivia...... 34.8 53.2
Other........ 133.6 208.5
-------- --------
$3,304.6 $3,301.0
======== ========
The Company is not economically dependent on a limited number of customers
for the sale of its product because gold can be sold through numerous commodity
market traders worldwide. In 2000, sales to one customer totaled $1.1 billion
or 62% of total sales. In 1999, sales to two customers totaled $771 million and
$531 million or 47% and 32%, respectively. In 1998, sales to two customers
totaled $869 million and $264 million or 51% and 15% of total sales,
respectively.
NOTE 21 COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL OBLIGATIONS
The Company's mining and exploration activities are subject to various
federal and state laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and are
generally becoming more restrictive. The Company conducts its operations so as
to protect the public health and environment and believes its operations are in
compliance with all applicable laws and regulations. The Company has made, and
expects to make in the future, expenditures to comply with such laws and
regulations, but cannot predict the amount of such future expenditures.
Estimated future reclamation costs are based principally on legal and
regulatory requirements. At December 31, 2000 and December 31, 1999, $108.9
million and $89.8 million, respectively, were accrued for reclamation costs
relating to currently producing mineral properties.
Certain appeals were filed by third parties with the Department of Interior
Board of Land Appeals in conjunction with the Twin Creeks Environmental Impact
Statement. Those appeals sought to impose mitigation and other conditions on
the mine operations. The Company has been recently advised that such appeals
have been resolved in the Company's favor at the administrative level.
In addition, the Company is involved in several matters concerning
environmental obligations associated with former mining activities. Generally,
these matters concern developing and implementing remediation plans at the
various sites involved. The Company believes 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 compliance
required to meet general environmental standards. Based upon the Company's best
estimate of its liability for these matters, $63.5 million and $56.6 million
were accrued for such obligations at December 31, 2000 and December 31, 1999,
respectively. These amounts are included in Other accrued liabilities and
Reclamation and remediation liabilities. Depending upon the ultimate resolution
of these matters, the Company believes that it is reasonably possible that the
liability for these matters could be as much as 40% greater or lower than the
amount accrued at December 31, 2000. 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, Other in the period
estimates are revised.
A-46
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Details about certain of the more significant sites involved are discussed
below.
Idarado Mining Company ("Idarado")--80.1% owned
In July 1992, the Company and Idarado signed a consent decree with the State
of Colorado ("State") that was agreed to by the U.S. District Court of Colorado
to settle a lawsuit brought by the State under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), generally referred to as
the "Superfund Act." Idarado settled natural resources damages and past and
future response costs and provided habitat enhancement work. In addition,
Idarado agreed in the consent decree to undertake specified remediation work at
its former mining site in the Telluride/Ouray area of Colorado. Remediation
work at this property is substantially complete. If the remediation does not
achieve specific performance objectives defined in the consent decree, the
State may require Idarado to implement supplemental activities at the site,
also as defined in the consent decree. Idarado and the Company have obtained a
$7.0 million reclamation bond to secure their potential obligations under the
consent decree.
Resurrection Mining Company ("Resurrection")--100% owned
The Company, Resurrection and other defendants have been named in lawsuits
filed by the State of Colorado, under the Superfund Act in 1983 and
subsequently consolidated with a lawsuit filed by the U.S. Environmental
Protection Agency ("EPA") in 1986. These proceedings seek to compel the
defendants to remediate the impacts of pre-existing, historic mining activities
near Leadville, Colorado that date back to the mid-1800's, which the government
agencies claim are causing substantial environmental problems in the area.
In 1988 and 1989, the EPA issued administrative orders with respect to one
area on the site and the defendants have collectively implemented those orders
by constructing a water treatment plant, which was placed in operation in early
1992. Remaining remedial work for this area primarily consists of environmental
monitoring and maintenance activities.
The parties have entered into a consent decree with respect to the remaining
areas that apportions liabilities and responsibilities for the site among the
various parties. The EPA has approved remedial actions for selected components
of Resurrection's portion of the site, which were initiated in 1995. The EPA
has not yet selected the final remedy for the site. Accordingly, the Company
cannot yet determine the full extent or cost of its share of the remedial
action that will be required. The government agencies may also seek to recover
for damages to natural resources. In March 1999, the parties entered into a
Memorandum of Understanding ("MOU") to facilitate the settlement of natural
resources damages claims under CERCLA for the upper Arkansas River Basin. The
MOU provides a structure for evaluation of damages and possible restoration
activities that may be required if it is concluded such damages have occurred.
Dawn Mining Company LLC ("Dawn")--51% owned
Dawn leased an open-pit uranium mine, currently inactive, on the Spokane
Indian Reservation in the State of Washington. The mine is subject to
regulation by agencies of the U.S. Department of Interior, the Bureau of Indian
Affairs and the Bureau of Land Management, as well as the EPA. Dawn also owns a
nearby uranium millsite facility that is subject to federal and state
regulation.
In 1991, Dawn's lease was terminated. As a result, Dawn was required to file
a formal mine closure and reclamation plan. The Department of Interior has
commenced an Environmental Impact Study to analyze Dawn's proposed plan and to
consider alternate closure and reclamation plans for the mine. Dawn cannot
predict at this time what type of mine reclamation plan may be selected by the
Department of Interior. Dawn does not have sufficient funds to pay for the
reclamation plan it proposed, for any alternate plan, or for the closure of its
mill.
A-47
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Department of Interior previously notified Dawn that when the lease was
terminated, it would seek to hold Dawn and the Company (as Dawn's 51% owner)
liable for any costs incurred as a result of Dawn's failure to comply with the
lease and applicable regulations. Other government agencies have asserted that
the Company is liable for future reclamation or remediation work at the mine or
millsite. In mid-2000, the mine was included on the National Priorities List
under CERCLA. The Company will vigorously contest any claims as to its
liability. The Company cannot reasonably predict the likelihood or outcome of
any future action against Dawn or the Company arising from this matter.
In late 1999, Dawn initiated state approval for a revised mill closure plan
that, if implemented, would expedite the reclamation process at the mill. The
State of Washington is reviewing this revised plan. The currently approved
clean fill plan for the mill is secured by a $19.9 million bond that is 50%
secured by a letter of credit and is guaranteed by the Company.
San Luis, Colorado--100% owned
The San Luis open-pit gold mine in southern Colorado was operated by Battle
Mountain and ceased operations in November 1996. Since then substantial closure
and reclamation work has been undertaken. In 1998, Battle Mountain provided
notice to regulatory agencies and began implementation of a response plan for
identified elevated levels of naturally-occurring constituents detected in its
monitoring well located downgradient from the west pit of the mine. In early
1999, the Colorado Mined Land Reclamation Board held a formal public hearing to
consider the matter and determined that no violation had occurred.
Subsequently, Battle Mountain has received approval for a number of technical
revisions to the current permit which outline the necessary response actions to
be taken with respect to remediation and protection of the uncontaminated
portion of the aquifer. In August 1999, the Colorado Department of Public
Health and Environment ("CDPHE") issued a notice of violation of the Water
Quality Control Act and in October 1999 amended the notice to authorize
operation of a water treatment facility and the discharge of treated water.
Battle Mountain has made all submittals required by the CDPHE notice and
conducted the required response activities. Battle Mountain negotiated a
settlement with CDPHE resolving alleged violations that was effective September
1, 2000. In October 2000, the CDPHE received an "Application for
Reconsideration of Order for Civil Penalty" by project opponents seeking to
appeal the terms of the settlement. The application was denied by CDPHE. The
parties have filed a judicial appeal in the District Court for Costilla County,
Colorado, naming the CDPHE as defendant. Battle Mountain has intervened in the
appeal to protect its interests in the settlement. In 2000 and 1999, the
remediation liability for San Luis was increased $13.2 million and $9.5
million, respectively. The Company cannot reasonably predict the likelihood or
outcome of this or any future action against Battle Mountain or the Company
relating to this site.
GUARANTEE OF THIRD PARTY INDEBTEDNESS
The Company guaranteed a former subsidiary's $35.7 million Pollution Control
Revenue Bonds, due 2009. The former subsidiary is BHP Copper Inc., formerly
known as Magma Copper Company. It is expected that the Company will be required
to remain liable on this guarantee as long as the bonds remain outstanding;
however, the Company has not been required to pay any of these amounts, nor
does it expect to have to pay any in the future.
OTHER COMMITMENTS AND CONTINGENCIES
In June 2000, a transport contractor of Minera Yanacocha spilled
approximately 151 kilograms of mercury near the town of Choropampa, Peru, which
is located 53 miles southwest of the mine. Mercury is a byproduct of gold
mining and was sold to a Lima firm for use in medical instrumentation and
industrial applications. A comprehensive health and environmental remediation
program was undertaken by Minera Yanacocha. In August 2000, Minera Yanacocha
paid under protest a fine of 1,740,000 soles (approximately US$500,000) to the
A-48
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Peruvian government. Minera Yanacocha entered into agreements with three of the
communities impacted by this incident to provide a variety of public works as
compensation for the disruption and inconvenience caused by the incident.
Estimated costs of $10.0 million for these improvements, other remediation
efforts, personal compensation and the fine were included in Other expense in
2000. The Company cannot reasonably predict the likelihood of any additional
expenditures related to this matter.
Under a 1992 agreement with Barrick Goldstrike Mines Inc. ("Barrick"),
Barrick mined the Deep Post deposit, which is located on both companies'
property and with respect to which both companies shared mining costs and
dewatering costs. The Company paid $36.5 million and $14.5 million for its
share of such costs in 2000 and 1999, respectively. No payments were made in
1998 and mining was completed during 2000.
The Golden Giant property in Canada includes a quarter claim acquired from
two unrelated mining companies that retained a 50% net profits royalty based on
a deemed production rate of 500 tons per day. In addition, a 3% net smelter
return is paid to the original quarter claim prospectors.
In a 1993 asset exchange, a wholly-owned subsidiary transferred a coal lease
under which the subsidiary had collected advance royalty payments totaling $484
million. From 1994 to to 2018, remaining payments under the lease to the
transferee total $390 million. In the event of title failure as stated in the
lease, this subsidiary has a primary obligation to refund previously collected
payments and has a secondary obligation to refund any of the $390 million
collected by the transferee, if the transferee fails to meet its refund
obligation. The subsidiary has no direct liability to the lessor and has title
insurance on the leased coal deposits of $240 million covering the secondary
obligation. The Company and the subsidiary regard the circumstances entitling
the lessor to a refund as remote. The Company has agreed to maintain the
subsidiary's net worth at $108 million until July 1, 2005.
The Company has minimum royalty obligations on one of its producing mines in
Nevada for the life of the mine. Amounts paid as a minimum royalty (where
production royalties are less than the minimum obligation) in any year are
recoverable in future years when the minimum royalty obligation is exceeded.
Although the minimum royalty requirement may not be met in a particular year,
the Company expects that over the mine life, gold production will be sufficient
to meet the minimum royalty requirements.
At December 31, 2000, there were $95.6 million of outstanding letters of
credit and surety bonds primarily for bonding reclamation plans and reinsurance
agreements. The surety bonds and letters of credit reflect fair value as a
condition of their underlying purpose and are subject to fees competitively
determined in the marketplace.
The Company is from time to time involved in various legal proceedings of a
character normally incident to its business. It does not believe that adverse
decisions in any pending or threatened proceeding or that amounts which it may
be required to pay by reason thereof will have a material adverse effect on its
financial condition or results of operations.
A-49
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 22 UNAUDITED SUPPLEMENTARY DATA
QUARTERLY DATA
The following is a summary of selected quarterly financial information (in
millions except per share amounts):
2000
---------------------------------------------------------
THREE MONTHS ENDED
-------------------------------------------- YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- -------- ------------- ------------ ------------
Sales.......................................... $453.2 $411.1 $419.4 $525.8 $1,809.5
Gross profit (1)............................... $105.7 $ 86.9 $ 73.9 $116.3 $ 382.8
Net income (loss) before cumulative effect of a
change in accounting principle applicable to
common shares (2)(3)......................... $ 6.1 $(25.9) $(36.5) $(33.5) $ (89.8)
Net loss applicable to common shares........... $ (6.5) $(25.8) $(36.5) $(33.5) $ (102.3)
Net income (loss) before cumulative effect of a
change in accounting principle per common
share, basic and diluted..................... $ 0.03 $(0.13) $(0.19) $(0.18) $ (0.47)
Net income (loss) per common share, basic and
diluted...................................... $(0.03) $(0.13) $(0.19) $(0.18) $ (0.53)
Basic weighted average shares outstanding...... 191.9 192.0 192.2 192.8 192.2
Dividends declared per NMC common share........ $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.12
Closing price of NMC common stock.............. $22.44 $21.63 $17.00 $17.06 $ 17.06
1999
---------------------------------------------------------
THREE MONTHS ENDED
-------------------------------------------- YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- -------- ------------- ------------ ------------
Sales........................................ $380.9 $369.2 $382.5 $494.5 $1,627.1
Gross profit (1)............................. $ 75.4 $ 58.4 $ 62.9 $144.9 $ 341.6
Net income (loss)............................ $ (4.6) $(10.1) $(59.0) $(28.3) $ (102.0)
Net income (loss) per common share, basic and
diluted.................................... $(0.02) $(0.05) $(0.31) $(0.15) $ (0.53)
Basic weighted average shares outstanding.... 191.4 191.5 191.6 191.7 191.6
Dividends declared per NMC common share...... $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.12
Closing price of NMC common stock............ $17.50 $19.88 $25.88 $24.50 $ 24.50
--------
(1) Sales less costs applicable to sales and depreciation, depletion and
amortization.
(2) In the quarter ended December 31, 2000, the Company changed its method of
accounting for revenue recognition, as described in Note 19. The accounting
principle was applied retroactively to January 1, 2000, and 2000 quarterly
information was restated.
(3) Included an after-tax charge of $0.4 million, none, $1.4 million and $1.3
million in the quarters ended March 31, June 30, September 30 and December
31, respectively, for expenses related to the change in accounting
principle and an after-tax impairment charge of $21.3 million, in the
quarter ended December 31.
A-50
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 1.4, 0.5, (5.2), 1.9, and 1.1 for
the years ended December 31, 2000, 1999, 1998, 1997 and 1996, respectively. The
ratio of earnings to fixed charges represents income before income taxes and
interest expense divided by interest expense. Interest expense includes
amortization of capitalized interest and the portion of rent expense
representative of interest. Earnings in 1998 were inadequate to cover fixed
charges, with a deficiency of $706 million. The Company guarantees certain
third party debt; however, it has not been and does not expect to be required
to pay any amounts associated with such debt. Therefore, related interest on
such debt has not been included in the ratio of earnings to fixed charges.
ITEM 7. EXHIBIT
(c) Exhibit
23 Consent of Independent Public Accountants
EXHIBIT NO. DESCRIPTION
----------- -----------
23 Consent of Independent Public Accountants
A-51
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEWMONT MINING CORPORATION
/S/ BRITT D. BANKS
By: _________________________________
Britt D. Banks, Secretary and
Associate General Counsel
Dated: May 9, 2001
A-52
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 8-K, into Newmont Mining Corporation's
previously filed S-8 Registration Statement Nos. 033-49872, 033-53267,
033-62496, 333-04161, 333-64795, 333-69147, 333-69145, 333-75993, 333-38178,
333-38184; S-8 Registration Statement to Form S-4 No. 333-50516; Post-Effective
Amendment No. 1 on Form S-8 to Form S-4 No. 333-19335-01; S-3 Registration
Statement Nos. 033-45325, 033-54249, 033-45325, 333-59141, 333-82671,
333-48908; S-3 Registration Statement to Form S-4 No. 333-50516; S-4
Registration Statement No. 333-92029.
Denver, Colorado,
May 9, 2001.
A-53
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
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: 1-1153
NEWMONT MINING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-2526632
(STATE OR OTHER JURISDICTION INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1700 LINCOLN STREET, DENVER, COLORADO 80203
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
303-863-7414
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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. [X] Yes [_] No
There were 196,034,980 shares of common stock outstanding on October 25, 2001.
A-54
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEWMONT MINING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE)
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
2001 2000
-------- --------
Sales and other income
Sales.................................................................... $424,397 $419,395
Dividends, interest and other............................................ (3,291) 697
-------- --------
421,106 420,092
-------- --------
Costs and expenses
Costs applicable to sales................................................ 283,269 256,320
Depreciation and depletion............................................... 71,479 89,204
Exploration and research................................................. 12,843 20,699
General and administrative............................................... 12,388 18,593
Interest, net of capitalized interest of $2,881 and $2,189, respectively. 21,745 22,984
Expenses for acquisition settlement...................................... -- 42,181
Other.................................................................... 2,953 20,616
-------- --------
404,677 470,597
-------- --------
Operating income (loss)..................................................... 16,429 (50,505)
Gain on written call options................................................ 943 24,123
-------- --------
Pre-tax income (loss) before minority interest and equity income............ 17,372 (26,382)
Income tax benefit.......................................................... 8,509 10,552
Minority interest in income of affiliates................................... (19,335) (19,496)
Equity income of Batu Hijau................................................. 16,852 666
-------- --------
Net income (loss)........................................................... 23,398 (34,660)
Preferred stock dividends................................................... (1,870) (1,870)
-------- --------
Net income (loss) applicable to common shares............................... $ 21,528 $(36,530)
======== ========
Net income (loss)........................................................... $ 23,398 $(34,660)
Other comprehensive income (loss), net of tax............................... 7,163 (8,934)
-------- --------
Comprehensive income (loss)................................................. $ 30,561 $(43,594)
======== ========
Net income (loss) per common share, basic and diluted....................... $ 0.11 $ (0.19)
======== ========
Basic weighted average shares outstanding................................... 195,880 192,191
Diluted weighted average shares outstanding................................. 196,068 192,191
Cash dividends declared per common share.................................... $ 0.03 $ 0.03
======== ========
See Notes to Consolidated Financial Statements
A-55
NEWMONT MINING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
2001 2000
---------- ----------
Sales and other income
Sales........................................................................... $1,210,855 $1,283,712
Dividends, interest and other................................................... 3,587 4,460
---------- ----------
1,214,442 1,288,172
---------- ----------
Costs and expenses
Costs applicable to sales....................................................... 812,963 758,626
Depreciation and depletion...................................................... 218,829 258,605
Exploration and research........................................................ 43,463 58,884
General and administrative...................................................... 40,532 49,389
Interest, net of capitalized interest of $9,523and $4,039, respectively......... 62,641 71,063
Merger and restructuring........................................................ 60,510 --
Expenses for acquisition settlement............................................. -- 42,181
Other........................................................................... 8,203 25,873
---------- ----------
1,247,141 1,264,621
---------- ----------
Operating income (loss)............................................................ (32,699) 23,551
Gain on written call options....................................................... 1,797 13,054
---------- ----------
Pre-tax income (loss) before minority interest, equity income (loss) and cumulative
effect of changes in accounting principle........................................ (30,902) 36,605
Income tax benefit (expense)....................................................... 6,666 (5,782)
Minority interest in income of affiliates.......................................... (44,423) (66,733)
Equity income (loss) of Batu Hijau................................................. 23,214 (14,735)
---------- ----------
Net loss before cumulative effect of changes in accounting principle............... (45,445) (50,645)
Cumulative effect of changes in accounting principle, net.......................... -- (12,572)
---------- ----------
Net loss........................................................................... (45,445) (63,217)
Preferred stock dividends.......................................................... (5,607) (5,607)
---------- ----------
Net loss applicable to common shares............................................... $ (51,052) $ (68,824)
========== ==========
Net loss........................................................................... $ (45,445) $ (63,217)
Other comprehensive income (loss), net of tax...................................... 11,140 (27,309)
---------- ----------
Comprehensive loss................................................................. $ (34,305) $ (90,526)
========== ==========
Net loss before cumulative effect of changes in accounting principles per common
share, basic and diluted......................................................... $ (0.26) $ (0.29)
========== ==========
Net loss per common share, basic and diluted....................................... $ (0.26) $ (0.36)
========== ==========
Basic weighted average shares outstanding.......................................... 194,720 192,014
Diluted weighted average shares outstanding........................................ 194,720 192,014
Cash dividends declared per common share........................................... $ 0.09 $ 0.09
========== ==========
See Notes to Consolidated Financial Statements
A-56
NEWMONT MINING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- ------------
Assets
Cash and cash equivalents................................ $ 90,516 $ 77,558
Short-term investments................................... 7,338 7,084
Accounts receivable...................................... 26,381 29,281
Inventories.............................................. 327,801 361,040
Marketable securities of Lihir........................... 62,340 37,879
Prepaid taxes............................................ 20,130 46,307
Current portion of deferred income tax assets............ 9,626 9,624
Other current assets..................................... 46,856 43,395
---------- ----------
Current assets....................................... 590,988 612,168
Property, plant and mine development, net................... 2,261,642 2,190,504
Investment in Batu Hijau.................................... 541,464 527,568
Long-term inventory......................................... 148,474 163,782
Deferred income tax assets.................................. 341,744 294,939
Restricted cash............................................. -- 41,968
Other long-term assets...................................... 92,944 85,837
---------- ----------
Total assets...................................... $3,977,256 $3,916,766
========== ==========
Liabilities
Short-term borrowings.................................... $ -- $ 10,000
Current portion of long-term debt........................ 189,189 70,447
Accounts payable......................................... 72,400 87,757
Current portion of deferred income tax liabilities....... 7,983 10,223
Other accrued liabilities................................ 186,482 220,175
---------- ----------
Current liabilities.................................. 456,054 398,602
Long-term debt........................................... 1,092,293 1,129,390
Reclamation and remediation liabilities.................. 170,342 160,548
Deferred revenue......................................... 191,039 137,198
Fair value of written call options....................... -- 55,638
Deferred income tax liabilities.......................... 123,046 104,649
Other long-term liabilities.............................. 254,366 239,384
---------- ----------
Total liabilities................................. 2,287,140 2,225,409
---------- ----------
Contingencies (Notes 5 and 12)
Minority interest in affiliates............................. 230,539 191,314
---------- ----------
Stockholders' equity
Convertible preferred stock.............................. 11,500 11,500
Common stock............................................. 313,559 312,107
Additional paid-in capital............................... 1,460,637 1,463,318
Accumulated other comprehensive loss..................... (14,648) (25,788)
Retained deficit......................................... (311,471) (261,094)
---------- ----------
Total stockholders' equity........................ 1,459,577 1,500,043
---------- ----------
Total liabilities and stockholders' equity........ $3,977,256 $3,916,766
========== ==========
See Notes to Consolidated Financial Statements
A-57
NEWMONT MINING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
2001 2000
---------- ---------
Operating activities:
Net loss......................................................................... $ (45,445) $ (63,217)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and depletion.................................................... 218,829 258,605
Amortization of capitalized mining costs...................................... 30,696 62,814
Deferred taxes................................................................ (35,282) (22,736)
Noncash merger and restructuring expenses..................................... 14,667 --
Stock issued for acquisition settlement....................................... -- 40,000
Cumulative effect of accounting changes....................................... -- 12,572
Amortization of put option premiums........................................... -- 16,842
Gain on written call options.................................................. (1,797) (13,054)
Foreign currency exchange loss................................................ 5,283 5,855
Minority interest, net of dividends........................................... 39,224 37,048
Undistributed (income) losses of Batu Hijau................................... (23,214) 14,735
Gain on sale of assets and other.............................................. (5,795) (862)
(Increase) decrease in operating assets:
Accounts receivable........................................................ (2,502) 7,214
Inventories................................................................ 49,402 (44,253)
Other assets............................................................... 21,785 (14,982)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses...................................... (45,046) 16,689
Other liabilities.......................................................... 13,531 24,971
---------- ---------
Net cash provided by operating activities........................................... 234,336 338,241
---------- ---------
Investing activities:
Additions to property, plant and mine development................................ (329,374) (271,063)
Repayments from (advances to) Batu Hijau......................................... 8,780 (111,488)
Repayments from joint ventures and affiliates.................................... -- 16,440
Cash effect of affiliate merger.................................................. -- (54,700)
Proceeds from asset sales and other.............................................. 2,073 (3,671)
---------- ---------
Net cash used in investing activities............................................... (318,521) (424,482)
---------- ---------
Financing activities:
Repayment of short-term borrowings............................................... (10,000) --
Proceeds from long-term borrowings............................................... 1,013,550 384,000
Repayments of long-term borrowings............................................... (931,196) (342,971)
Decrease in restricted cash...................................................... 40,000 --
Dividends paid on common and preferred stock..................................... (23,219) (20,724)
Other............................................................................ 5,845 (938)
---------- ---------
Net cash provided by financing activities........................................... 94,980 19,367
---------- ---------
Effect of exchange rate changes on cash............................................. 2,163 3,572
---------- ---------
Net change in cash and cash equivalents............................................. 12,958 (63,302)
Cash and cash equivalents at beginning of period.................................... 77,558 122,832
---------- ---------
Cash and cash equivalents at end of period.......................................... $ 90,516 $ 59,530
========== =========
Supplemental information:
Interest paid, net of amounts capitalized of $9,523 and $4,039, respectively........ $ 60,449 $ 77,387
Income taxes paid................................................................... $ 56,379 $ 67,370
See Notes to Consolidated Financial Statements
A-58
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PREPARATION OF FINANCIAL STATEMENTS
These unaudited interim consolidated financial statements of Newmont Mining
Corporation ("NMC") and its subsidiaries (collectively, the "Company") have
been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission. Such rules and regulations allow the omission of
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
as long as the statements are not misleading. In the opinion of management, all
adjustments necessary for a fair presentation of these interim statements have
been included and are of a normal recurring nature. These interim financial
statements should be read in conjunction with the 2000 financial statements of
the Company filed on Form 8-K on May 9, 2001.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
In January 2001, the Company completed a merger with Battle Mountain Gold
Company ("Battle Mountain") where each share of common stock of Battle Mountain
and each exchangeable share of Battle Mountain Canada Ltd. (a wholly-owned
subsidiary of Battle Mountain) was converted into the right to receive 0.105
share of NMC common stock, or approximately 24.1 million shares. The Company
also exchanged 2.3 million shares of newly issued $3.25 convertible preferred
stock for all outstanding shares of Battle Mountain $3.25 convertible preferred
stock. The merger was accounted for as a pooling of interests, and as such,
consolidated financial statements have been restated to include Battle
Mountain's financial data as if Battle Mountain had always been part of Newmont.
The following table sets forth results of operations of the previously
separate companies for the periods before the combination (in millions):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- ------------------
2001 2000 2001 2000
------ ------ -------- --------
Sales--pre-merger:
Company............................................... $ -- $363.5 $ -- $1,082.1
Battle Mountain....................................... -- 55.9 -- 201.6
Sales--post-merger....................................... 424.4 -- 1,210.9 --
------ ------ -------- --------
Total.................................................... $424.4 $419.4 $1,210.9 $1,283.7
====== ====== ======== ========
Net income (loss) applicable to common shares pre-merger:
Company............................................... $ -- $(20.1) $ -- $ (38.6)
Battle Mountain....................................... -- (16.4) -- (30.2)
Net income (loss) applicable to common shares post merger 21.5 -- (51.1) --
------ ------ -------- --------
Total.................................................... $ 21.5 $(36.5) $ (51.1) $ (68.8)
====== ====== ======== ========
A-59
(2) INVENTORIES (IN THOUSANDS)
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- ---------------
2001 2000
---------------- ---------------
Current:
Ore and in-process inventories. $222,293 $241,181
Precious metals................ 9,111 23,452
Materials and supplies......... 96,397 95,395
Other.......................... -- 1,012
-------- --------
$327,801 $361,040
======== ========
Non-current:
Ore in stockpiles.............. $148,474 $163,782
======== ========
(3) INVESTMENT IN BATU HIJAU
The Company has an indirect 45% interest in P.T. Newmont Nusa Tenggara
(PTNNT), the owner of the Batu Hijau copper/gold mine in Indonesia, through the
Nusa Tenggara Partnership (NTP). Because the Company carried a proportionate
amount of the investment of the 20% Indonesian owner, until recouping the bulk
of its construction investment, including interest, the Company recognizes
56.25% of Batu Hijau's income. The equity investment in Batu Hijau was $541.5
million and $527.6 million at September 30, 2001 and December 31, 2000,
respectively, based on accounting principles generally accepted in the U.S.
Differences between 56.25% of NTP's net assets and the Company's investment
include (i) $206.9 million for the fair market value adjustment recorded by NTP
in conjunction with the Company's initial contribution, net of amortization,
(ii) $22.7 million for intercompany charges, (iii) $115.2 million for the fair
market value adjustment recorded by the Company in conjunction with the
purchase of a subsidiary minority interest, net of amortization and (iv) $139.8
million for contributions recorded by the Company that were classified as debt
by NTP. Certain of these amounts are amortized or depreciated on a
unit-of-production basis. (See Note (11) for a description of the Company's
equity income (loss) in Batu Hijau, where its net income reflects the
elimination of interest between PTNNT and NTP.) NTP's long-term debt is
non-recourse to the Company and its partner. Repayment of this debt will be in
semi-annual installments of $43.5 million from May 2001 through November 2010
and $22.1 million from May 2011 through November 2013 for the project
financing, and $22.5 million in May 2005 for an additional loan facility. The
Company and its partner have a contingent obligation to provide a $125 million
support facility on a pro-rata basis, if required.
Following is NTP summarized financial information based on U.S. generally
accepted accounting principles (in millions):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
Revenues.......... $133.3 $111.7 $356.7 $284.8
Net income (loss). $ 19.0 $(11.1) $ 1.9 $(64.1)
Dividends received $ -- $ -- $ -- $ --
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- ---------------
2001 2000
(IN THOUSANDS) ---------------- ---------------
Current assets...................................... $ 215,438 $ 209,011
Property, plant and mine development, net........... $1,935,172 $2,020,386
Other assets........................................ $ 185,533 $ 135,674
Current portion of long-term debt................... $ 86,732 $ 86,732
Current liabilities................................. $ 195,5631 $ 198,455
Debt and related interest to partners and affiliates $ 252,802 $ 283,504
Long-term debt...................................... $ 892,403 $ 913,268
Other liabilities................................... $ 4,8791 $ 2,013
A-60
(4) LONG-TERM DEBT
In October 2001, the Company replaced its $1.0 billion revolving credit
facility, expiring in June 2002, with a new $600 million revolving credit
facility with a consortium of banks. The new facility includes (1) a $200
million revolver, with an initial term of 364 days that can be renewed annually
as may be agreed between the Company and the lenders and (2) a $400 million
5-year revolving facility that matures in October 2006. There have been no
borrowings under the new facility. Interest rates under the new facility are
variable, can be fixed for up to six months at the option of the Company and
are subject to adjustment if changes in the Company's long-term debt ratings
occur. An annual facility fee of 0.150% and 0.175% is required for the 364-day
and 5-year components, respectively. The new facility contains certain
covenants, including limitations on aggregate consolidated indebtedness (net of
cash balances) to 62.5% of total capitalization, maintenance of a ratio of
"consolidated indebtedness (net of cash balances)" to "earnings before
interest, taxes, depreciation and amortization" of 4.0 or less and certain
limitations on incurring liens, fundamental business changes and transactions
with affiliates.
In May 2001, the Company issued $275 million of 8.625% notes due 2011.
Proceeds of $272 million after transaction costs were used to repay then
outstanding debt under the Company's $1.0 billion revolving credit facility,
with the remainder for general corporate purposes. Battle Mountain Canada had
$87.1 million outstanding at December 31, 2000 under a loan agreement with the
Canadian Imperial Bank of Commerce, with respect to which a restricted,
collateral cash account had been established for repayment of a portion of the
loan. Another portion of the loan was due the earlier of the sale of Lihir Gold
stock or December 31, 2003.
Subsequent to the NMC/Battle Mountain merger, the entire loan was repaid
from the collateral cash account and from the Company's credit facility.
(5) SALES CONTRACTS, COMMODITY AND FINANCIAL INSTRUMENTS
In mid-1999, the Company purchased near-term put option contracts for 2.85
million ounces of gold, with a strike price of $270 per ounce, which expired
August 1999 through December 2000. This noncash purchase was paid for by
selling call option contracts for 2.35 million ounces at average strike prices
ranging from $350 to $385 per ounce. The initial fair value of the put options
of $37.6 million was amortized over the term of the options. The call options,
with an initial fair value of $37.6 million, were marked to market at each
reporting date in current earnings and at December 31, 2000, had a fair value
of $55.6 million. In September 2001, the Company entered into transactions that
closed out the call options. These options were replaced with a series of sales
contracts requiring physical delivery of the same quantity of gold over
slightly extended future periods. The written call options were marked to their
market value of $53.8 million immediately prior to close out, resulting in a
noncash gain of $0.9 million in the third quarter of 2001. The noncash
mark-to-market gain totaled $1.8 million and $13.1 million for the nine months
ended September 30, 2001 and 2000, respectively. The $53.8 million value of the
sales contracts was recorded as DEFERRED REVENUE and will be included in sales
revenue as delivery occurs.
Under the terms of the sales contracts, the Company will receive the lower
of the gold spot market price on each delivery date or the designated capped
price indicated below:
2005 2008 2009 2011 TOTAL
-------- ---------- -------- -------- ----------
Ounces............. 500,000 1,000,000 600,000 250,000 2,350,000
Price cap per ounce $ 350 $ 384 $ 381 $ 392 $ 377
In 1999, the Company entered into a prepaid forward sale contract for
approximately 483,333 ounces of gold, with initial proceeds of $137.2 million,
for delivery in June 2005, 2006 and 2007. Such proceeds were recorded as
DEFERRED REVENUE and will be recognized in income when the related gold is
delivered. Additional proceeds will be determined at each delivery date based
on the excess of the then existing market price (not to exceed $380 per ounce)
over $300 per ounce. The prepaid forward sale contract also included semi-annual
A-61
delivery requirements of approximately 17,950 ounces beginning June 2000
through June 2007. The Company entered into forward purchase contracts at
prices increasing from $263 per ounce in 2000 to $354 per ounce in 2007 to
coincide with these delivery commitments. The fair value of the forward
purchase contracts was $1.5 million at September 30, 2001 and changes in fair
value are reflected in OTHER COMPREHENSIVE INCOME (LOSS).
The Company also had the following commodity instruments as of September 30,
2001:
2001 2002 2003 2004 TOTAL/AVERAGE
------- ------- ------- ------ -------------
Combination call and put options:
Written call options--ounces........... 23,188 92,752 92,752 7,563 216,255
Average strike price per ounce..... $ 348 $ 348 $ 348 $ 359 $ 348
Purchased put options--ounces............. 23,188 92,752 92,752 7,563 216,255
Average strike price per ounce..... $ 286 $ 286 $ 286 $ 296 $ 286
Flat forward contracts--ounces............ 7,813 31,252 31,252 1,563 71,880
Average price per ounce............ $ 314 $ 314 $ 314 $ 323 $ 314
The Company is not required to place collateral with respect to its sales
contracts and commodity instruments and there are no associated margin calls.
Credit risk is minimized by dealing only with major financial
institutions/counterparties. The combination put and call options have been
designated as cash flow hedges and had a fair value of $1.4 million and $2.7
million at September 30, 2001 and January 1, 2001, respectively (included in
OTHER LONG-TERM ASSETS). The effective portion of the intrinsic value component
of these hedges is marked to market through accumulated OTHER COMPREHENSIVE
INCOME (LOSS). The flat forwards had a fair value of $1.3 million and $2.0
million at September 30, 2001 and December 31, 2000, respectively. A $1.00
increase in the gold price would result in a $0.57 per ounce increase and $1.00
per ounce decrease in the fair value of the combination options and flat
forwards, respectively, at September 30, 2001.
In September and October 2001, the Company entered into a series of
interest-rate swap transactions in which the Company will receive fixed-rate
interest payments, at 8.375% or 8.625%, and will pay floating-rate interest
amounts based on periodic LIBOR settings plus a spread, ranging from 3.45% to
4.25%. To date, the notional principal amount of these transactions
(representing the amount of principal tied to floating interest rate exposure)
totals $110 million. These transactions have been designated as fair value
hedges and at September 30, 2001, had a fair value of $0.6 million.
(6) DIVIDENDS, INTEREST AND OTHER INCOME
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------ ------------
2001 2000 2001 2000
----- ----- ----- -----
Interest income.............................. $ 1.5 $ 1.9 $ 3.2 $ 7.9
Foreign currency exchange loss, net.......... (4.5) (2.7) (5.3) (6.6)
Net gain (loss) on sale of surplus properties (0.2) -- 3.6 --
Other........................................ (0.1) 1.5 2.1 3.2
----- ----- ----- -----
Total..................................... $(3.3) $ 0.7 $ 3.6 $ 4.5
===== ===== ===== =====
(7) MERGER AND RESTRUCTURING EXPENSES
In conjunction with the NMC/Battle Mountain merger, expenses of $28.1
million were incurred in the first quarter of 2001. Total merger expenses of
$35.0 million, of which $6.9 million were incurred in 2000, included $19.8
million for investment/professional advisory fees, $11.7 for terminated
employee benefits and severance costs and $3.5 million for office closures and
related disposals of redundant assets. Expenses associated with restructuring
the Company's exploration program and a voluntary early retirement program were
$32.4 million and included $22.1 million for retirement benefits and $10.3
million for employee severance and office closures.
A-62
(8) EXPENSES FOR ACQUISITION SETTLEMENT AND OTHER EXPENSES
In the third quarter of 2000, the Company resolved a long-standing dispute
regarding the acquisition of an additional interest in Minera Yanacocha, a gold
mining operation located in Peru, by issuing $40 million (2.6 million shares)
of NMC common stock. Including expenses, $42.2 million was charged to income.
OTHER EXPENSES for the 2000 periods included $9.5 million for community
improvements, remediation efforts and a fine related to the Yanacocha mercury
spill described in Note 12 (b) and $5.6 million to increase the estimated
reclamation liability at the San Luis property in Colorado.
(9) ACCOUNTING CHANGES
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No.133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133") that requires recognition of all derivative
instruments on the balance sheet as either assets or liabilities and
measurement at fair value. Unless specific hedging criteria are met, changes in
the derivative's fair value are recognized currently in earnings. Gains and
losses on derivative hedging instruments are recorded in either other
comprehensive income (loss) or current earnings (loss), depending on the nature
of the instrument.
The Company changed its method of accounting for revenue recognition in the
fourth quarter of 2000, effective January 1, 2000, to record sales upon
delivery of third-party refined gold to the customer. Previously, revenue was
recognized upon the completion of the production process, or when gold was
poured into dore at the mine site. The cumulative effect of the change was
$12.6 million, net of tax and minority interest.
In June 2001, the FASB issued SFAS Nos. 141 and 142, "Business Combinations"
and "Goodwill and Other Intangible Assets", respectively. The adoption of these
standards is not expected to impact the Company's historical financial
statements or results of operations.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" that established standards for recognition and
measurement of a liability for an asset retirement obligation and the
associated asset retirement cost. The statement provides for an initial
recognition of the fair value of a liability for an asset retirement obligation
in the period in which it is incurred when a reasonable estimate of fair value
can be made. The asset retirement obligation is recorded as a liability with a
corresponding increase to the carrying amount of the related long-lived asset.
Subsequently, the asset retirement cost is allocated to expense using a
systematic and rational allocation method and is adjusted to reflect
period-to-period changes in the liability resulting from passage of time and
revisions to either timing or the amount of the original estimate. The
statement is effective for fiscal years beginning after June 15, 2002 and the
Company is in the process of determining the effect of adoption, but does not
anticipate a significant impact upon adoption.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" that established a single accounting model,
based on the framework of SFAS No. 121 ("Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"), for long-lived
assets to be disposed of by sale. The statement is effective for fiscal years
beginning after December 15, 2001 and the Company does not expect any
significant impact upon adoption.
(10) COMPREHENSIVE INCOME (LOSS)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX, included a $16.6 million gain
and a $24.9 million loss, for temporary changes in the market value of Lihir
Gold securities, and losses of $5.2 million and $2.4 million, for foreign
currency translation adjustments, in the nine months ended September 30, 2001
and 2000, respectively. The first nine months of 2001 also included losses of
$0.3 million for the effective portion of changes in fair value of cash flow
hedge instruments.
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(11) SEGMENT INFORMATION
The Company predominantly operates in a single industry as a worldwide
corporation engaged in gold production, exploration for gold and acquisition of
gold properties. The Company has operations in North America, South America,
Indonesia, Uzbekistan and Australia and its reportable segments are based on
the geographic location of these operations. Earnings from operations do not
include general corporate expenses, interest (except project-specific interest)
or income taxes (except for equity investments).
Financial information relating to the Company's consolidated segments is as
follows (in millions):
THREE MONTHS ENDED SEPTEMBER 30, 2001
-------------------------------------
NORTH SOUTH ZARAFSHAN-
AMERICAN AMERICAN MINAHASA NEWMONT,
OPERATIONS OPERATIONS* INDONESIA UZBEKISTAN AUSTRALIA OTHER CONSOLIDATED
---------- ----------- --------- ---------- --------- ------ ------------
Sales........................... $214.1 $164.1 $21.2 $16.9 $8.1 $ -- $424.4
Interest income................. $ 0.1 $ 0.6 $ 0.1 $ 0.3 $ -- $ 0.4 $ 1.5
Interest expense, net of amounts
capitalized.................... $ 0.1 $ 0.8 $ -- $ 0.2 $ -- $ 20.6 $ 21.7
Depreciation and depletion...... $ 36.5 $ 25.9 $ 3.9 $ 2.5 $1.0 $ 1.7 $ 71.5
Pre-tax income (loss) before
minority interest and equity
income......................... $ (8.6) $ 60.7 $ 4.5 $ 6.3 $2.9 $(48.4) $ 17.4
Significant non-cash items:
Amortization of capitalized
mining....................... $ 12.1 $ -- $ -- $ -- $ -- $ -- $ 12.1
Capital expenditures............ $ 16.1 $ 75.9 $ -- $11.3 $0.6 $ 4.6 $108.5
--------
* Not reduced for minority interest
THREE MONTHS ENDED SEPTEMBER 30, 2000
-------------------------------------
NORTH SOUTH ZARAFSHAN-
AMERICAN AMERICAN MINAHASA NEWMONT,
OPERATIONS OPERATIONS* INDONESIA UZBEKISTAN AUSTRALIA OTHER CONSOLIDATED
---------- ----------- --------- ---------- --------- ------ ------------
Sales........................... $231.7 $140.8 $24.3 $15.5 $7.1 $ -- $419.4
Interest income................. $ -- $ 0.5 $ -- $ -- $ -- $ 1.4 $ 1.9
Interest expense, net of amounts
capitalized.................... $ -- $ 0.7 $ -- $ 0.4 $ -- $ 21.9 $ 23.0
Depreciation and depletion...... $ 48.3 $ 27.4 $ 6.6 $ 4.4 $0.9 $ 1.6 $ 89.2
Pre-tax income (loss) before
minority interest and equity
income......................... $ (3.9) $ 46.8 $ 7.7 $ 3.7 $3.5 $(84.2) $(26.4)
Significant non-cash items:
Amortization of capitalized
mining....................... $ 25.9 $ -- $ 1.2 $ -- $ -- $ -- $ 27.1
Capital expenditures............ $ 39.6 $ 68.3 $ -- $ 0.7 $1.2 $ 1.8 $111.6
--------
* Not reduced for minority interest
NINE MONTHS ENDED SEPTEMBER 30, 2001
------------------------------------
NORTH SOUTH ZARAFSHAN-
AMERICAN AMERICAN MINAHASA NEWMONT,
OPERATIONS OPERATIONS* INDONESIA UZBEKISTAN AUSTRALIA OTHER CONSOLIDATED
---------- ----------- --------- ---------- --------- ------- ------------
Sales........................... $632.5 $437.0 $73.4 $43.6 $24.4 $ -- $1,210.9
Interest income................. $ 0.1 $ 1.5 $ 0.1 $ 0.3 $ -- $ 1.2 $ 3.2
Interest expense, net of amounts
capitalized.................... $ 0.2 $ 2.4 $ -- $ 0.7 $ -- $ 59.3 $ 62.6
Depreciation and depletion...... $110.4 $ 77.2 $15.0 $ 8.3 $ 3.0 $ 4.9 $ 218.8
Pre-tax income (loss) before
minority interest and equity
income......................... $(21.2) $134.0 $20.7 $13.0 $10.2 $(187.6) $ (30.9)
Significant non-cash items:
Amortization of capitalized
mining....................... $ 26.6 $ -- $ 4.1 $ -- $ -- $ -- $ 30.7
Capital expenditures............ $ 60.4 $242.1 $ -- $17.2 $ 2.1 $ 7.6 $ 329.4
--------
* Not reduced for minority interest
A-64
NINE MONTHS ENDED SEPTEMBER 30, 2000
-----------------------------------
NORTH SOUTH ZARAFSHAN-
AMERICAN AMERICAN MINAHASA NEWMONT,
OPERATIONS OPERATIONS* INDONESIA UZBEKISTAN AUSTRALIA OTHER CONSOLIDATED
---------- ----------- --------- ---------- --------- ------- ------------
Sales.............................. $703.5 $417.8 $86.7 $51.8 $23.9 $ -- $1,283.7
Interest income.................... $ -- $ 3.0 $ 0.1 $ -- $ -- $ 4.8 $ 7.9
Interest expense, net of amounts
capitalized....................... $ 0.2 $ 4.0 $ -- $ 1.4 $ -- $ 65.5 $ 71.1
Depreciation and depletion......... $148.2 $ 72.8 $18.3 $10.0 $ 3.4 $ 5.9 $ 258.6
Pre-tax income (loss) before
minority interest, equity loss and
cumulative effect of a change in
accounting principle.............. $ 19.2 $161.8 $33.0 $17.4 $11.5 $(206.3) $ 36.6
Cumulative effect of a change in
accounting principle.............. $ (5.2) $ (5.2) $(2.1) $(2.4) $(0.1) $ 2.4 $ (12.6)
Significant non-cash items:
Amortization of capitalized
mining.......................... $ 60.8 $ -- $ 2.0 $ -- $ -- $ -- $ 62.8
Capital expenditures............... $ 96.2 $156.8 $ 2.3 $ 3.0 $ 4.2 $ 8.6 $ 271.1
--------
* Not reduced for minority interest
The Company operates the Batu Hijau mine in Indonesia that is accounted for
as an equity investment. Batu Hijau financial information, based on U.S.
generally accepted accounting principles, was as follows (in millions):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- ------------------
2001 2000 2001 2000
------ ------ -------- --------
Sales........................ $133.0 $111.6 $ 356.0 $ 284.5
Interest income.............. $ 0.3 $ -- $ 0.7 $ 0.3
Interest expense............. $ 27.4 $ 37.6 $ 98.1 $ 93.7
Depreciation and amortization $ 24.1 $ 19.1 $ 69.9 $ 56.0
Net income (loss)............ $ 13.4 $(23.1) $ (20.8) $ (83.4)
Capital expenditures......... $ (0.6) $ 55.4 $ (23.2) $ 124.7
Total assets at September 30, $2,204.8 $2,230.4
EQUITY INCOME OF BATU HIJAU was $16.9 million in the third quarter of 2001
(based on 56.25% of Batu Hijau's income and elimination of $5.2 million and
$2.8 million of intercompany interest and management fees, respectively, and
amortization adjustments of $1.4 million). In the comparable 2000 period,
equity income was $0.7 million (based on 56.25% of the Batu Hijau loss and
elimination of $9.2 million and $2.9 million of intercompany interest and
management fees, respectively, and amortization adjustments of $1.6 million).
For the nine months ended September 30, 2001, EQUITY INCOME OF BATU HIJAU was
$23.2 million (based on 56.25% of Batu Hijau's income and elimination of $22.6
million and $8.5 million of intercompany interest and management fees,
respectively, and amortization adjustments of $3.8 million) and for the
comparable 2000 period, the equity loss was $14.7 million (based on 56.25% of
the Batu Hijau loss and elimination of $20.6 million and $8.8 million of
intercompany interest and management fees, respectively, and amortization
adjustments of $2.8 million).
(12) CONTINGENCIES
(A) RECLAMATION OBLIGATIONS
The Company's mining and exploration activities are subject to various
federal and state laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and are
generally becoming more restrictive. The Company conducts its operations so as
to protect the public health and environment and believes its operations are in
compliance with all applicable laws and regulations. The Company has made, and
expects to make in the future, expenditures to comply with such laws and
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regulations, but cannot predict the amount of such future expenditures.
Estimated future reclamation costs are based principally on legal and
regulatory requirements. At September 30, 2001 and December 31, 2000, $120.3
million and $108.9 million, respectively, were accrued for reclamation costs
relating to currently producing mineral properties.
In addition, the Company is involved in several matters concerning
environmental obligations associated with former mining activities. Generally,
these matters concern developing and implementing remediation plans at the
various sites involved. The Company believes 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 compliance
required to meet general environmental standards. Based upon the Company's best
estimate of its liability for these matters, $58.6 million and $63.5 million
were accrued for such obligations at September 30, 2001 and December 31, 2000,
respectively. These amounts are included in OTHER ACCRUED LIABILITIES and
RECLAMATION AND REMEDIATION LIABILITIES. Depending upon the ultimate resolution
of these matters, the Company believes that it is reasonably possible that the
liability for these matters could be as much as 40% greater or lower than the
amount accrued at December 31, 2000. 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, OTHER in the period
estimates are revised.
Details about certain of the more significant sites involved are discussed
below.
IDARADO MINING COMPANY ("IDARADO")--80.1% OWNED
In July 1992, the Company and Idarado signed a consent decree with the State
of Colorado ("State") that was agreed to by the U.S. District Court of Colorado
to settle a lawsuit brought by the State under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), generally referred to as
the "Superfund Act."
Idarado settled natural resources damages and past and future response costs
and provided habitat enhancement work. In addition, Idarado agreed in the
consent decree to undertake specified remediation work at its former mining
site in the Telluride/Ouray area of Colorado. Remediation work at this property
is substantially complete. If the remediation does not achieve specific
performance objectives defined in the consent decree, the State may require
Idarado to implement supplemental activities at the site, also as defined in
the consent decree. Idarado and the Company have obtained a $7.0 million
reclamation bond to secure their potential obligations under the consent decree.
RESURRECTION MINING COMPANY ("RESURRECTION")--100% OWNED
The Company, Resurrection and other defendants were named in lawsuits filed
by the State of Colorado, under the Superfund Act in 1983, and subsequently
consolidated with a lawsuit filed by the U.S. Environmental Protection Agency
("EPA") in 1986. These proceedings seek to compel the defendants to remediate
the impacts of pre-existing, historic mining activities near Leadville,
Colorado that date back to the mid-1800's, which the government agencies claim
are causing substantial environmental problems in the area.
In 1988 and 1989, the EPA issued administrative orders with respect to one
area on the site and the defendants have collectively implemented those orders
by constructing a water treatment plant, which was placed in operation in early
1992. Remaining remedial work for this area primarily consists of environmental
monitoring and maintenance activities.
The parties have entered into a consent decree with respect to the remaining
areas that apportions liabilities and responsibilities for the site among the
various parties. The EPA has approved remedial actions for selected components
of Resurrection's portion of the site, which were initiated in 1995. The EPA
has not yet selected the final remedy for the site. Accordingly, the Company
cannot yet determine the full extent or cost of its share of the remedial
action that will be required. The government agencies may also seek to recover
for damages to
A-66
natural resources. In March 1999, the parties entered into a Memorandum of
Understanding ("MOU") to facilitate the settlement of natural resources damages
claims under CERCLA for the upper Arkansas River Basin. The MOU provides a
structure for evaluation of damages and possible restoration activities that
may be required if it is concluded such damages have occurred.
DAWN MINING COMPANY LLC ("DAWN")--51% OWNED
Dawn leased an open-pit uranium mine, currently inactive, on the Spokane
Indian Reservation in the State of Washington. The mine is subject to
regulation by agencies of the U.S. Department of Interior, the Bureau of Indian
Affairs and the Bureau of Land Management, as well as the EPA. Dawn also owns a
nearby uranium millsite facility that is subject to federal and state
regulation.
In 1991, Dawn's lease was terminated. As a result, Dawn was required to file
a formal mine closure and reclamation plan. The Department of Interior has
commenced an Environmental Impact Study to analyze Dawn's proposed plan and to
consider alternate closure and reclamation plans for the mine. Dawn cannot
predict at this time what type of mine reclamation plan may be selected by the
Department of Interior. Dawn does not have sufficient funds to pay for the
reclamation plan it proposed or for any alternate plan.
The Department of Interior previously notified Dawn that when the lease was
terminated, it would seek to hold Dawn and the Company (as Dawn's 51% owner)
liable for any costs incurred as a result of Dawn's failure to comply with the
lease and applicable regulations. Other government agencies have asserted that
the Company is liable for future reclamation or remediation work at the mine or
millsite. In mid-2000, the mine was included on the National Priorities List
under CERCLA. The Company will vigorously contest any claims as to its
liability. The Company cannot reasonably predict the likelihood or outcome of
any future action against Dawn or the Company arising from this matter.
In late 1999, Dawn initiated state approval for a revised mill closure plan
that, if implemented, would expedite the reclamation process at the mill. The
State of Washington recently approved this revised plan. The currently approved
clean fill plan for the mill is secured by a $14.1 million bond that is 50%
secured by a letter of credit and is guaranteed by the Company.
SAN LUIS, COLORADO--100% OWNED
The San Luis open-pit gold mine in southern Colorado was operated by a
subsidiary of Battle Mountain and ceased operations in November 1996. Since
then substantial closure and reclamation work has been performed. In August
1999, the Colorado Department of Public Health and Environment ("CDPHE") issued
a notice of violation of the Water Quality Control Act and in October 1999
amended the notice to authorize operation of a water treatment facility and the
discharge of treated water. Battle Mountain has made all submittals required by
the CDPHE notice and conducted the required response activities. Battle
Mountain negotiated a settlement with CDPHE resolving alleged violations that
was effective September 1, 2000. In October 2000, the CDPHE received an
"Application for Reconsideration of Order for Civil Penalty" by project
opponents seeking to appeal the terms of the settlement. The application was
denied by CDPHE. Project opponents have filed a judicial appeal in the District
Court for Costilla County, Colorado, naming the CDPHE as defendant. Battle
Mountain has intervened in the appeal to protect its interests in the
settlement. The Company cannot reasonably predict the likelihood or outcome of
this or any future action against Battle Mountain or the Company relating to
this site.
(B) OTHER
In June 2000, a transport contractor of Minera Yanacocha spilled
approximately 151 kilograms of mercury near the town of Choropampa, Peru, which
is located 53 miles southwest of the mine. Mercury is a byproduct of gold
mining and was sold to a Lima firm for use in medical instrumentation and
industrial applications. A comprehensive health and environmental remediation
program was undertaken by Minera Yanacocha. In August 2000, Minera Yanacocha
paid under protest a fine of 1,740,000 soles (approximately US$500,000) to the
A-67
Peruvian government. Minera Yanacocha entered into agreements with three of the
communities impacted by this incident to provide a variety of public works as
compensation for the disruption and inconvenience caused by the incident.
Estimated costs of $10.0 million for these improvements, other remediation
efforts, personal compensation and the fine were included in Other expense in
2000.
On September 10, 2001, NMC, various wholly-owned subsidiaries and Minera
Yanacocha S.R.L. (51.35% owned by Newmont Second Capital Corporation) and other
defendants were named in a lawsuit filed by over 900 Peruvian citizens in
Denver District Court for the State of Colorado. This action seeks compensatory
and punitive damages based on claims associated with the mercury spill
incident. The response to the Complaint will be filed in late October. Neither
the Company nor Minera Yanacocha can reasonably predict the likelihood of any
additional expenditures related to this matter.
(13) SUPPLEMENTARY DATA
The ratio of earnings to fixed charges for the nine months ended September
30, 2001 was 0.83 and earnings were inadequate to cover fixed charges with a
deficiency of $12 million. The ratio of earnings to fixed charges represents
income before income taxes and interest expense divided by interest expense.
Interest expense includes amortization of capitalized interest and the portion
of rent expense representative of interest. The Company guarantees certain
third party debt; however, it has not been and does not expect to be required
to pay any amounts associated with such debt. Therefore, related interest on
such debt has not been included in the ratio of earnings to fixed charges.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following provides information that management believes is relevant to
an assessment and understanding of the consolidated results of operations and
financial condition of Newmont Mining Corporation ("NMC") and its subsidiaries
(collectively, "Newmont"). The discussion should be read in conjunction with
Management's Discussion and Analysis included in Newmont's Annual Report on
Form 10-K.
As described in Note (1), Newmont completed a merger with Battle Mountain
Gold Company in January 2001, where each share of common stock of Battle
Mountain and each exchangeable share of Battle Mountain Canada Ltd. (a wholly-
owned subsidiary of Battle Mountain) was converted into the right to receive
0.105 share of NMC stock, or approximately 24.1 million shares. The transaction
was accounted for as a pooling of interests and as such, consolidated financial
statements were restated to include Battle Mountain's financial data as if
Battle Mountain had always been part of Newmont.
SUMMARY
Newmont recorded net income to common shares of $21.5 million ($0.11 per
share) and a net loss of $36.5 million ($0.19 per share) in the third quarter
of 2001 and 2000, respectively. For the first nine months of 2001 and 2000,
before an accounting change for revenue recognition in 2000, net losses to
common shares were $51.1 million ($0.26 per share) and $56.3 million ($0.29 per
share), respectively. The cumulative effect of the 2000 accounting change
totaled $12.6 million ($0.07 per share), net of tax and minority interest.
The third quarter and first nine months of 2001 included, net of tax, a $0.6
million and $1.1 million gain, respectively, for the noncash mark-to-market
position on call option contracts that were closed out at the end of the
quarter. The nine-month results in 2001 reflected lower gold prices and merger
and restructuring expenses of $43.7 million ($0.23 per share), net of tax. The
third quarter and first nine months of 2000 included, net of tax, a $13.3
million gain ($0.07 per share) and a $2.4 million loss ($0.01 per share),
respectively, for noncash mark-to-market losses on call option contracts and
amortization of put option premiums. The 2000 results also included $27.4
million ($0.14 per share), net of tax, for expenses related to an acquisition
settlement.
A-68
Total equity gold sales, total cash costs and average realized gold prices
were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2001 2000 2001 2000
-------- -------- -------- --------
Equity gold sales ounces (000).. 1,393.3 1,320.1 4,034.9 3,986.4
Total cash costs per ounce...... $ 191 $ 176 $ 185 $ 173
Total costs per ounce........... $ 241 $ 240 $ 237 $ 235
Average price realized per ounce $ 274 $ 280 $ 269 $ 283
For the full-year 2001, gold sales are expected to total approximately 5.4
million ounces with a total cash cost of $183 per ounce.
MARKET CONDITIONS AND RISKS
METAL PRICE
Changes in the market price of gold significantly affect Newmont's
profitability and cash flow. Gold prices can fluctuate widely and are affected
by numerous factors, such as demand; forward selling by producers; central bank
sales, purchases and lending; investor sentiment and global mine production
levels. The gold price fell to a 20-year low of $253 in July 1999 and has
periodically recovered moderately, with an average price of $269 for the first
nine months of 2001 and $283 for September 2001. Changes in the market price of
copper also affect Newmont's profitability and cash flow from its Batu Hijau
mine in Indonesia. Newmont has generally sold its production at market prices,
but has used a limited number of commodity instruments to provide a measure of
price protection. At September 30, 2001, the following commodity instruments
were outstanding:
FAIR VALUE
OUNCES (IN MILLIONS)
------- -------------
Combination, matched put and call options, expiring 2001-2004 216,255 $1.4
Flat forward sales contracts, 2001-2004...................... 71,880 $1.3
The combination, matched put and call options have been designated as cash
flow hedges such that changes in the effective portion of the intrinsic value
component of the hedge is marked to market through accumulated other
comprehensive income or loss. A one-dollar increase in the gold price would
result in a $0.57 per ounce increase and $1.00 per ounce decrease in the fair
value of the combination option contracts and flat forward contracts,
respectively, assuming all other factors are constant.
In mid-1999, the Company purchased near-term put option contracts for 2.85
million ounces of gold, with a strike price of $270 per ounce, which expired
August 1999 through December 2000. This noncash purchase was paid for by
selling call option contracts for 2.35 million ounces at average strike prices
ranging from $350 to $385 per ounce. The initial fair value of the put options
of $37.6 million was amortized over the term of the options. The call options,
with an initial fair value of $37.6 million, were marked to market at each
reporting date in current earnings and at December 31, 2000, had a fair value
of $55.6 million. In September 2001, the Company entered into transactions that
closed out the call options. These options were replaced with a series of sales
contracts requiring physical delivery of the same quantity of gold over
slightly extended future periods. The written call options were marked to the
market value of $53.8 million immediately prior to close, resulting in a
noncash gain of $0.9 million in the third quarter of 2001. The noncash
mark-to-market gain totaled $1.8 million and $13.1 million for the nine months
ended September 30, 2001 and 2000, respectively. The $53.8 million value of the
sales contracts were recorded as DEFERRED REVENUE and will be included in sales
revenue as delivery occurs. Under the terms of the contracts, Newmont will
realize the lower of the spot price on the delivery date or the capped price
ranging from $350 per ounce in 2005 to $392 per ounce in 2011.
A-69
FOREIGN CURRENCY
In addition to the U.S., Newmont conducts operations in Canada, Peru,
Bolivia, Uzbekistan and Indonesia and has an interest in joint ventures in
Mexico and Australia. Gold produced at these operations is sold in the
international markets for U.S. dollars. The cost and debt structures at these
operations are also primarily U.S. dollar denominated, except for Canadian and
Australian operations where such structures are primarily denominated in local
currencies. To the extent that there are fluctuations in local currency
exchange rates against the U.S. dollar, the devaluation of a local currency is
generally economically neutral or beneficial to the operation since local
salaries and supply contracts will decrease against the U.S. dollar revenue
stream. Foreign currency exchange rate losses related to Canadian and
Australian operations were $5.3 million and $6.6 million in the nine months
ended September 30, 2001 and 2000, respectively.
INTEREST RATES
Newmont's long-term debt is substantially comprised of fixed-rate debt as of
September 30, 2001. In September and October 2001, Newmont entered into a
series of interest-rate swap transactions in which it will receive fixed-rate
interest payments, at 8.375% or 8.625%, and will pay floating-rate interest
amounts based on periodic LIBOR settings plus a spread, ranging from 3.45% to
4.25%. To date, the notional principal amount of these transactions
(representing the amount of principal tied to floating interest rate exposure)
totals $110 million. These transactions have been designated as fair value
hedges and at September 30, 2001, had a fair value of $0.6 million.
RESULTS OF OPERATIONS
GOLD SALES
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------- ------------------------------------
2001 2000 2001 2000 2001 2000 2001 2000
---- ---- ---- ---- ---- ---- ---- ----
EQUITY OZS. SOLD TOTAL CASH COSTS EQUITY OZS. SOLD TOTAL CASH COSTS
(IN THOUSANDS) PER OZ. (IN THOUSANDS) PER OZ.
-------------- ------- -------------- -------
North American operations:
Nevada operations............. 653.9 728.0 $ 238 $ 212 1,986.6 2,020.6 $ 223 $ 212
Mesquite, California.......... 16.5 30.5 188 212 80.2 98.5 208 204
La Herradura, Mexico.......... 14.0 13.2 179 109 40.8 37.0 168 133
Golden Giant, Canada.......... 72.6 73.0 204 148 196.2 332.1 193 144
Holloway, Canada.............. 20.5 19.4 218 230 64.4 65.8 226 212
South American operations:
Yanacocha, Peru............... 264.0 220.8 116 79 719.5 645.3 117 85
Kori Kollo, Bolivia........... 76.9 65.8 127 191 201.1 187.9 164 199
Zarafshan-Newmont, Uzbekistan.... 62.5 56.0 129 132 162.6 183.4 136 126
Vera/Nancy, Australia............ 29.6 25.3 129 106 90.9 84.2 108 102
Minahasa, Indonesia.............. 78.4 67.5 162 147 275.4 248.1 135 141
Batu Hijau, Indonesia............ 104.4 38.5 n/a n/a 235.2 101.4 n/a n/a
Less prepaid forward ounces... -- (18.0) (18.0) (18.0)
------- ------- ------- -------
Total/Weighted average........ 1,393.3 1,320.0 $ 191 $ 175 4,034.9 3,986.3 $ 185 $ 173
======= ======= ======= =======
A-70
Total cash costs include charges for mining ore and waste associated with
current period gold production, processing ore through milling and leaching
facilities, production taxes, royalties and other cash costs. Batu Hijau costs
are reported per pound of copper, with gold revenue as an offsetting by-product
credit. Cash costs per ounce are determined based on the Gold Institute
reporting standard below:
THREE MONTHS ENDED NINE MONTHS ENDED
PRODUCTION COSTS PER EQUITY OUNCE SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
Direct mining and production costs................ $ 177 $ 176 $ 177 $ 168
Capitalized mining cost adjustments............... 8 (4) 4 1
Other............................................. 1 -- -- --
-------- -------- -------- --------
Cash operating costs.............................. $ 186 $ 172 $ 181 $ 169
Royalties......................................... 4 3 3 3
Production taxes.................................. 1 -- 1 1
-------- -------- -------- --------
TOTAL CASH COSTS.................................. $ 191 $ 175 $ 185 $ 173
Reclamation and mine closure...................... 3 4 4 4
-------- -------- -------- --------
Total costs applicable to sales................... 194 179 189 177
Depreciation, depletion and amortization.......... 47 60 48 58
-------- -------- -------- --------
Total costs....................................... $ 241 $ 239 $ 237 $ 235
======== ======== ======== ========
Reconciliation (in millions):
Costs applicable to sales per financial statements $ 283.3 $ 256.3 $ 813.0 $ 758.6
Minority interest in Yanacocha.................... (31.9) (21.7) (87.9) (65.1)
Minority interest in Kori Kollo................... (1.4) (1.7) (4.7) (4.8)
Reclamation accruals.............................. (4.3) (5.3) (14.2) (13.9)
-------- -------- -------- --------
Total cash costs used in per ounce calculations... $ 245.7 $ 227.6 $ 706.2 $ 674.8
======== ======== ======== ========
Equity ounces sold, net (000)..................... 1,288.9 1,299.5 3,817.7 3,902.9
Equity total cash cost per ounce.................. $ 191 $ 175 $ 185 $ 173
NORTH AMERICAN OPERATIONS
Newmont's Nevada operations are along the Carlin Trend near Elko and in the
Winnemucca Region, where the Twin Creeks and the Lone Tree Complex mines are
located. Gold sales in the third quarter of 2001 decreased 10% to 654 thousand
ounces from the comparable 2000 period, with lower average mill ore grades and
lower leach production. Total cash costs for the third quarter of 2001 were
$238 per ounce compared with $212 per ounce in the same 2000 period, primarily
reflecting the inclusion of previously capitalized mining costs that were
amortized in the current period. In the first nine months of 2001 and 2000,
sales totaled 2.0 million ounces with total cash costs per ounce of $223 and
$212, respectively. Full-year 2001 sales in Nevada are expected to exceed 2.7
million ounces with total cash costs about $220 per ounce.
Production at the Deep Post underground mine began in March 2001 with 143
thousand ounces year-to-date. Production at the underground mine was
temporarily halted on August 29, 2001 as a safety precaution following a slope
movement on the south wall of the Betze-Post open pit that affected a section
of the south access road to Deep Post. Operations resumed on September 5, 2001
following inspections by the federal Mine Safety and Health Administration and
the Nevada State Mine Inspector's Office. No injuries or damage to underground
mine workings, facilities or reserves occurred. By 2003, Deep Post will reach
an annual production rate of 380 thousand ounces at an average total cash cost
of approximately $150 per ounce over the life of the mine.
Mesquite mine sales were 17 thousand ounces and 80 thousand ounces in the
third quarter and first nine months of 2001, respectively. Total cash costs
were $208 per ounce year-to-date 2001. The heap-leach operation
A-71
in southern California ceased mining operations in the second quarter of 2001
with the depletion of the ore body. Production in 2001 is expected at
approximately 95 thousand ounces with total cash costs about $200 per ounce, as
declining amounts of gold are recovered from the leach pads. Selected equipment
from the Mesquite mine has been transferred to operations in South America and
in Nevada.
La Herradura, a 44%-owned non-operated joint venture in Mexico, sold 41
thousand equity ounces in the first nine months of 2001 at a total cash cost of
$168 per ounce. Production for 2001 is expected at approximately 60 thousand
equity ounces at a cash cost about $175 per ounce.
Gold sales from the Golden Giant and the 84.65%-owned Holloway underground
mines in Ontario, Canada were 196 thousand and 64 thousand ounces,
respectively, in the first nine months of 2001, with total cash costs of $193
and $226 per ounce. Production for 2001 is expected to total approximately 300
thousand and 90 thousand equity ounces at Golden Giant and Holloway,
respectively, with cash costs about $180 and $215 per ounce.
OVERSEAS OPERATIONS
Sales at Minera Yanacocha in Peru increased 20% and 11% in the third quarter
and first nine months of 2001, respectively, to 264 thousand and 720 thousand
equity ounces from the same 2000 periods, with higher recoveries. Total cash
costs increased to $116 per ounce in the third quarter and to $117 per ounce in
first nine months of 2001 compared with $79 and $85 per ounce in respective
2000 periods, primarily reflecting higher waste-to-ore ratios resulting from
short- term changes in the mine production schedule. Gold production for 2001
is expected to be just over one million equity ounces at a total cash cost of
about $120 per ounce.
At the newly developed La Quinua deposit at Yanacocha, testing of the
agglomeration facility and ore placements on the leach pad were completed in
the third quarter of 2001, with gold production commencing in the fourth
quarter. By 2003, production from La Quinua is expected to reach one million
ounces at a total cash cost of approximately $125 per ounce over the life of
the deposit.
At the 88%-owned Kori Kollo open-pit mine in Bolivia, gold sales totaled 77
thousand and 201 thousand equity ounces in the third quarter and first nine
months of 2001 at a total cash cost of $164 per ounce year-to date. For 2001,
total sales are expected at 250 thousand equity ounces with total cash costs
about $160 per ounce. Ore placements on its first heap leach pad began at the
end of the 2001 second quarter and will add to production in the remainder of
the year.
In the third quarter and first nine months of 2001, equity gold sales from
Zarafshan-Newmont, a 50%-owned joint venture in the Central Asian Republic of
Uzbekistan, were 63 thousand ounces and 163 thousand ounces, respectively,
about 11% below the year-to-date 2000 period reflecting lower average ore
grades. Total cash costs per ounce of $136 in the 2001 nine-month period
compared with $126 in the same 2000 period. Production in 2001 is expected to
total approximately 200 thousand equity ounces with total cash costs of about
$140 per ounce. Ore placement on the heap-leach pad expansion project is
scheduled for the beginning of 2002.
In Indonesia, at Newmont's 80%-owned Minahasa property, gold sales of 78
thousand ounces were up 16% from the third quarter of 2000 and sales of 275
thousand ounces for the first nine months were up 11% from the comparable 2000
period reflecting higher leach production and average ore grades. Total cash
costs were $135 per ounce for the first nine months of 2001 compared with $141
for the same 2000 period. Production is expected to approximate 320 thousand
ounces in 2001 with total cash costs of approximately $150 per ounce. Mining
operations will cease by the end of the 2001 with the depletion of the ore body.
At Vera/Nancy, a 50%-owned joint venture in Queensland, Australia, nine-
months 2001 equity gold sales were 91 thousand ounces with total cash costs of
$108 per ounce. Total production in 2001 is expected at approximately 125
thousand ounces at a total cash cost of about $100 per ounce.
A-72
The Batu Hijau mine in Indonesia, which commenced production in the fourth
quarter of 1999, produced 104 million and 292 million equity pounds of copper
during the third quarter and first nine months of 2001, respectively, and sold
104 thousand and 235 thousand equity ounces of gold. Copper sales totaled 283
million equity pounds for the first nine months of 2001 compared with 188
million equity pounds in the same 2000 period. Total cash costs were $0.36 and
$0.63 per pound, after gold sales credits, for the first nine months of 2001
and 2000, respectively. Production has continued to ramp up since 1999 and 2001
production benefited from higher mill throughput, average ore grades and
recovery rates. Copper production in 2001 is expected to be between 320 million
and 350 million equity pounds at a cash cost under $0.40 per pound, with gold
production over 260 thousand equity ounces.
FINANCIAL RESULTS
Consolidated sales include 100% of Minera Yanacocha and Kori Kollo and
Newmont equity production elsewhere, but exclude Batu Hijau, which is accounted
for as an equity investment. The increase in consolidated sales revenue in the
third quarter was primarily attributable to increased gold sales and the
decrease in the first nine months of 2001, primarily to lower gold prices as
shown in the following table:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2001 2000 2001 2000
-------- -------- -------- --------
Consolidated sales (in millions)......... $ 424.4 $ 419.4 $1,210.9 $1,283.7
Consolidated production ounces sold (000) 1,549.6 1,499.8 4,508.8 4,522.0
Average price received per ounce......... $ 274 $ 280 $ 269 $ 283
Average market price received per ounce.. $ 274 $ 277 $ 268 $ 283
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 VS 2000 2001 VS 2000
------------- -------------
Increase (decrease) in consolidated sales due to (in millions):
Consolidated production..................................... $ 10.8 $ (2.4)
Average gold price received................................. (5.8) (70.4)
------------- -------------
Total................................................... $ 5.0 $ (72.8)
============= =============
COSTS APPLICABLE TO SALES include total cash costs and provisions for
estimated final reclamation expenses related to consolidated production.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2001 2000 2001 2000
------ ------ ------ ------
(IN MILLIONS)
North American operations:
Nevada operations...... $158.0 $156.7 $451.0 $434.2
Mesquite............... 3.1 6.6 18.1 20.2
La Herradura........... 2.5 1.5 7.0 5.1
Golden Giant........... 15.3 11.2 39.0 50.0
Holloway............... 4.6 4.5 14.9 14.9
South American operations:
Yanacocha.............. 63.3 37.2 173.5 115.1
Kori Kollo............. 11.6 16.9 38.8 49.9
Vera/Nancy................ 3.8 2.7 9.8 9.0
Zarafshan-Newmont......... 8.2 7.4 22.3 23.3
Minahasa.................. 12.8 10.1 37.8 35.5
Other..................... 0.1 1.5 0.8 1.4
------ ------ ------ ------
Total..................... $283.3 $256.3 $813.0 $758.6
====== ====== ====== ======
A-73
DEPRECIATION AND DEPLETION:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2001 2000 2001 2000
----- ----- ------ ------
(IN MILLIONS)
North American operations:
Nevada operations...... $29.0 $37.8 $ 86.7 $107.2
Mesquite............... 0.9 2.4 3.7 8.5
La Herradura........... 0.9 0.8 2.7 2.2
Golden Giant........... 4.2 4.8 12.5 21.6
Holloway............... 1.5 2.5 4.8 8.7
South American operations:
Yanacocha.............. 20.2 21.3 61.7 54.6
Kori Kollo............. 5.7 6.1 15.5 18.2
Vera/Nancy................ 1.0 0.9 3.0 3.4
Zarafshan-Newmont......... 2.5 4.4 8.3 10.0
Minahasa.................. 3.9 6.6 15.0 18.3
Other..................... 1.7 1.6 4.9 5.9
----- ----- ------ ------
Total..................... $71.5 $89.2 $218.8 $258.6
===== ===== ====== ======
EXPLORATION AND RESEARCH expense was $43.5 million in the first nine months
of 2001 compared with $58.9 million in the 2000 period, reflecting the planned
reduction to approximately $50 million for the year.
GENERAL AND ADMINISTRATIVE expense was $40.5 million in the first nine
months of 2001, 18% lower than in the comparable 2000 period reflecting
synergies from the Battle Mountain merger and savings from the first quarter
2001 restructuring.
INTEREST EXPENSE, NET OF CAPITALIZED INTEREST was $21.7 million and $23.0
million for the third quarter of 2001 and 2000, respectively, and $62.6 million
and $71.1 million for the first nine months of 2001 and 2000, respectively,
reflecting lower average interest rates and higher capitalized interest in the
current periods.
INCOME TAX EXPENSE in the first nine months of 2001 and 2000 was a $6.7
million benefit and a $5.8 million expense, respectively. The decrease
primarily reflected recovery of taxes provided in prior periods.
MERGER AND RESTRUCTURING EXPENSES in the first nine months of 2001 of $60.5
million ($43.7 million, net of tax) included $28.1 million of transaction and
related costs associated with the Battle Mountain merger and $32.4 million of
restructuring expenses that included $22.1 million for voluntary early
retirement pension benefits and $10.3 million for employee severance and office
closures.
EXPENSES FOR ACQUISITION SETTLEMENT of $42.2 million in the 2000 periods
were related to the resolution of a dispute regarding Newmont's purchase of an
additional 13.35% interest in Minera Yanacocha. Under the settlement, Newmont
issued $40 million of its common stock, or 2.6 million shares.
OTHER EXPENSES for the 2000 periods included $9.5 million for community
improvements, remediation efforts and a fine related to the Yanacocha mercury
spill described in Note 12 (b) and $5.6 million to increase the estimated
reclamation liability at the San Luis property in Colorado.
Gain on written call options reflected the change in fair value as of the
end of each period. In September 2001, the Company entered into transactions
that closed out the call options. These options were replaced with a series of
sales contracts requiring physical delivery of the same quantity of gold over
slightly extended future periods. The call options were marked to the market
value of $53.8 million immediately prior to close, resulting in a noncash gain
of $0.9 million in the third quarter of 2001. The noncash mark-to-market gain
totaled
A-74
$1.8 million and $13.1 million for the nine months ended September 30, 2001 and
2000, respectively. The value of new sales contracts were recorded as Deferred
revenue and will be included in sales revenue as delivery occurs.
EQUITY IN INCOME OF BATU HIJAU of $16.9 million and $23.2 million for the
third quarter and first nine months of 2001, respectively, compared with income
of $0.7 million and losses of $14.7 million for the same 2000 periods,
reflecting the ramp up in production that commenced in December 1999.
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS 133") that requires recognition of all derivative
instruments on the balance sheet as either assets or liabilities and
measurement at fair value. Unless specific hedging criteria are met, changes in
the derivative's fair value are recognized currently in earnings. Gains and
losses on derivative hedging instruments are recorded in either other
comprehensive income (loss) or current earnings (loss), depending on the nature
of the instrument.
The Company changed its method of accounting for revenue recognition in the
fourth quarter of 2000, effective January 1, 2000, to record sales upon
delivery of third-party refined gold to the customer. Previously, revenue was
recognized upon the completion of the production process, or when gold was
poured into dore at the mine site. The cumulative effect of the change was
$12.6 million, net of tax and minority interest.
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX, included a $16.6 million gain
and a $24.9 million loss, for temporary changes in the market value of Lihir
Gold securities, and losses of $5.2 million and $2.4 million, for foreign
currency translation adjustments, in the nine months ended September 30, 2001
and 2000, respectively. The first nine months of 2001 also included a $0.3
million loss for the effective portion of changes in fair value of cash flow
hedge instruments.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 2001, cash flow from operations ($234.3
million), restricted cash ($40.0 million), net borrowings ($72.4 million) and
other investing activities ($10.9 million) funded capital expenditures ($329.4
million) and dividends ($23.2 million). In the current gold price environment,
Newmont is continuously monitoring and adjusting cash requirements for
operating, exploration and capital expenditures in order to minimize long-term
borrowings required during 2001.
INVESTING ACTIVITIES AND CAPITAL EXPENDITURES
Capital expenditures were as follows (in millions):
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2001 2000
------ ------
North American operations.............. $ 60.4 $ 96.2
Overseas operations.................... 261.4 166.3
Other projects and capitalized interest 7.6 8.6
------ ------
Total............................... $329.4 $271.1
====== ======
Expenditures for North American operations during the first nine months of
2001 included $48.2 million related to activities in Nevada, primarily for the
development of the Deep Post underground mine. Overseas capital expenditures
were primarily at Minera Yanacocha ($232.7 million) for development of the La
Quinua project and other ongoing expansion work. Capital expenditures in the
2000 period were primarily for Nevada and Minera Yanacocha leach pad expansion
projects and Nevada capitalized mining.
In the fourth quarter of 2001, Newmont expects to contribute approximately
$10 million to Batu Hijau in conjunction with a contingent support facility, to
be utilized for scheduled debt repayments.
A-75
FINANCING ACTIVITIES
In October 2001, the Company replaced its $1.0 billion revolving credit
facility, expiring in June 2002, with a new $600 million revolving credit
facility with a consortium of banks. The new facility includes a $200 million
revolver, with an initial term of 364 days that can be renewed annually as may
be agreed between Newmont and the lenders, and a $400 million 5-year revolving
facility that matures in October 2006. There have been no borrowings under the
new facility. Interest rates under the new facility are variable, can be fixed
for up to six months at the option of the Company and are subject to adjustment
if changes in the Company's long-term debt ratings occur. An annual facility
fee of 0.150% and 0.175% is required for the 364-day and 5-year components,
respectively. The new facility contains certain covenants, including (1)
limitations on aggregate consolidated indebtedness (net of cash balances) to
62.5% of total capitalization, (2) maintenance of a "consolidated indebtedness
(net of cash balances)" to "earnings before interest, taxes, depreciation and
amortization" ratio not to exceed 4.0 and (3) certain limitations on incurring
liens, fundamental business changes and transactions with affiliates.
In May 2001, Newmont issued $275 million of 8.625% notes due 2011. Proceeds
of $272 million after transaction costs were used to repay debt outstanding
under the Company's revolving credit facility, with the remainder for general
corporate purposes. As a result, during the first nine months of 2001, net
repayments of $147 million were made under Newmont's $1.0 billion revolving
credit facility, with no remaining outstanding borrowing.
During the first nine months of 2001, net borrowings of $41.5 million
occurred under project financings, primarily for Minera Yanacocha. And at the
time of the merger, Battle Mountain Canada had $87.1 million of debt
outstanding, which was repaid in January 2001, using $40 million of restricted
cash and borrowings under Newmont's $1.0 billion credit facility.
SAFE HARBOR STATEMENT
The foregoing discussion and analysis, as well as certain information
contained elsewhere in this Quarterly Report, contain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and are intended to be covered by the safe harbor created
thereby. Such forward-looking statements include, without limitation, (i)
estimates of future gold production for specific operations and on a
consolidated basis, (ii) estimates of future production costs and other
expenses for specific operations and on a consolidated basis, (iii) estimates
of future capital expenditures and other cash needs for specific operations and
on a consolidated basis and expectations as to the funding thereof, (iv)
estimates of future costs and other liabilities for certain environmental and
related health matters, (v) estimates of reserves and (vi) estimates with
respect to future operations.
Where Newmont expresses 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 at the time made. However, such forward-looking
statements are subject to risks, uncertainties and other factors, which could
cause actual results to differ materially from such forward-looking statements.
Important factors that could cause actual results to differ materially from
such forward-looking statements ("cautionary statements") are disclosed under
"Risk Factors" in the Newmont Annual Report on Form 10-K for the year ended
December 31, 2000, as well as other filings by Newmont with the United States
Securities and Exchange Commission. Many of these factors are beyond Newmont's
ability to control or predict. Readers are cautioned not to put undue reliance
on 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 the cautionary statements. Newmont's forward-looking statements
contained in this Report speak only as of the date of this Report. Newmont
disclaims any intent or obligation to update any forward-looking statements set
forth in this Report, whether as a result of new information, future events or
otherwise.
A-76
PART II--OTHER INFORMATION
ITEM 4. Submission Of Matters To A Vote Of Security Holders
None
ITEM 6. Exhibits and Reports on Form 8-K
None
A-77
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWMONT MINING CORPORATION
(Registrant)
Date: October 29, 2001 /s/ BRUCE D. HANSEN
-----------------------------
Bruce D. Hansen
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: October 29, 2001 /s/ LINDA K. WHEELER
------------------------------
Linda K. Wheeler
Vice President and Controller
(Principal Accounting Officer)
A-78
NEWMONT MINING CORPORATION
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
12 --Statement re Computation of Ratio of Earnings to Fixed Charges.
A-79
EXHIBIT 12
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS EXCEPT RATIO)
(UNAUDITED)
NINE\MONTHS
ENDED
SEPTEMBER 30,
2001
-------------
Earnings:
Loss before income taxes..................................... $(75,326)
Adjustments:.................................................
Net interest expense (1)................................. 62,641
Amortization of capitalized interest..................... 4,730
Portion of rental expense representative of interest..... 2,065
Undistributed income of affiliate........................ 23,214
Minority interest........................................ 44,423
--------
$ 61,747
========
Fixed Charges:
Net interest expense (1)..................................... $ 62,641
Capitalized interest......................................... 9,523
Portion of rental expense representative of interest......... 2,065
--------
$ 74,229
========
Ratio of earnings to fixed charges.............................. 0.83
========
--------
(1) Includes interest expense of majority-owned subsidiaries and amortization
of debt issuance costs.
A-80
ANNEX B--NORMANDY FINANCIAL INFORMATION
EXCERPTS FROM PUBLICLY AVAILABLE NORMANDY DOCUMENTS
This Annex B sets forth certain selected financial information with respect
to Normandy, excerpted from the following publicly-available Normandy documents:
(i) Normandy Q1 Report on Activities to Shareholders--Three Months to
September 30, 2001
(ii) Normandy 2001 Annual Shareholder Report
(iii) Normandy 2000 Annual Shareholder Report
Normandy's financial data is presented in accordance with Australian GAAP,
which differs in certain significant respects from U.S. GAAP. These differences
as they relate to Normandy cannot be quantified due to the limited disclosure
provided in publicly available financial information.
Pursuant to Rule 409 promulgated under the U.S. Securities Act of 1933, on
December 17, 2001, we requested that Normandy and its independent public
accountants provide to us all material information required to be included in
this offer document or required to make statements made herein not misleading.
On December 11, 2001, we requested that Normandy's independent public
accountants consent in a customary manner to the inclusion of its audit reports
with respect to the financial statements of Normandy included in this offer
document. On December 14, 2001, Normandy's independent public accountants
responded in writing to our December 11, 2001 letter stating that it was
reluctant to give consent for the inclusion of its audit report where consent
has not been given for the financial statements themselves, and believed it was
appropriate that its consent be given concurrently with Normandy's consent. On
December 19, 2001, Normandy, on its own behalf and on behalf of its
accountants, responded in writing to our December 17, 2001 letter and stated
that it was not appropriate for Normandy to bear any burden as to what the
offer document should contain and whether or not such document was misleading.
Normandy further stated that if there were specifics which Newmont wished to
refer to Normandy for review and comment, Normandy would consider whether it
could be of assistance and to what extent, on a case by case basis. In
addition, Normandy stated that its accountants were not in a position to
provide assistance to us, that work on U.S. GAAP reconciliation of its
financial statements had not been completed to Normandy's satisfaction and that
Normandy had not yet determined whether it would allow U.S. GAAP reconciliation
of its financial statements to be made public at this time. As a result, we
have had to rely on our best estimates in presenting these reconciliations to
U.S. GAAP of figures prepared in accordance with Australian GAAP and Australian
dollars. Errors in such estimates may be material.
B-1
INDEX TO EXCERPTS FROM PUBLICLY AVAILABLE NORMANDY DOCUMENTS
PAGE
----
Normandy unaudited condensed financial information for the three months ended September 30, 2001
(excerpt from Normandy Q1 Report on Activities to Shareholders)............................... B-3
Management discussion and analysis (excerpt from Normandy 2001 Annual Shareholder Report).......
B-9
Normandy consolidated financial statements 2001 (excerpt from Normandy 2001 Annual
Shareholder Report)...........................................................................
B-15
Management discussion and analysis (excerpt from Normandy 2000 Annual Shareholder Report).......
B-68
Normandy consolidated financial statements 2000 (excerpt from Normandy 2000 Annual
Shareholder Report)...........................................................................
B-77
B-2
NORMANDY MINING LIMITED
REPORT ON FINANCIAL RESULTS TO SHAREHOLDERS
FOR THE THREE MONTHS TO 30 SEPTEMBER 2001
(EXCERPT FROM Q1 REPORT ON ACTIVITIES TO SHAREHOLDERS)
FINANCIAL RESULTS--39% PROFIT INCREASE
Profit attributable to Normandy shareholders for the September quarter was
A$35.4 million, a 39% increase (A$25.5M, before significant items).
Significantly, over half of the result was achieved in September, with
excellent operating performances from Tanami and Midas Operations.
Gross profit from gold operations increased 15% to A$99.8 million, largely
due to record production at Tanami Operations, which will be further enhanced
next quarter with commencement of production at Groundrush. Kalgoorlie
Operations' contribution was lower reflecting a 21% decrease in Super Pit head
grade.
SIMPLIFIED FINANCIAL RESULTS
PERIODS ENDED
--------------------------
3 MONTHS 3 MONTHS 12 MONTHS
30 SEPT. 30 JUNE 30 JUNE
2001 2001 2001
-------- -------- ---------
(A$M) (A$M) (A$M)
(UNAUDITED)
Sales revenue................................................................ 429.7 393.8 1,543.7
Cost of production........................................................... (256.1) (216.8) (913.4)
Depreciation & amortization.................................................. (71.8) (87.4) (263.3)
Mine closure................................................................. (4.9) (6.4) (27.8)
Gross profit................................................................. 96.9 83.2 339.2
Share of net profit of associates............................................ 2.2 (5.1) (4.8)
Exploration provisions & write-offs.......................................... (9.2) (19.8) (58.1)
Administration expenses...................................................... (15.2) (26.6) (64.3)
Borrowing costs.............................................................. (24.2) (28.0) (112.0)
Net write-off of non-current assets.......................................... -- (236.7) (236.7)
Other income/(expenses)...................................................... 1.6 17.7 33.7
Profit/(loss) from ordinary activities....................................... 52.1 (215.3) (103.0)
Income tax expense relating to ordinary activities........................... (12.5) 0.5 (20.4)
Profit/(loss) from ordinary activities after related income tax expense...... 39.6 (214.8) (123.4)
Outside equity interests..................................................... (4.2) (34.4) (31.2)
Net profit/(loss) attributable to members of Normandy Mining Limited......... 35.4 (249.2) (154.6)
Operating profit before significant items attributable to members of Normandy
Mining Limited............................................................. 35.4 25.5 120.1
Significant items included in operating profit/(loss) before outside equity
interests(1)............................................................... -- (236.7) (236.7)
Outside equity interests..................................................... (38.0) (38.0)
Operating profit after significant items attributable to members of Normandy
Mining Limited............................................................. 35.4 (249.2) (154.6)
--------
(1) No tax benefit applicable
Non-gold operations recorded a loss of A$2.9 million compared with a loss of
A$3.6 million in the June quarter. The result includes a loss of A$4.0 million
from Golden Grove, reflecting continued depressed base metal prices offset
partly by increased concentrate production.
B-3
NORMANDY MINING LIMITED
REPORT ON FINANCIAL RESULTS TO SHAREHOLDERS--(CONTINUED)
FOR THE THREE MONTHS TO 30 SEPTEMBER 2001
(EXCERPT FROM Q1 REPORT ON ACTIVITIES TO SHAREHOLDERS)
Normandy's share of associates profit includes contribution from TVX
Normandy Americas and Australian Gold Refineries (AGR).
Exploration expense decreased to A$9.2 million in line with reduced spending
that is focused on projects within close proximity to existing infrastructure.
Administration expenses were lower than last quarter, which included several
one-off restructure costs. Reduced borrowing costs are the result of lower
average borrowings for the quarter.
NOTES TO SIMPLIFIED FINANCIAL RESULTS
3 MONTHS 3 MONTHS 12 MONTHS
TO 30 SEPT. TO 30 JUNE TO 30 JUNE
2001 2001 2001
----------- ---------- ----------
(A$M) (A$M) (A$M)
GOLD
Yandal...... 9.6 7.4 40.3
Kalgoorlie.. 19.8 39.3 112.5
Tanami...... 36.1 16.3 78.1
Pajingo..... 12.6 11.6 47.2
Boddington.. 9.2 6.3 22.5
Mt Leyshon.. (0.9) (3.4) 11.9
Midas....... 3.9 3.5 3.5
Other....... 9.5 5.8 15.6
Total....... 99.8 86.8 331.6
NON-GOLD
Golden Grove (4.0) (6.1) 18.0
Other....... 1.1 2.5 (10.4)
Total....... (2.9) (3.6) 7.6
B-4
NORMANDY MINING LIMITED
REPORT ON FINANCIAL RESULTS TO SHAREHOLDERS--(CONTINUED)
FOR THE THREE MONTHS TO 30 SEPTEMBER 2001
(EXCERPT FROM Q1 REPORT ON ACTIVITIES TO SHAREHOLDERS)
FINANCIAL POSITION--GEARING REDUCED
A further reduction in gearing was achieved resulting in a net debt to net
debt plus equity ratio of 39%, down from 40% in June. This was achieved on
strong operating cash flows coupled with increased equity from earnings.
SIMPLIFIED STATEMENT OF FINANCIAL POSITION
30 SEPT. 30 JUNE
2001 2001
-------- -------
A$M A$M
(UNAUDITED)
CURRENT ASSETS
Cash, bank bills & gold bullion.......................... 430.7 344.8
Receivables.............................................. 109.2 123.7
Inventories.............................................. 188.0 169.5
Other.................................................... 142.1 161.9
------- -------
870.0 799.9
------- -------
NON-CURRENT ASSETS
Investments.............................................. 263.9 244.0
Exploration & evaluation................................. 160.6 151.7
Development properties................................... 449.3 499.5
Property, plant & equipment.............................. 1,818.6 1,750.0
Other.................................................... 395.5 401.4
------- -------
3,087.9 3,046.6
------- -------
TOTAL ASSETS............................................. 3,957.9 3,846.5
======= =======
Current liabilities......................................
Accounts payable......................................... 276.4 249.8
Interest-bearing liabilities............................. 116.5 114.0
Other.................................................... 229.5 238.6
------- -------
622.4 602.4
------- -------
NON-CURRENT LIABILITIES..................................
Interest-bearing facilities.............................. 1,242.6 1,181.8
Other.................................................... 656.2 664.3
------- -------
1,898.8 1,846.1
------- -------
TOTAL LIABILITIES........................................ 2,521.2 2,448.5
======= =======
NET ASSETS............................................... 1,436.7 1,398.0
======= =======
EQUITY
Contributed equity....................................... 1,593.9 1,593.9
Reserves................................................. 72.6 71.4
Retained profits/(accumulated losses).................... (399.4) (434.8)
Equity attributable to members of Normandy Mining Limited 1,267.1 1,230.5
Outside equity interests in controlled entities.......... 169.6 167.5
------- -------
TOTAL EQUITY............................................. 1,436.7 1,398.0
======= =======
B-5
NORMANDY MINING LIMITED
REPORT ON FINANCIAL RESULTS TO SHAREHOLDERS--(CONTINUED)
FOR THE THREE MONTHS TO 30 SEPTEMBER 2001
(EXCERPT FROM Q1 REPORT ON ACTIVITIES TO SHAREHOLDERS)
CASH FLOW
Cash at the end of the quarter increased to A$430.7 million, largely the
result of strong operating cash flow from gold operations. Payments for
property, plant and equipment includes Midas (A$32M), Yandal (A$10M) and Martha
(A$8M). Development expenditure relates principally to AMC. Business acquired
(A$13.4M) relates to settlement of an investment in AGR.
Net proceeds from borrowings relates to drawings under the A$650 million
syndicated corporate facility (A$255M drawn at 30 September 2001) which was
offset by increases in cash balances in other subsidiaries, resulting in a
decrease in consolidated net debt to A$928 million (A$951M at the end of June).
SIMPLIFIED STATEMENT OF CASH FLOWS
30
SEPT. 30 JUNE
2001 2001
------ --------
(A$M) (A$M)
(UNAUDITED)
OPERATING ACTIVITIES
Receipts from customers................. 416.1 1,576.6
Payments to suppliers and employees..... (265.5) (1,186.9)
Dividends received from associates...... -- 42.6
Interest paid........................... (33.4) (93.8)
Income tax paid......................... (2.8) (38.9)
Other................................... 6.7 22.5
NET OPERATING CASH FLOWS................ 121.1 322.1
INVESTING ACTIVITIES
Payments for property, plant & equipment (75.0) (146.5)
Payments for exploration................ (16.5) (62.8)
Payments for development projects....... (19.2) (87.8)
Proceeds from sale of investments....... -- 130.3
Loans repaid by other entities.......... 16.9 113.0
Businesses acquired/disposed............ (13.4) 120.1
Other................................... 17.9 13.5
NET INVESTING CASH FLOWS................ (89.3) 79.8
FINANCING ACTIVITIES
Net (repayment)/proceeds of borrowings.. 55.0 (302.4)
Dividends paid.......................... (0.9) (95.2)
Proceeds from issue of securities....... -- 93.8
NET FINANCING CASH FLOWS................ 54.1 (303.8)
NET INCREASE/(DECREASE) IN CASH HELD.... 85.9 98.1
Cash at beginning of period............. 344.8 245.4
Exchange rate adjustments............... -- 1.3
CASH AT END OF PERIOD................... 430.7 344.8
B-6
NORMANDY MINING LIMITED
REPORT ON FINANCIAL RESULTS TO SHAREHOLDERS--(CONTINUED)
FOR THE THREE MONTHS TO 30 SEPTEMBER 2001
(EXCERPT FROM Q1 REPORT ON ACTIVITIES TO SHAREHOLDERS)
HEDGING
(AUSTRALIAN GOLD COUNCIL STANDARD) ,000OZS A$/OZ(1)
---------------------------------- ------- --------
NORMANDY WHOLLY-OWNED
Forward Sales
2001-02........................................... 225 524
2002-03........................................... 1,238 519
2003-04........................................... 806 546
2004-05........................................... 735 574
2005-10........................................... 2,850 574
Total............................................. 5,854 557
Put Options Purchased
2001-02........................................... 660 523
2002-03........................................... 167 518
2003-04........................................... 9 526
2004-05........................................... 121 522
2005-10........................................... 409 513
Total............................................. 1,366 520
Convertible Options Purchased
2004-05........................................... 34 524
2005-12........................................... 1,639 544
Total............................................. 1,673 543
NORMANDY MT LEYSHON LIMITED & NORMANDY NFM LIMITED(2)
Forward Sales
2001-02........................................... 364 560
2002-03........................................... 509 576
2003-04........................................... 286 574
2004-05........................................... 227 580
2005-07........................................... 140 609
Total............................................. 1,526 575
,000OZS US$/OZ
------- --------
TVX NORMANDY AMERICAS
Forward Sales........................................
2000-02........................................... 4 321
Total............................................. 4 321
Put Options Purchased
2001-02........................................... 91 282
2002-03........................................... 128 280
2003-04........................................... 130 274
2004-05........................................... 130 267
2005-09........................................... 218 341
Total............................................. 697 296
,000OZS $/OZ
------- --------
Total A$ Contracts(3)(4).......................... 10,419 553
Total US$ Contracts(3)(4)......................... 701 296
Committed A$ Contracts............................ 9,053 557
Committed US$ Contracts........................... 4 321
B-7
NORMANDY MINING LIMITED
REPORT ON FINANCIAL RESULTS TO SHAREHOLDERS--(CONTINUED)
FOR THE THREE MONTHS TO 30 SEPTEMBER 2001
(EXCERPT FROM Q1 REPORT ON ACTIVITIES TO SHAREHOLDERS)
NOTES TO HEDGING
(1) Net of lease fees for actual lease fees that are fixed, with the balance
assumed at 2%.
(2) 100% of subsidiaries.
(3) Margin calls do not apply to any contracts.
(4) No separate foreign exchange contracts relating to the gold hedging.
Deferred income from hedge close-outs to be brought to the income statement:
(A$M)
-----
2001-02 62.5
2002-03 56.4
2003-04 48.6
2004-05 46.8
2005-10 13.5
-----
Total.. 227.8
=====
The hedge book mark-to-market value is:
(A$M)(I)
--------
Normandy(ii)............ (802)
Normandy Mt Leyshon(iii) (1)
NormandyNFM(iii)........ (65)
--------
(i) Spot price at 30 September 2001, A$590/oz.
(ii) Wholly owned, including TVX Normandy Americas.
(iii) 100 percent of subsidiaries.
B-8
NORMANDY MINING LIMITED--2001 MANAGEMENT DISCUSSION AND ANALYSIS
(EXCERPT FROM 2001 ANNUAL SHAREHOLDER REPORT)
FINANCIAL PERFORMANCE
OPERATING CONTRIBUTIONS
Consolidated sales revenue was A$1,543.7 million, an increase of 16 percent
compared to 2000 consolidated sales revenue of A$1,323.6 million.
Gold sales revenue was A$1,252.0 million, an increase of 34 percent which
excludes the gold attributable to non-controlled TVX Normandy Americas.
Consolidated gold sales increased from 1.617 million ounces in 2000 to 2.226
million ounces in 2001. The increase is mainly due to the full 12 months gold
sales of 0.786 million ounces from Normandy Yandal Operations Limited ("Yandal
Operations") following its acquisition in April 2000. Also, increased gold
production at Normandy NFM and the recent acquisition of the Midas mine more
than replaced the gold sales from discontinued operations. The average realised
sale price for the consolidated gold division decreased from A$576 per ounce to
A$562 per ounce compared to the average spot price for the year of A$501 per
ounce. The decrease was mainly due to lower forward prices for hedge contracts
in the Yandal Operations hedge book.
Average gold cash costs decreased by A$8 per ounce to A$302 per ounce. This
was mainly influenced by Yandal Operations' Jundee mine (0.411 million ounces
at A$255 per ounce), lower unit costs at Normandy NFM due to higher grade ore
and the sale/closure of higher-cost operations.
Gold operations earnings before interest, tax and non-cash costs increased
38 percent due to the increased revenue and reduced cash costs. Non-cash costs
(depreciation, amortisation and mine completion provisions) increased from A$68
per ounce to A$110 per ounce in 2001 associated mainly with the Yandal
Operations. As a consequence, gross profit from gold operations increased by 7
percent to A$331.6 million.
Non-gold sales revenue decreased 24 percent to A$291.8 million reflecting
the sale of industrial minerals operations in June last year offset by the
inclusion of A$69.6 million of revenue from Australian Magnesium Corporation
Limited ("AMC"). Non-gold gross profit was A$7.6 million, a decrease of 78
percent due to the sale of the industrial minerals businesses, lower zinc
production at Golden Grove and the consolidated loss of AMC.
EXPENSES
Exploration provisions and write-offs totaled A$58.1 million, a 25 percent
increase on last year due to the first full year effect of Yandal Operations.
Borrowing costs increased from A$66.7 million to A$112.0 million reflecting
the first full year consolidation of the Yandal USD bonds, the A$285 million
syndicated Yandal acquisition facility and the Australian Magnesium Corporation
debt facility. Interest income increased by 12 percent to A$28.2 million.
Administration costs increased by 7 percent to A$64.6 million mainly due to
one off redundancy costs of A$5.7 million.
Income tax expense was A$20.4 million for the year, an effective rate of 15
percent which is lower than the prima-facie rate of 30 percent due to
recognition of previously unrecognised tax credits and utilisation of losses.
A net operating loss of A$6.8 million was attributed to outside equity
interests due to the losses of AMC (62.6 percent-owned) relative to the profits
of Normandy NFM (87.5 percent-owned) and Normandy Mt Leyshon (76.4
percent-owned).
B-9
The net profit after tax but before significant items of A$120.1 million was
lower than last year's result of A$138.4 million, principally due to the impact
of higher borrowing costs and discontinued or sold operations.
Significant items included a A$159 million write down of the Kasese Cobalt
plant to zero together with a A$38 million write off in outside equity
interests, both reflecting the ongoing risks associated with the project. Other
significant expense items included write downs of A$42 million relating to
offshore regional exploration and development capitalised in previous years,
A$30 million write down of the Bronzewing mine property and A$20 million
provision against the investment in TVX Gold Inc shares, reflecting the market
price following a reconstruction scheme implemented in June 2001. Partially
offsetting these write downs was a net gain of A$14.3 million on the settlement
of the Peruvian asset dispute, including profit on sale of shares received in
consideration for the settlement.
After taking into account the significant items detailed above, the net loss
for the Group was A$154.6 million.
CASH FLOWS
Net cash inflow from operating activities increased by 49 percent to A$322.1
million, mainly due to the inclusion of the Yandal Operations for the full 12
months and higher cash flow generated by Pajingo and Normandy NFM. This
outweighed the loss of cash flow from discontinued and sold operations as well
as the higher net financing costs.
Capital expenditures totaled A$306.4 million, a reduction of 8 percent
mainly due to lower expenditure on development projects including Kasese,
Yamfo-Sefwi and Perama Hill as well as a significant reduction in expenditure
on investments.
Net proceeds from the sale of investments of A$130.3 million mainly
comprised A$49.5 million proceeds on sale of BRGM Perou/Mine Or, A$19.4 million
on sale of New Hampton Goldfields shares and A$7 million proceeds on sale of
Normandy Tennant Creek Pty Ltd.
Inflows from businesses acquired relate to cash balances held by AMC and
Midas at the time of acquisition and net proceeds received on sale of
businesses principally represent the Group's investments in Larvik Pigment
(Asia Pacific), Sdn Bhd, Larvik Pigment (Australia) Ltd and Larvik Pigment
(Norway) AS.
Net repayment of borrowings of A$302.4 million reflects the full payment and
cancellation of the A$285 million syndicated Yandal acquisition facility and
scheduled repayments relating to the Kasese project facility.
Dividends of A$95.2 million were paid, comprising the 2000 final dividend
and 2001 interim dividend of Normandy Mining Limited, Normandy Mt Leyshon
Limited and Normandy NFM Limited to outside shareholders.
Proceeds from issue of shares of A$93.8 million relate principally to the
cash portion of the Franco-Nevada transaction.
In summary, cash and bullion increased by A$98.1 million to A$344.8 million
at year end.
FINANCIAL POSITION
Total assets increased by A$220 million mainly as a result of the
acquisition of the Midas property following the transaction with Franco-Nevada.
Development properties increased by A$189 million reflecting the AMC
consolidation, partly offset by the write down of the Kasese project.
Investments decreased due to the consolidation of AMC which was previously
equity accounted and the sale of Mine Or and BRGM Perou as part
B-10
of the Peruvian assets settlement. Investments now comprise only the 49.9
percent interest in TVX Normandy Americas.
Total liabilities decreased by A$192 million mainly as a result of A$303
million debt repayments during the year, offset by consolidation of AMC debt.
Interest bearing liabilities at year end comprise A$200 million drawn under a
A$650 million syndicated corporate facility, US$300 million Notes issued in
April 1998 (non-recourse to Normandy), US$250 million Notes issued in July
1998, and project financing relating to the Kasese (US$50.7 million), Ovacik
(US$40 million) and AMC (A$39 million) projects.
Equity increased by A$412 million, reflecting the 446.1 million shares
issued to Franco-Nevada and increased outside equity interests recognised on
consolidation of AMC, offset by current year losses and dividends paid.
The Group's overall gearing decreased from 57 percent to 40 percent due to
the combined effect of lower net debt and the share issue to Franco-Nevada.
B-11
NORMANDY MINING LIMITED
STATEMENTS OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2001
CONVENIENCE
TRANSLATION
CONSOLIDATED CONSOLIDATED
-------------- -----------------
NOTES 2000 2001 2001 2000
----- ------ ------ -------- -------
US$M US$M A$M A$M
Sales Revenue................................................... 2 794.2 782.1 1,543.7 1,323.6
Cost of production.............................................. (586.6) (610.2) (1,204.5) (977.6)
------ ------ -------- -------
GROSS PROFIT.................................................... 207.6 171.9 339.2 346.0
------ ------ -------- -------
Other revenue from ordinary activities.......................... 2 15.1 14.3 28.2 25.2
Proceeds on sale of assets...................................... 2 127.8 77.4 152.9 213.0
Book value of assets sold....................................... (102.3) (59.2) (116.9) (170.6)
Share of net profit/(loss) of associates and joint ventures
accounted for using the equity method......................... 12.1 (2.4) (4.8) 20.1
Exploration and evaluation expenses............................. 14
Current year................................................. (28.0) (29.4) (58.1) (46.6)
Previously capitalized....................................... 4 -- (15.7) (31.0) --
Administration expenses......................................... (36.2) (32.7) (64.6) (60.4)
Borrowing costs................................................. (40.0) (56.8) (112.0) (66.7)
Net write off of non-current assets.............................
Previously capitalized....................................... 4 (309.2) (111.1) (220.0) (515.3)
Other income/(expenses) from ordinary activities................ (18.1) (8.4) (15.9) (30.1)
------ ------ -------- -------
PROFIT/(LOSS) FROM ORDINARY ACTIVITIES.......................... (103.0) (285.4)
(171.2) (52.1)
Income tax expense relating to ordinary activities.............. 5 (22.4) (10.3) (20.4) (37.3)
------ ------ -------- -------
Profit/(loss) from ordinary activities after related income tax
expense....................................................... (193.6) (62.4) (123.4) (322.7)
Net profit/(loss) attributable to outside equity interests...... 24.2 (15.8) (31.2) 40.4
------ ------ -------- -------
Net profit/(loss) attributable to members of the
parent entity................................................. (169.4) (78.2) (154.6) (282.3)
------ ------ -------- -------
Increase/(decrease) in foreign currency translation reserve
arising on translation of self-sustaining foreign
operations.................................................... 23 10.2 14.4 28.3 17.0
------ ------ -------- -------
Total revenue, expense and valuation adjustments attributable to
members of the parent entity recognised directly in equity.... 10.2 14.4 28.3 17.0
------ ------ -------- -------
Total changes in equity other than those resulting from
transactions with owners as owners............................ (159.2) (63.8) (126.3) (265.3)
------ ------ -------- -------
Earnings per share
Basic (cents per share)...................................... 22 (9.7) (4.3) (8.6) (16.2)
------ ------ -------- -------
The above Statements of Financial Performance should be read in conjunction
with the accompanying notes.
B-12
NORMANDY MINING LIMITED
STATEMENTS OF FINANCIAL POSITION--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
CONVENIENCE
TRANSLATION
CONSOLIDATED CONSOLIDATED
---------------- ----------------
NOTES 2000 2001 2001 2000
----- ------- ------- ------- -------
US$M US$M A$M A$M
CURRENT ASSETS
Cash assets...................................... 7 147.2 174.7 344.8 245.4
Receivables...................................... 8 74.4 62.6 123.7 124.0
Inventories...................................... 9 77.8 85.9 169.5 129.6
Other financial assets........................... 12 29.8 10.8 21.3 49.6
Other............................................ 17 74.1 71.2 140.6 123.5
------- ------- ------- -------
TOTAL CURRENT ASSETS............................. 403.3 405.2 799.9 672.1
------- ------- ------- -------
NON-CURRENT ASSETS
Receivables...................................... 8 16.4 5.7 11.2 27.3
Tax assets....................................... 10 51.8 51.8 102.3 86.4
Investments accounted for using the equity method 11 268.1 123.6 244.0 446.8
Other financial assets........................... 12 163.0 71.4 141.0 271.7
Development properties........................... 13 186.4 253.0 499.5 310.7
Exploration and evaluation expenditure........... 14 105.1 76.8 151.7 175.1
Property, plant and equipment.................... 15 842.2 886.6 1,750.0 1,403.6
Intangible assets................................ 16 28.5 22.4 44.2 47.5
Other............................................ 17 111.0 52.2 102.7 185.0
------- ------- ------- -------
TOTAL NON-CURRENT ASSETS......................... 1,772.5 1,543.5 3,046.6 2,954.1
------- ------- ------- -------
TOTAL ASSETS..................................... 2,175.8 1,948.7 3,846.5 3,626.2
------- ------- ------- -------
CURRENT LIABILITIES
Payables......................................... 97.4 126.5 249.8 162.4
Interest bearing liabilities..................... 18 66.7 57.8 114.0 111.1
Provisions....................................... 19 133.5 109.9 216.8 222.4
Tax liabilities.................................. 20 16.4 11.0 21.8 27.4
------- ------- ------- -------
TOTAL CURRENT LIABILITIES........................ 314.0 305.2 602.4 523.3
------- ------- ------- -------
NON-CURRENT LIABILITIES
Interest bearing liabilities..................... 18 863.2 598.7 1,181.8 1,438.6
Provisions....................................... 19 241.0 136.2 268.9 401.7
Tax liabilities.................................. 20 113.6 129.2 255.0 189.3
Other............................................ 21 52.4 71.1 140.4 87.3
------- ------- ------- -------
TOTAL NON-CURRENT LIABILITIES.................... 1,270.2 935.2 1,846.1 2,116.9
------- ------- ------- -------
TOTAL LIABILITIES................................ 1,584.2 1,240.4 2,448.5 2,640.2
------- ------- ------- -------
NET ASSETS....................................... 591.6 708.3 1,398.0 986.0
------- ------- ------- -------
EQUITY
Contributed equity............................... 22 693.3 807.5 1,593.9 1,155.5
Reserves......................................... 23 27.0 36.2 71.4 45.0
Retained profits/(accumulated losses)............ 23 (151.1) (220.2) (434.8) (251.9)
------- ------- ------- -------
EQUITY ATTRIBUTABLE TO MEMBERS OF NORMANDY MINING
LIMITED........................................ 569.2 623.5 1,230.5 948.6
Outside equity interests in controlled entities.. 24 22.4 84.8 167.5 37.4
------- ------- ------- -------
TOTAL EQUITY..................................... 25 591.6 708.3 1,398.0 986.0
======= ======= ======= =======
The above Statements of Financial Performance should be read in conjunction
with the accompanying notes.
B-13
NORMANDY MINING LIMITED
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2001
CONVENIENCE
TRANSLATION
CONSOLIDATED CONSOLIDATED
-------------- ------------------
NOTES 2000 2001 2001 2000
----- ------ ------ -------- --------
US$M US$M A$M A$M
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from sales..................................... 781.6 798.7 1,576.6 1,302.7
Payments to suppliers and employees..................... (630.6) (601.3) (1,186.9) (1,051.0)
Interest received....................................... 16.6 11.4 22.5 27.7
Dividends received...................................... 11.6 21.6 42.6 19.3
Other receipts.......................................... 8.2 -- -- 13.6
Income tax paid......................................... (18.9) (19.7) (38.9) (31.5)
Interest and other costs of finance paid................ (38.9) (47.5) (93.8) (64.9)
------ ------ -------- --------
NET CASH INFLOW FROM OPERATING ACTIVITIES............... 26(d) 129.6 163.2 322.1 215.9
------ ------ -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment.............. (78.5) (67.7) (133.6) (130.9)
Interest capitalised on qualifying assets............... (9.4) (6.5) (12.9) (15.7)
Payments for development projects....................... (61.1) (44.5) (87.8) (101.9)
Payments for exploration and evaluation................. (35.2) (31.8) (62.8) (58.6)
Payments for investments................................ (15.9) (4.7) (9.3) (26.4)
Proceeds from sale of non-current assets................ 23.4 13.6 26.9 39.0
Proceeds from sale of investments....................... 38.2 66.0 130.3 63.7
Repayment of loans by other entities.................... 0.1 57.2 113.0 0.1
Loans to other entities................................. (21.8) (2.1) (4.1) (36.4)
Businesses acquired..................................... 26(e) 28.0 24.5 48.3 46.4
Businesses disposed..................................... 26(f) 63.5 36.4 71.8 105.9
------ ------ -------- --------
NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES..... (68.7) 40.4 79.8 (114.8)
------ ------ -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of borrowings................................ (388.7) (329.1) (649.7) (647.8)
Proceeds from borrowings................................ 254.5 175.9 347.3 424.1
Dividends paid to outside equity interests in controlled
entities.............................................. (7.1) (10.6) (20.9) (11.9)
Dividends paid.......................................... 6 (40.9) (37.6) (74.3) (68.1)
------ ------ -------- --------
PROCEEDS FROM ISSUE OF SHARES........................... -- 47.5 93.8 --
------ ------ -------- --------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES.............. (182.2) (153.9) (303.8) (303.7)
------ ------ -------- --------
Net increase/(decrease) in cash......................... (121.3) 49.7 98.1 (202.6)
Cash at the beginning of the financial year............. 263.9 124.3 245.4 439.9
Effect of changes in the exchange rate on cash held in
foreign currencies at the beginning of the financial
year.................................................. 4.8 0.7 1.3 8.1
------ ------ -------- --------
Cash at end of financial year........................... 26(a) 147.4 174.7 344.8 245.4
====== ====== ======== ========
The above Statements of Financial Performance should be read in conjunction
with the accompanying notes.
B-14
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2001
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This general purpose financial report has been prepared in accordance with
applicable Accounting Standards, Urgent Issues Group Consensus Views and the
Corporations Act 2001. It is prepared in accordance with the historical cost
convention, except for certain assets which are noted as at valuation. The
accounting policies adopted are consistent with those of the previous year.
The directors have elected under section 334(5) of the Corporations Act 2001
to apply Accounting Standards AASB 1041 "Revaluation of Non-Current Assets" for
this financial year, even though the standard is not required to be applied
until annual reporting periods beginning on or after 30 September 2001.
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are presented as one set of financial
statements and include all entities which comprise the Normandy Mining Limited
consolidated entity, being the parent entity and its controlled entities. There
are no controlled entities in the consolidated entity other than those listed
in Note 28. The effects of all transactions between entities within the
consolidated entity are eliminated in full.
(B) FOREIGN CURRENCIES
Transactions denominated in foreign currencies have been brought to account
at the exchange rates ruling at the time of the transactions. At balance date,
foreign currency receivables and payables are translated at exchange rates
ruling at that date.
Exchange gains and losses and hedging costs arising on contracts entered
into as hedges of specific revenue or expense transactions are deferred until
the date of such transactions at which time they are included in the
determination of such revenues or expenses.
Assets and liabilities of self-sustaining overseas controlled entities are
translated at exchange rates ruling at balance date and any exchange gain or
loss arising on translation is carried directly to a foreign currency
translation reserve.
When anticipated purchase or sale transactions have been hedged, actual
purchases or sales which occur during the hedged period are accounted for as
having been hedged until the amounts of those transactions are fully allocated
against the hedged amounts.
Where a hedge transaction is terminated early and the anticipated
transaction is still expected to occur as designated, the deferred gains and
losses that arose on the hedge prior to its termination continue to be deferred
and are included in the measurement of the purchase or sale or interest
transaction when it occurs. Where a hedge transaction is terminated early
because the anticipated transaction is no longer expected to occur as
designated, deferred gains and losses that arose on the hedge prior to its
termination are included in the statement of financial performance for the
period.
(C) REVENUE
Gold bullion is taken up as a sale in the period during which it is shipped
from the mine, provided it is either sold or delivered to a gold refinery
within the normal time span. Bullion delivered against forward sales contracts
is accounted for at the contract rate. Base metal concentrate sales are
recognised at estimated sales value when
B-15
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
shipped and adjusted for variations in metal prices, assay, weight and
currency. Other sales are taken up when title has passed.
Gold bullion held at year end is valued at the contract rates for those
hedges it is expected to be delivered into. Base metal concentrate debtors are
valued at the relevant forward contract US dollar rate.
Royalty revenue is recognised on an accrual basis in accordance with the
substance of the relevant agreement.
Gains or costs arising upon entry into a hedging transaction intended to
hedge the sale of goods, together with subsequent exchange gains or losses
resulting from those transactions, are deferred up to the date of sale and
included in the measurement of the sale.
If the hedging transaction is terminated prior to its maturity date and the
hedged transaction is still expected to occur, deferral of any gains and losses
which arose prior to termination continues and those gains and losses are
included in the measurement of the hedged transaction.
In those circumstances where a hedging transaction is terminated prior to
maturity because the hedged transaction is no longer expected to occur, any
previously deferred gains and losses are recognised in the statements of
financial performance at the date of termination.
If a hedge transaction relating to a commitment for the sale of goods or
services is redesignated as a hedge of another specific commitment and the
original transaction is still expected to occur, the gains and losses that
arise on the hedge prior to its redesignation are deferred and included in the
measurement of the original sale when it takes place. If the hedge transaction
is redesignated as a hedge of another commitment because the original sale
transaction is no longer expected to occur, the gains and losses that arise on
the hedge prior to its redesignation are recognised in the statements of
financial performance at the date of the redesignation.
(D) RECEIVABLES
Receivables are recorded at amounts due less any provision for doubtful
debts.
(E) DERIVATIVES
Derivative financial instruments are not recognised in the financial
statements on inception. The costs associated with entering hedge transactions
in respect of commodity sales together with gains or losses to the date of sale
are deferred and included in the measurement of the final sale price.
Additional information in respect of hedging is set out in Note 32.
The amount received or paid under interest rate swaps is recognised as an
adjustment to interest rate expense when the cash flow takes place.
(F) INCOME TAX
Income tax has been brought to account using the liability method of tax
effect accounting. No provision has been made for any taxes on capital gains
which could arise in the event of a sale of certain revalued non-current assets
for the amount at which they are stated in the financial statements as it is
not expected that any such liability will crystallise.
B-16
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
(G) GOODWILL
Goodwill is measured as the excess of the cost of acquisition over the fair
value of the identifiable net assets acquired. Amortisation is provided on a
straight line basis over the period during which the benefits are expected to
arise based on life of mine or over a period of twenty years whichever is the
lesser.
(H) INVENTORIES
Inventories, apart from gold bullion, are valued at the lower of cost and
net realisable value. Costs are assigned to inventories on hand by the method
most appropriate to each class of inventory with the majority being valued on
an average cost basis. Costs of production include fixed and variable direct
costs and an appropriate portion of fixed overhead expenditure, depreciation
and mine amortisation.
(I) OTHER FINANCIAL ASSETS
The consolidated entity's interests in companies are carried at the lower of
cost and recoverable amount. Dividend income is recognised in profits when
received, except for associated entities which are accounted for using the
equity method. Loans to other corporations are recorded at amounts due less any
provisions for doubtful loans.
(J) JOINT VENTURES
(i) Joint venture operation
The proportionate interests in the assets, liabilities and expenses of a
joint venture operation have been incorporated in the financial statements
under the appropriate headings. Details of the joint venture are set out in
Note 29.
(ii) Joint venture entities
The consolidated entity's interest in the assets and liabilities of joint
venture entities are accounted for using the equity method. Additional
information is provided in Note 30.
(K) EXPLORATION AND EVALUATION EXPENDITURE
Exploration and evaluation expenditure incurred by the consolidated entity
is accumulated for each area of interest and recorded as an asset, if either:
(i) it is expected to be recouped through successful development of and
production from the area, or by its sale; or
(ii) significant exploration or evaluation of the area is continuing.
The expenditure incurred in areas of interest located around existing
milling facilities is provided for over the life of the milling facilities.
Expenditure on all other areas of interest is expensed for as the expenditure
is incurred other than for exploration assets acquired, which are initially
recorded at cost.
The recoverable amount of each area of interest is determined on a bi-annual
basis so that the net carrying amount does not exceed the recoverable amount.
For areas of interest which are not considered to have any commercial value, or
where exploration rights are no longer current, the capitalised amounts are
written off against the provision and any remaining amounts are charged against
profit.
B-17
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
(L) DEVELOPMENT PROPERTIES
Where it has been established to the satisfaction of Directors that ore
reserves or mineral resources exist, development expenditure is accumulated as
development properties. No amortisation is provided in respect of development
properties until they are reclassified as mine properties following
commencement of production.
(M) DEPRECIATION AND AMORTISATION
Mine properties are amortised on a units of production basis once production
has commenced. Property, plant and equipment is depreciated using a units of
production basis or a straight line basis over the useful life of the asset.
The units of production method causes rates of depreciation and amortisation to
vary according to the rate at which production has depleted the estimated
future mineable reserves of the respective mines.
(N) PREPAID/DEFERRED MINING COSTS
Direct expenditure on surface mining is brought to account at the life of
mine ratio of ore to waste for each pit. A prepayment or provision is booked
whenever the stripping ratio for a period differs from the mine plan.
Costs incurred in developing drives in underground mines which are expected
to be used for periods shorter than the mine life are apportioned over the life
of the mine using a ratio of development meters to tonnes of ore reserve. A
prepayment or provision is booked whenever the metres developed for a period
differs from the mine life ratio.
(O) RECOVERABLE AMOUNT OF NON-CURRENT ASSETS
Each reporting period, the recoverable amount of all non-current assets is
assessed.
Where the carrying amount of a non-current asset is greater than its
recoverable amount, the asset is revalued down to its recoverable amount. Where
net cash inflows are derived from a group of assets working together, such as
at a mining operation, recoverable amount is determined on the basis of the
relevant group of assets.
The expected net cash flows included in determining recoverable amounts of
non-current assets are discounted to their present values using a
market-determined, risk-adjusted discount rate. The effect of capital gains tax
has not been taken into account.
(P) MINE COMPLETION COSTS
Provision is made for estimated rehabilitation expenditure, decommissioning
and closure costs using the incremental method on a units of production basis
over the life of the mine from the time production commences. Future total mine
completion costs are estimated annually on an undiscounted basis taking into
account all current environmental and legal requirements and are adjusted on a
prospective basis.
Rehabilitation costs recognised include regrading of waste dumps,
revegetation and erosion and drainage control, in order to allow for
relinquishment of mining titles with no ongoing maintenance costs. Closure
costs recognised include employee redundancy payments and costs incurred in
auctioning remaining spares and
B-18
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
consumables. Rehabilitation costs associated with exploration and evaluation
activities are treated as exploration and evaluation expenditure.
(Q) EMPLOYEE ENTITLEMENTS
Provision is made for all know obligations in respect of employees. Annual
leave, long service leave and vested sick leave are provided at the current
rate of pay as per the relevant awards and employee contracts. Provisions for
long service leave commence at the anniversary of three years of service, with
further amounts being provided as the entitlement grows beyond three years. It
is expected that the resultant provision for long service leave will
approximate the present value of the estimated future cash outflows associated
with long service leave.
Additional information in respect of employee entitlements including
ownership based remuneration schemes is provided in Note 36.
(R) ACCOUNTS PAYABLE
Trade payables and other accounts payable are recognised when the economic
entity becomes obliged to make future payments resulting from the purchase of
goods and services.
(S) ACQUISITION OF ASSETS
Assets acquired are recorded at the cost of acquisition, being the purchase
consideration determined as at the date of acquisition plus costs incidental to
the acquisition. In the event that settlement of all or part of the cash
consideration given in the acquisition of an asset is deferred, the fair value
of the purchase consideration is determined by discounting the amounts payable
in the future to their present value as at the date of acquisition.
(T) BORROWING COSTS
Borrowing costs are expensed as incurred except where they relate to the
financing of projects under construction where they are capitalised up to the
date of commissioning or sale.
(U) INTEREST BEARING LIABILITIES
Interest expense is recognised on an effective yield basis. Debentures, bank
loans and other loans are recorded at an amount equal to the net proceeds
received. Interest expense is recognised on an accrual basis. Ancillary costs
incurred in connection with the arrangement of borrowings are deferred and
amortised over the period of borrowing.
(V) UNITED STATES DOLLAR CONVERSIONS
This financial report has been prepared using Australian dollars. For the
convenience of readers outside Australia the statements of financial
performance, statements of financial position and statements of cash flows have
been converted from A$ to US$ but remain prepared under Australian Generally
Accepted Accounting Practices.
These conversions appear under columns headed "Convenience Translation" and
represented rounded millions of US dollars.
B-19
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
The conversion has been made using the noon-buying rate in New York City for
cable transfers in non-US currencies. This rate is certified for custom
purposes by the Federal Reserve Bank of New York. The rate on 30 June 2001 was
A$1.00 to US$0.51 (2000: A$1.00 to US$0.60). These conversions are indicative
only and do not mean that the A$ amounts could be converted to US$ at the rate
indicated.
(W) ROUNDING AMOUNTS
The Company is of the kind referred to in Class Order 98/100 dated 10 July
1998 issued by the Australian Securities and Investment Commission. In
accordance with that Class Order amounts in this report and the financial
report have been rounded to the nearest one hundred thousand dollars, except
where rounding to the nearest one thousand dollars is required.
(X) COMPARATIVE AMOUNTS
The Company has adopted the presentation and disclosure requirements of
Accounting Standards AASB 1018 "Statement of Financial Performance", AASB 1034
"Financial Report Presentation and Disclosure" and AASB 1040 "Statement of
Financial Position" for the first time in the preparation of this financial
report. In accordance with the requirements of these new/revised Standards,
comparative amounts have been reclassified in order to comply with the new
presentation format. The reclassification of comparative amounts has not
resulted in a change to the aggregate amounts of current assets, non-current
assets, current liabilities, non-current liabilities or equity, or the net
profit/loss of the company as reported in the prior year financial report.
2 REVENUE
CONSOLIDATED
---------------
2001 2000
------- -------
A$M A$M
REVENUE FROM OPERATING ACTIVITIES
Gold............................................. 1,251.9 936.0
Metals........................................... 257.7 288.6
Other............................................ 34.1 99.0
------- -------
1,543.7 1,323.6
------- -------
INTEREST REVENUE
Other parties.................................... 27.8 21.7
Related parties.................................. 0.4 3.5
------- -------
28.2 25.2
------- -------
REVENUE FROM NON-OPERATING ACTIVITIES
Proceeds on sale of investments.................. 130.3 173.4
Proceeds on sale of property, plant and equipment 22.6 39.6
Insurance claims proceeds receivable............. 12.9 1.5
Other............................................ 17.8 20.1
------- -------
183.6 234.6
------- -------
1,755.5 1,583.4
======= =======
B-20
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
3 OPERATING PROFIT
Profit/(loss) from ordinary activities before income tax includes the following
specific net gains and expenses:
CONSOLIDATED
----------------
2001 2000
------- -------
A$M A$M
NET GAINS
Net gains on disposal of:
Property, plant and equipment.............. 20.5 4.1
Deferred hedge gain amortisation.............. 92.6 91.4
EXPENSES
Amortisation
Mine properties............................ 169.4 57.9
Goodwill................................... 3.6 6.5
Other...................................... -- 1.7
Depreciation
Land and buildings......................... 2.2 0.5
Plant and equipment........................ 111.7 74.1
------- -------
Total depreciation and amortisation(1)........ 286.9 140.7
------- -------
Royalties..................................... 27.6 14.9
Borrowing costs
Interest and finance charges............... 124.9 82.4
Less amount capitalised--qualifying assets. (12.9) (15.7)
------- -------
Borrowing costs expensed...................... 112.0 66.7
Addition to/(reductions in) provisions for
Directors' entitlements.................... 1.5 1.3
Employee entitlements...................... 13.7 (1.7)
Mine completion costs...................... 1.4 17.3
Doubtful debts............................. (0.7) (15.0)
Other...................................... 2.2 8.0
AUDITORS' REMUNERATION
A$ A$
------- -------
Audit Services
Auditors of the company.................... 869,000 748,000
Other auditors............................. 425,000 659,000
Other Services
Auditors of the company.................... 854,000 382,000
Other auditors............................. 2,000 52,000
======= =======
--------
(1) Amortisation and depreciation rates were recalculated during the year to
reflect the increase in mineable reserves. The effect has been to reduce
these expenses by A$12.9 million (2000: a reduction of A$27 million).
B-21
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
4 INDIVIDUALLY SIGNIFICANT ITEMS
CONSOLIDATED
--------------
2001 2000
------ ------
A$M A$M
INCLUDED IN OPERATING PROFIT ARE THE FOLLOWING ITEMS:
Profit on sale of investments....................................................... 14.3 36.6
Net write-off of non-current assets to recoverable amount
--development properties......................................................... (170.0) (96.0)
--mine properties................................................................ (30.0) --
--investments.................................................................... (20.0) --
Exploration expenses................................................................
--previously capitalised expenditure............................................. (31.0) --
Purchase consideration expensed..................................................... -- (359.0)
Equity share of writedowns of associates............................................ -- (60.3)
------ ------
(251.0) (515.3)
INCLUDED IN OUTSIDE EQUITY INTEREST IS THE FOLLOWING SIGNIFICANT ITEM:
Recognition/(write-down) of outside equity interest in Kasese Cobalt Company Limited (38.0) 58.0
------ ------
(274.7) 420.7
====== ======
B-22
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
5 INCOME TAX
CONSOLIDATED
--------------
2001 2000
------ ------
A$M A$M
THE INCOME TAX EXPENSES/(BENEFIT) FOR THE FINANCIAL YEAR DIFFERS FROM THE AMOUNT
CALCULATED ON THE PROFIT/(LOSS). THE DIFFERENCES ARE RECONCILED AS FOLLOWS:
Operating profit/(loss) before income tax................................................. (103.0) (285.4)
------ ------
Prima facie income tax expense calculated at applicable tax rate on the profit/(loss) from
ordinary activities..................................................................... (35.0) (102.7)
TAX EFFECT OF PERMANENT DIFFERENCES
Non-deductible depreciation and amortisation.............................................. 1.5 3.2
Adjustment to carrying value of assets.................................................... 78.5 34.6
Purchase consideration expensed........................................................... -- 129.2
Equity accounted results.................................................................. -- 14.5
Research and development and investment allowance......................................... (0.6) (0.9)
Capital losses recouped................................................................... (37.7) (45.8)
Non-assessable revenue items.............................................................. (3.6) (11.9)
Non-deductible exploration................................................................ 0.6 0.2
Other non-deductible items................................................................ 2.1 5.8
------ ------
Income tax adjusted for permanent differences............................................. 5.8 26.2
Tax effect of timing differences not previously recognised................................ (4.2) 30.5
Change in company tax rates from 1 July 2000.............................................. (1.0) (8.5)
Benefit of prior year losses recouped..................................................... (1.4) --
Losses not recognised as future income tax benefits....................................... 28.4 2.4
------ ------
27.6 50.6
Over provision in previous years.......................................................... (7.2) (13.3)
------ ------
Income tax expense attributable to operating profit/(loss)................................ 20.4 37.3
====== ======
ADJUSTMENT TO DEFERRED INCOME TAX BALANCES
Legislation reducing the Australian company income tax rate from 36% to 34%
in respect of the 2000-2001 income tax year and then to 30% from the 2001-2002
income tax year was announced on 21 September 1999 and received Royal Assent on
10 December 1999. As a consequence, deferred tax balances which are expected to
reverse in the 2000-2001 or a later income tax year have been remeasured using
the appropriate new rates, depending on the timing of their reversal.
B-23
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
6 DIVIDENDS
CONSOLIDATED
--------------
2001 2000
----- -----
A$M A$M
Ordinary shares
Interim dividend paid (2.5 cents per share) (2000: 2.5 cents per share)
Franked at 36 percent......................................................................... -- 18.3
Franked at 34 percent......................................................................... 19.4 --
Unfranked..................................................................................... 24.7 25.2
----- -----
44.1 43.5
----- -----
Final dividend declared (nil) (2000: 3.5 cents per share) --
Franked at 34 percent......................................................................... -- 27.0
Unfranked..................................................................................... -- 34.3
----- -----
-- 61.3
----- -----
Total dividends provided for or paid (2.5 cents per share) (2000: 6.0 cents per share)............ 44.1 104.8
Over Provision arising from shareholders electing to take shares in lieu of cash dividends under
the parent entity's Share Investment Plan....................................................... (13.9) (10.8)
----- -----
30.2 94.0
----- -----
Dividends satisfied by the issue of shares under the Dividend Reinvestment and Share Investment
Plans........................................................................................... 17.1 35.5
Dividends paid in cash............................................................................ 74.3 68.1
----- -----
91.4 103.6
----- -----
FRANKED DIVIDENDS
The franked portion of the dividends proposed as at 30 June 2001 will be franked out of existing franking credits
or out of franking credits arising from the payment of income tax in the year ending 30 June 2002.
Franking credits available for subsequent financial years at 30% (2000: 34%)...................... 23.4 11.9
===== =====
The above amounts represent the balance of the franking account as at the
end of the financial year, adjusted for:
(a) franking credits that will arise from the payment of the current tax
liability
(b) franking debits that will arise from the payment of dividends
recognised as a liability at the reporting date
(c) franking credits that will arise from the receipt of dividends
recognised as receivables at the reporting date
(d) franking credits that may be prevented from being distributed in
subsequent financial years
B-24
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
7 CASH ASSETS
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
Cash............................................................. 239.4 152.7
Bank bills....................................................... 65.8 69.4
Gold bullion..................................................... 39.6 23.3
----- -----
344.8 245.4
===== =====
8 RECEIVABLES
CURRENT
Trade debtors................................................... 35.7 28.7
Provision for doubtful debts.................................... (0.2) --
----- -----
35.5 28.7
Bank guarantee deposits......................................... -- 15.9
Other debtors................................................ 86.8 80.3
Provision for doubtful debts................................. (0.7) (0.9)
----- -----
86.1 79.4
Amounts owing by associated entities............................ 2.1 --
----- -----
123.7 124.0
===== =====
NON-CURRENT
Amounts owing by associated entities............................ 0.5 24.8
Provision for doubtful debts.................................... -- (21.9)
----- -----
0.5 2.9
Other debtors................................................... 11.2 30.0
Provision for doubtful debts.................................... (0.5) (5.6)
----- -----
10.7 24.4
----- -----
11.2 27.3
===== =====
B-25
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
9 INVENTORIES
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
CURRENT
Stores at cost................................................... 46.5 34.6
Work in progress
--gold ore stocks at cost..................................... 28.4 54.0
--gold ore stocks at net realizable value..................... 47.1 1.9
--base metals at cost......................................... -- 1.2
--gold in circuit at cost..................................... 28.4 17.9
----- -----
103.9 75.0
Finished goods
--base metals concentrate at cost............................. 14.3 2.9
--base metals concentrate at net realizable value............. 3.9 13.1
--other finished goods at cost................................ 0.9 4.0
----- -----
19.1 20.0
----- -----
169.5 129.6
===== =====
10 TAX ASSETS
CONSOLIDATED
------------
2001 2000
----- ----
A$M A$M
NON-CURRENT
FUTURE INCOME TAX BENEFIT
Attributable to carry forward tax losses......................... 67.8 59.6
Attributable to timing differences............................... 34.5 26.8
----- ----
102.3 86.4
===== ====
UNBOOKED FUTURE INCOME TAX BENEFITS
The consolidated entity has future income tax benefits not brought to
account as assets in respect of tax losses of A$168.2 million as at 30 June
2001 (2000: A$82.5 million).
The potential future income tax benefit will only be realised if:
(i) the consolidated entity derives future assessable income of a nature
and of an amount sufficient to enable the benefit from the losses and
deductions to be realised;
(ii) the consolidated entity continues to comply with the conditions for
deductibility imposed by the law; and
(iii) no changes in tax legislation adversely affect the consolidated
entity in realising the benefit from the deductions for the losses.
B-26
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
11 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
NON-CURRENT
Associated entities (listed) note 31..... -- 76.4
Joint venture entities (unlisted) note 30 244.0 370.4
----- -----
244.0 446.8
===== =====
12 OTHER FINANCIAL ASSETS
CURRENT
Loans to associated entities......... -- 49.6
Loans to other corporations.......... 31.9 --
Provision for doubtful debts......... (10.6) --
----- -----
21.3 49.6
----- -----
NON-CURRENT
Listed shares at recoverable amount.. 6.3 52.0
Unlisted shares at recoverable amount 21.0 19.3
Loans to other corporations.......... 115.1 148.7
Provision for doubtful debts......... (1.4) (5.0)
----- -----
113.7 143.7
----- -----
Loans to associated entities......... -- 56.7
----- -----
141.0 271.7
===== =====
13 DEVELOPMENT PROPERTIES
RECONCILIATION OF THE CARRYING AMOUNTS OF DEVELOPMENT PROPERTIES AT THE
BEGINNING AND END OF THE CURRENT AND PREVIOUS FINANCIAL YEAR ARE SET OUT BELOW:
CONSOLIDATED
--------------
2001 2000
------ ------
A$M A$M
Balance brought forward............................................ 310.7 287.0
Expenditure incurred during the year including capitalised interest 100.7 62.6
Acquisitions....................................................... 230.7 30.4
Transferred from exploration and evaluation........................ -- 28.4
Expenditure written off during the year............................ (169.2) (104.0)
Foreign exchange movements......................................... 26.6 6.3
------ ------
Balance carried forward............................................ 499.5 310.7
====== ======
Projects in the development phase include Kasese, Stanwell Magnesium
Project, Perama and Yamfo Sefwi.
B-27
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
ASSETS PLEDGED AS SECURITY
Refer to note 18 for information on assets pledged as security by the parent
entity or its controlled entities.
14 EXPLORATION AND EVALUATION EXPENDITURE
RECONCILIATION OF THE CARRYING AMOUNTS OF EXPLORATION AND EVALUATION
EXPENDITURE AT THE BEGINNING AND END OF THE CURRENT AND PREVIOUS FINANCIAL YEAR
ARE SET OUT BELOW:
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
Balance brought forward................ (i) 175.1 189.7
Expenditure incurred during the year....... 62.8 58.5
Expenditure written off during the year.... (89.1) (46.6)
Transferred to development properties...... -- (28.4)
Transferred to mine properties............. (6.2) (3.2)
Acquisitions and disposals................. 3.2 (0.7)
Foreign exchange movements................. 5.9 5.8
----- -----
Balance carried forward.................... 151.7 175.1
===== =====
--------
(i) A reclassification from property, plant and equipment to capitalised
exploration and evaluation expenditure of A$46.1 million has been made to
more accurately reflect the nature of the projects. This has resulted in a
change in the disclosure of the comparative information
15 PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED
---------------------------------------------------
2001 2000
------------------------- -------------------------
A$M A$M A$M A$M A$M A$M
Land and buildings at cost. 119.2 (51.8) 67.4 57.1 (27.3) 29.8
Mine properties at cost (i) 1,843.9 (729.6) 1,114.3 1,499.1 (587.7) 911.4
Plant and equipment at cost 1,026.7 (486.3) 540.4 850.3 (426.8) 423.5
Capital work in progress... 27.9 -- 27.9 38.9 -- 38.9
------- -------- ------- ------- -------- -------
3,017.7 (1,267.7) 1,750.0 2,445.4 (1,041.8) 1,403.6
======= ======== ======= ======= ======== =======
--------
(i) A reclassification from property, plant and equipment to capitalised
exploration and evaluation expenditure of A$46.1 million has been made to
more accurately reflect the nature of the projects. This has resulted in a
change in the disclosure of the comparative information
The majority of the land and buildings relate to the mining operations and
the Directors consider that the best indicator of their current value is their
book value. These assets are being depreciated over the life of the mine to
which they relate, in accordance with the accounting policy stated in Note 1
(m). These land and buildings form an integral part of producing assets and
have no significant value beyond the life of the mine. It is considered that
the current value of non-mining land and buildings as at 30 June 2001
approximates book value.
B-28
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
ASSETS PLEDGED AS SECURITY
Refer to note 18 for information on assets pledged as security by the parent
entity or its controlled entities.
RECONCILIATIONS
Reconciliations of the carrying amounts of each class of property, plant and
equipment at the beginning and end of the current and previous financial year
are set out below:
CAPITAL
LAND AND MINE PLANT AND WORK IN
BUILDINGS PROPERTIES EQUIPMENT PROGRESS TOTAL
--------- ---------- --------- -------- -------
A$M A$M A$M A$M A$M
CONSOLIDATED 2001
Carrying amount at start of year........................... 29.8 911.4 423.5 38.9 1,403.6
Additions............................................ 16.5 55.1 56.5 5.5 133.6
Disposals............................................ (0.8) (9.5) (6.4) -- (16.7)
Additions through acquisitions of entities.... (note 26(e)) 23.0 337.8 160.7 -- 521.5
Depreciation/amortisation expense................. (note 3) (2.2) (169.4) (111.7) -- (283.3)
Transfer from exploration and evaluation................... -- 6.2 -- -- 6.2
Transfer of capital work in progress....................... 1.0 3.1 12.4 (16.5) --
Recoverable amount write-off of mine properties............ -- (30.0) -- -- (30.0)
Foreign currency exchange differences...................... 0.1 9.6 5.4 -- 15.1
---- ------- ------ ----- -------
Carrying amount at end of year............................. 67.4 1,114.3 540.4 27.9 1,750.0
==== ======= ====== ===== =======
16 INTANGIBLE ASSETS
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
Goodwill at cost........ 93.8 94.2
Accumulated amortisation (49.6) (46.7)
----- -----
44.2 47.5
===== =====
B-29
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
17 OTHER ASSETS
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
CURRENT
Prepaid mining costs.... 111.2 58.9
Prepaid hedging fees.... 15.1 5.2
Other prepaid expenses.. 8.9 7.9
Other assets............ 5.4 --
Assets held for resale.. -- 51.5
----- -----
140.6 123.5
===== =====
NON-CURRENT
Prepaid mining costs.... 25.7 94.7
Deferred expenses....... 25.9 12.0
Prepaid hedging fees.... 13.5 20.5
Prepaid interest........ -- 10.2
Redesignated hedge gains 37.6 37.6
Other................... -- 10.0
----- -----
102.7 185.0
===== =====
18 INTEREST BEARING LIABILITIES
CONSOLIDATED
---------------
2001 2000
------- -------
A$M A$M
CURRENT
UNSECURED
Bank loans(i)................. -- 11.0
Amounts owing to other parties 6.0 10.1
------- -------
SECURED 6.0 21.1
Bank loans(iii)............... 108.0 90.0
------- -------
114.0 111.1
======= =======
NON-CURRENT
UNSECURED
Bank loans(i)................. 200.1 170.0
US dollar guaranteed notes(ii) 875.7 875.9
Amounts owing to other parties 2.8 22.3
------- -------
1,078.6 1,068.2
======= =======
SECURED
Bank loans(iii)............... 103.2 370.4
------- -------
1,181.8 1,438.6
======= =======
B-30
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
Details of the financing facilities of the consolidated entity are as
follows:
AVAILABLE AT USED AT UNUSED AT
BALANCE DATE BALANCE DATE BALANCE DATE
------------ ------------ ------------
2001 2000 2001 2000 2001 2000
----- ----- ----- ----- ----- -----
A$M A$M A$M A$M A$M A$M
Unsecured bank loans(i) 685.0 710.0 200.1 181.0 484.9 529.0
Secured bank loans(iii) 211.2 460.4 211.2 460.4 -- --
--------
(i) Unsecured bank loans
Normandy Group Finance Ltd, a wholly owned entity, has an A$650 million
committed revolving multi-option facility with a syndicate of banks
established in November 1997. The facility consists of three tranches.
Tranche 1 and Tranche 2 are available to a maximum of A$370 million and
mature in November 2001. Tranche 3 is a term facility available to a maximum
of A$280 million and matures in November 2003. All tranches are at an
interest rate dependent on the currency drawn plus a margin of 0.60 percent.
Interest is paid at the end of each interest period nominated by the
borrower, to a maximum of 180 days. As at 30 June 2001, Tranche 1 and
Tranche 2 were undrawn (2000: A$60 million) and the amount drawn down under
Tranche 3 was A$200 million (2000: A$110 million).
Normandy NFM Limited, a controlled entity, had a A$25 million committed
revolving multi-option facility which matured in August 2001. As at 30 June
2001, this facility was undrawn (2000: A$11 million drawn). Interest was
paid at an interest rate dependent on the currency drawn plus a margin of
0.7 percent at the end of each interest period nominated by the borrower, to
a maximum of 180 days.
Normandy NFM Limited has a committed short term A$10 million overdraft
facility, which at 30 June 2001 was undrawn (2000: undrawn)
(ii) US dollar denominated debt
In July 1998, Normandy Finance Limited ("NFL") issued US$100 million of
seven year 7.5 percent and US$150 million of ten year 7.625 percent
guaranteed notes. Interest on the notes is paid semi-annually in arrears.
Certain financial instruments were entered into whereby NFL has agreed to
exchange the US dollar fixed interest amounts payable on the seven and ten
year notes, with the 90 day Australian dollar bank bill rate plus a margin
of 1.70 percent and 1.76 percent respectively. The US$250 million has been
recorded at A$403.2 million (2000: A$403.2 million) reflecting the future
exchange rate of the hedge transaction.
In April 1998, Normandy Yandal Operations Limited (formerly Great Central
Mines Limited) issued US$300 million of ten year 8.875 percent senior
unsecured notes. Interest on the notes is paid semi-annually in arrears.
Certain financial instruments were entered into whereby Normandy Yandal
Operations Limited has agreed to exchange US dollar fixed interest amounts
payable with gold interest rate exposure. Of the total, US$183.6 million has
been swapped into a gold interest rate exposure, of which half is fixed at
3.87% and half is floating. The floating rate at 30 June 2001 was 2.07%
(2000: 1.49%).
(iii) Secured bank loans
A controlled entity has a loan facility in respect of the Ovacik mine for
US$40.0 million, established in December 1996, subsequently refinanced in
May 1998 and in April 2000. As at 30 June 2001, the facility was fully drawn
(2000: fully drawn), has an interest rate of LIBOR plus 1.0 percent and
matures in December 2001.
A controlled entity has project financing facilities in respect of the
Kasese project totalling US$50.7 million and are at varying interest rates
dependent upon the term of each facility (2000: US$58.2 million) from a
number of parties. These facilities were fully drawn in the current and
prior years.
B-31
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
A controlled entity has project financing facilities in respect of the QMAG
project totalling A$38.6 million (2000: nil) from a number of parties. At 30
June 2001 these facilities were fully drawn and are at varying interest
rates dependent upon the term of each facility.
In the prior year a controlled entity, Yandal Gold Holdings Pty Ltd. had a
fully-drawn secured term debt facility amounting to A$285 million. The
facility was repaid and cancelled during the year.
(iv) Assets pledged as security
The carrying amounts of assets pledged as security are:
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
FIRST MORTGAGE
Development properties.......... 83.5 239.1
FLOATING CHARGE
Cash assets..................... 5.1 4.3
Receivables--current............ 5.6 6.2
Receivables--non-current........ 4.9 5.3
Other assets.................... 12.5 7.8
----- -----
Total assets pledged as security 111.6 262.7
===== =====
19 PROVISIONS
CURRENT
Deferred hedge gain.... 102.2 100.7
Directors' entitlements 3.9 2.4
Dividends.............. -- 61.3
Employee entitlements.. 31.7 18.3
Mine completion costs.. 54.7 32.1
Other.................. 24.3 7.6
----- -----
216.8 222.4
===== =====
NON-CURRENT
Deferred hedge gain.... 151.1 242.0
Deferred mining costs.. -- 17.3
Employee entitlements.. 12.5 9.7
Mine completion costs.. 81.8 110.2
Deferred income........ -- 9.2
Other.................. 23.5 13.3
----- -----
268.9 401.7
===== =====
B-32
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
20 TAX LIABILITIES
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
CURRENT
Income tax payable........... 21.8 27.4
----- -----
NON-CURRENT
Deferred income tax liability 255.0 189.3
===== =====
21 OTHER LIABILITIES
NON-CURRENT
Deferred exploration liability 72.2 81.3
Unearned income............... 39.2 --
Deferred royalty liability.... 28.7 --
Other......................... 0.3 6.0
----- ----
140.4 87.3
===== ====
22 CONTRIBUTED EQUITY
PARENT ENTITY
---------------
2001 2000
------- -------
A$M A$M
2,231,293,599 (2000: 1,751,558,731)
Ordinary shares fully paid....... 1,593.9 1,155.5
======= =======
During the year the following changes to share capital occurred:
NUMBER OF
SHARES 2001 2000
------------- ------- -------
A$M A$M
Balance at beginning of financial year 1,751,558,731 1,155.5 1,130.3
Exercise of unlisted options
--1:1.101 basis....................... 8,998 -- --
Issue of shares(ii)................... 446,100,000 419.8 --
Employee share investment plan issue.. 1,453,350 1.6 0.5
Dividend Reinvestment Plan issue(iii). 17,439,957 17.0 24.7
Share Investment Plan issue(iii)...... 14,732,563 -- --
------------- ------- -------
Balance at end of financial year...... 2,231,293,599 1,593.9 1,155.5
============= ======= =======
ORDINARY SHARES
Ordinary shares entitle the holder to participate in dividends and the
proceeds on winding up of the company in proportion to the number of and
amounts paid on the shares held. On a show of hands every holder of ordinary
shares present at a meeting in person or by proxy, is entitled to one vote and
upon a poll each share is entitled to one vote.
B-33
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
--------
(i) Listed Options
At 30 June 2001 there were no listed options on issue. At 30 June 2000
there were 248,537,609 listed options on issue. These were exercisable at
A$2.50 per option on any business day during the months of January, April,
July and October each year. These options expired on 30 April 2001.
(ii) Issue of Shares
On 31 May 2001 446.1 million shares were issued to a nominee for
Franco-Nevada Mining Corporation Limited and its subsidiary for various
assets and cash.
(iii) Share Investment and Dividend Reinvestment Plans
Under the parent entity's dividend alternatives, holders of ordinary shares
may elect to have all or part of their dividend entitlements satisfied by
the issue of new fully paid ordinary shares rather than by being paid in
cash.
MILLIONS OF SHARES
------------------
2001 2000
------- -------
Weighted average number of ordinary shares used in the calculation of basic EPS 1,806.1 1,738.5
======= =======
Diluted earnings per share are not materially different from basic earnings
per share and therefore are not disclosed.
B-34
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
23 RESERVES AND RETAINED PROFITS
CONSOLIDATED
--------------
2001 2000
------ ------
A$M A$M
(A) RESERVES
Asset revaluation reserve................................................... -- 1.9
Foreign currency translation reserve........................................ 71.4 43.1
------ ------
71.4 45.0
====== ======
MOVEMENT IN RESERVES
ASSET REVALUATION RESERVE
Balance at beginning of financial year...................................... 1.9 1.9
Transfer to accumulated losses.............................................. (1.9) --
------ ------
Balance at end of financial year............................................ -- 1.9
====== ======
Foreign currency translation reserve
Balance at beginning of financial year...................................... 43.1 26.1
Net exchange difference on translation of overseas controlled entities...... 28.3 17.0
------ ------
Balance at end of financial year............................................ 71.4 43.1
====== ======
(B) RETAINED PROFITS/(ACCUMULATED LOSSES)
Retained profits/(accumulated losses) at the beginning of the financial year (251.9) 124.4
Transfer from asset revaluation reserve..................................... 1.9 --
Net profit/(loss) attributable to members of Normandy Mining Limited........ (154.6) (282.3)
Dividends provided for or paid (note 6)..................................... (30.2) (94.0)
------ ------
Retained profits/(accumulated losses) at the end of the financial year...... (434.8) (251.9)
====== ======
(C) NATURE AND PROFIT OF RESERVES
(i) Asset Revaluation Reserve
The asset revaluation reserve was used to record increments and decrements
on the revaluation of non-current assets.
(ii) Foreign Currency Translation Reserve
Exchange differences arising on translation of self-sustaining overseas
controlled entities are taken to the foreign currency translation reserve,
as described in accounting policy note 1(b).
B-35
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
24 OUTSIDE EQUITY INTERESTS
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
Share capital..... 173.5 30.4
Accumulated losses (72.8) (31.2)
Other reserves.... 66.8 38.2
----- -----
167.5 37.4
===== =====
25 EQUITY
Total equity at the beginning of the financial year......................... 986.0 1,373.1
Total changes in equity recognised in the Statement of Financial Performance (126.3) (265.3)
Contributions of equity net of transaction costs............................ 438.4 25.2
Dividends provided for or paid.............................................. (30.2) (94.0)
Total changes in outside equity interest.................................... 130.1 (53.0)
------- -------
Total equity at the end of the financial year............................... 1,398.0 986.0
======= =======
26 NOTES TO STATEMENTS OF CASH FLOWS
(A) RECONCILIATION OF CASH
For the purpose of the statement of cash flows, cash includes cash on hand,
investments in money market instruments and gold bullion on hand net of
outstanding bank overdrafts. Cash at the end of the financial year, as shown in
the statement of cash flows, is reconciled to the related items in the
statements of financial positions as follows:
Cash........ 239.5 152.7
Bank bills.. 65.8 69.4
Gold bullion 39.5 23.3
----- -----
344.8 245.4
===== =====
(B) FINANCING FACILITIES
Refer to Note 18 for details of the credit standby arrangements and loan
facilities available to the consolidated entity.
(C) NON-CASH FINANCING AND INVESTING ACTIVITIES
During the year the consolidated entity entered into a transaction with
Franco-Nevada Mining Corporation Limited, under which the consolidated entity
issued 446.1 million new ordinary shares to a nominee for Franco-Nevada Mining
Corporation Limited and its subsidiary and received US$48 million (A$94
million) cash, as well as controlling interests in Normandy Midas Operations
Inc and Little River Pty Ltd. The consolidated entity's investments in BRGM
Perou and Mine Or were sold in exchange for cash and shares in Newmont Mining
Corporation and Compania de Minas Beunaventura (Beunaventura) totalling A$106
million, the Newmont Mining
B-36
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
Corporation shares were subsequently traded on-market. The consolidated
entity's investments in and loans to Australian Magnesium Investments in
exchange for Australian Magnesium Corporation Limited shares valued at A$112
million. During the previous year the Big Bell gold operations were sold to New
Hampton Goldfields Limited, with A$11.0 million proceeds received in the form
of ordinary shares in New Hampton Goldfields Limited. In June 2000, A$40.9
million of the acquisition of 100% of Normandy Yandal Operations Limited from
Edensor Nominees Pty Ltd was financed by the conversion of a loan to Edensor
into shares in Normandy Yandal Operations Limited.
(D) RECONCILIATION OF NET CASH INFLOW FROM OPERATING ACTIVITIES TO OPERATING
PROFIT/(LOSS) AFTER INCOME TAX
CONSOLIDATED
--------------
2001 2000
------ ------
A$M A$M
Operating profit/(loss) after income tax................................................ (123.4) (322.7)
Bad and doubtful debts expense.......................................................... 8.5 0.3
Depreciation and amortisation........................................................... 286.9 140.7
Exploration and evaluation written off.................................................. 89.1 46.6
Unrealised foreign exchange gain/(loss)................................................. -- (0.4)
Share of equity accounted (profit)/loss................................................. 4.8 40.2
Dividends received from associates...................................................... 42.6 19.3
Amortisation of deferred hedge gain..................................................... (92.6) (91.4)
(Gain)/loss on loan forgiveness......................................................... -- 2.8
Profit on sale of investments........................................................... (14.6) (2.0)
Profit on sale of other non-current assets.............................................. (21.1) (43.4)
Profit on refinancing of gold loans..................................................... -- (1.5)
Write down in carrying value of assets.................................................. 220.0 521.0
Loss on sale of investments............................................................. -- 0.3
Changes in net assets and liabilities, net of effects from businesses acquired/disposed:
(Increase)/decrease in receivables...................................................... (6.2) 21.6
(Increase)/decrease in inventories...................................................... (41.0) 15.3
(Increase)/decrease in future income tax benefit........................................ (15.9) (7.6)
(Increase)/decrease in other operating assets........................................... 4.9 (39.8)
Increase/(decrease) in trade creditors.................................................. (9.5) (44.4)
Increase/(decrease) in provision for income tax......................................... (5.6) 7.4
Increase/(decrease) in provision for deferred income tax................................ 2.0 (5.3)
Increase/(decrease) in other provisions................................................. 9.0 (41.1)
Increase/(decrease) in other operating liabilities...................................... (15.8) --
------ ------
Net cash inflow from operating activities............................................... 322.1 215.9
====== ======
(E) BUSINESSES ACQUIRED
The consolidated entity entered into a transaction with Franco-Nevada Mining
Corporation Limited, under which the consolidated entity received controlling
interests in Normandy Midas Operations Inc and Little River Pty Ltd. The
Normandy Group acquired a controlling interest in the Australian Magnesium
Corporation group.
During the previous year Normandy Yandal Operations Limited (formerly Great
Central Mines Limited) and it controlled entities, and Yandal Gold Holdings Pty
Ltd and its controlled entity were consolidated into the consolidated entity
for the first time.
B-37
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
Details of the acquisition are as follows:
CONSOLIDATED
--------------
2001 2000
------ ------
A$M A$M
CONSIDERATION
Cash assets....................................... 1.1 18.7
Shares Issued..................................... 333.2 --
Conversion of loan receivable..................... 49.7 40.9
Deferred exploration liability.................... -- 83.2
------ ------
Total............................................. 384.0 142.8
====== ======
FAIR VALUE OF NET ASSETS ACQUIRED
Current assets
Cash........................................... 49.4 65.1
Receivables.................................... 12.6 18.6
Inventories.................................... 7.4 19.8
Other.......................................... 1.7 3.1
Non-current assets
Mine properties, plant and equipment........... 521.5 563.9
Development properties......................... 229.1 110.4
Other.......................................... 6.0 61.8
Current liabilities
Trade creditors................................ (39.5) (72.0)
Provisions..................................... (14.8) --
Other.......................................... (1.9) --
Non-current liabilities
Interest bearing liabilities................... (48.7) (834.5)
Provisions..................................... (77.8) (61.5)
Other.......................................... (70.1) (1.4)
------ ------
Net assets acquired............................... 574.9 (126.7)
Outside equity interest share of business acquired (125.0) --
Prior investment.................................. (65.9) (89.5)
Purchase consideration expensed(i)................ -- 359.0
------ ------
Consideration..................................... 384.0 142.8
====== ======
CASH (INFLOW)/OUTFLOW FOR ACQUISITION
Cash consideration................................ 1.1 18.7
Less: cash balances acquired...................... (49.4) (65.1)
------ ------
Net (inflow)/outflow of cash...................... (48.3) (46.4)
====== ======
--------
(i) This represents the purchase consideration greater than the fair value of
the identifiable net assets acquired and, as the amount does not represent
goodwill, it has been expensed.
B-38
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
(F) BUSINESSES DISPOSED
During the year, the consolidated entity disposed of its investments in
Australian Magnesium Investments in exchange for Australian Magnesium
Corporation Limited shares, and its investments in and loans to Larvik Pigment
(Asia Pacific) Sdn Bhd, Larvik (Australia) Limited, Larvik Pigment (Norway) AS.
During the previous year the consolidated entity disposed of its Big Bell gold
operations, its 50% interest in Australian Magnesium Investments Pty Ltd and
its interests in various industrial minerals businesses.
Details of the disposals are as follows:
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
CONSIDERATION
Cash assets.................................. 71.8 114.6
Shares....................................... -- 11.0
Deferred settlement receivable............... -- 4.7
----- -----
Total........................................ 71.8 130.3
===== =====
BOOK VALUE OF ASSETS AND LIABILITIES DISPOSED
Current assets
Cash assets............................... -- 8.7
Receivables............................... -- 19.2
Inventories............................... 0.6 34.6
Assets held for re-sale................... 57.2 --
Non-current assets
Investments............................... -- 0.2
Property, plant and equipment............. 7.5 60.7
Other..................................... 7.2 33.7
Current liabilities
Trade creditors........................... -- (6.6)
Provisions................................ -- (20.7)
Non-current liabilities
Interest bearing liabilities.............. (16.0) --
Provisions................................ -- (6.9)
----- -----
Net assets disposed....................... 56.5 122.9
Deferred costs on disposal................ 0.5 --
Net profit on disposal.................... 14.8 7.4
----- -----
Consideration................................ 71.8 130.3
===== =====
Cash inflow/(outflow) from disposal
Cash consideration........................... 71.8 114.6
Less: cash balances disposed................. -- (8.7)
----- -----
Net inflow of cash........................... 71.8 105.9
===== =====
B-39
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
(G) CASH NOT AVAILABLE
A balance of US$20.0 million (2000: US$20.0 million) is being held as
security in respect of a project loan facility of a controlled entity.
27 SEGMENT INFORMATION
Details of industry segments are as follows:
SALES REVENUE ASSETS SEGMENT PROFIT
--------------- --------------- --------------
2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------ ------
A$M A$M A$M A$M A$M A$M
Gold............... 1,252.0 936.0 2,577.4 2,445.9 224.9 (149.4)
Base metals........ 191.0 178.1 159.0 529.8 (166.3) (19.4)
Industrial minerals 69.6 179.7 394.7 101.0 (8.2) 43.0
Exploration........ -- -- 151.7 129.0 (89.1) (46.6)
------- ------- ------- ------- ------ ------
1,512.6 1,293.8 3,282.8 3,205.7 (38.7) (172.4)
Unallocated........ 31.1 29.8 563.7 420.5 (115.9) (109.9)
------- ------- ------- ------- ------ ------
Consolidated total. 1,543.7 1,323.6 3,846.5 3,626.2 (154.6) (282.3)
======= ======= ======= ======= ====== ======
The major products/services from which the above segments derive revenue are:
INDUSTRY SEGMENTS PRODUCTS/SERVICES
Gold Gold and silver
Base Metals Zinc, copper and lead
Industrial Minerals Industrial minerals
Exploration Exploration
Inter-segment pricing is determined on an arm's-length basis.
GEOGRAPHICAL SEGMENTS
The consolidated entity operates predominantly in Australia. More than 90%
of revenue and profit from ordinary activities relate to operations in
Australia.
DETAILS OF GEOGRAPHICAL SEGMENTS ARE AS FOLLOWS:
SALES REVENUE ASSETS SEGMENT PROFIT
--------------- --------------- --------------
2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------ ------
A$M A$M A$M A$M A$M A$M
Australia/New Zealand 1,467.2 1,232.9 2,796.7 2,651.4 98.2 (213.6)
Africa............... 21.2 20.3 105.9 246.7 (194.1) (34.7)
North America........ 18.7 -- 558.4 75.2 (17.0) --
South America........ -- -- 176.5 288.9 7.2 2.0
Other................ 36.6 70.4 209.0 364.0 (48.9) (36.0)
------- ------- ------- ------- ------ ------
Consolidated total... 1,543.7 1,323.6 3,846.5 3,626.2 (154.6) (282.3)
======= ======= ======= ======= ====== ======
B-40
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
28 CONTROLLED ENTITIES
Details of controlled entities are shown below. For entities where the
parent entity has less than 50 percent ownership, control is determined though
the capacity to dominate decision making in relation to the financial and
operating policies of the entity.
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
Normandy Mining Limited............................. Aust
WHOLLY OWNED ENTITIES OF NORMANDY MINING LIMITED
ACM (New Zealand) Ltd............................... NZ
ACM Exploration Pty Ltd(b).......................... Aust
ACM Gold Pty Ltd(b)................................. Aust
ACM Mines Pty Ltd(b)................................ Aust
Armada Resources Pty Ltd(b)......................... Aust
Ausdev Investments Pty Ltd(b)....................... Aust
Australian Consolidated Minerals Pty Ltd............ Aust
Australian Gold Alliance Pty Ltd(b),(c),(d)......... Aust
Australian Metals Corporation Pty Limited(b),(d),(e) Aust
Autin Investments BV(b)............................. Netherlands
Aztec Finance Pty Ltd(b)............................ Aust
Aztec Mining Company Limited(b)..................... Aust
Aztec Nominees Pty Ltd(b)........................... Aust
Bardini Pty Ltd(b).................................. Aust
Big Bell Mines Pty Ltd(b),(f)....................... Aust
Blackhill Minerals Ltd.............................. NZ
Clave Pty Ltd(b).................................... Aust
Clynton Court Pty Ltd(b),(e)........................ Aust
Commercial Minerals Beteiligungs-gesellschaft mbH(b) Germany
Dafrico (Overseas) Limited(b)....................... Cyprus
Eagle Mining Pty Ltd(b),(e)......................... Aust
Gatro Cl............................................ Ivory Coast
GMK Finance Pty Ltd................................. Aust
GMK Investments Pty Ltd............................. Aust
GoldenGrove Group Investment Holding Pty Ltd(b)..... Aust
GoldenGrove Group Investment Unit Trust............. Aust
Great Central Holdings Pty Ltd(b),(e)............... Aust
Great Central Investments Pty Ltd(b),(e)............ Aust
Grillo Zincoli GmbH(b).............................. Germany
Hampton Areas Australia Pty Ltd(b).................. Aust
Hampton Jubilee Pty Ltd(b).......................... Aust
HTA Pty Ltd(b),(d).................................. Aust
Hunter Resources Pty Limited(b),(e)................. Aust
Kalgoorlie Lake View Pty Ltd........................ Aust
LaSource Developpement SAS.......................... France
Lachlan Zinc Pty Ltd(b)............................. Aust
B-41
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
Linfast Pty Ltd(b)......................... Aust
Little River (Resources) Pty Ltd(b),(d).... Aust
Macapa Pty Ltd(b).......................... Aust
Martha Hill Gold Mines Limited(b).......... NZ
Matlock Castellano Pty Ltd(b),(e).......... Aust
Matlock Descanso Pty Ltd(b),(e)............ Aust
Matlock Mining Pty Ltd(b),(e).............. Aust
Metal Traders Australasia Pty Ltd(b)....... Aust
Metals Exploration Pacific Pty Ltd(b)...... Aust
Millmerran Coal Pty Ltd(b)................. Aust
Minera Normandy Argentina SA............... Argentina
Minera Normandy Chile Limitada............. Chile
Murchison Zinc Pty Ltd..................... Aust
National Shareholder Services Pty Ltd(b)... Aust
NGF Limited................................ Cayman Is
Nicron Resources (US) Pty Ltd(b)........... Aust
NIM Australia Pty Ltd(b)................... Aust
NIM Overseas Pty Ltd(b).................... Aust
Norkal Pty Ltd............................. Aust
Normandie Service SAS...................... France
Normandy ACM Management Pty Ltd(b)......... Aust
Normandy ACM Pty Ltd....................... Aust
Normandy Americas Holdings Limited......... Canada
Normandy Anglo Asian Pty Ltd(d),(b)........ Aust
Normandy Anglo Pte Ltd(d).................. Singapore
Normandy Asia Pty Ltd(b)................... Aust
Normandy Asia (Philippines) Inc............ Philippines
Normandy Boddington Holdings Pty Ltd....... Aust
Normandy Boddington Investments Pty Ltd.... Aust
Normandy Boddington Pty Ltd................ Aust
Normandy Capital Group Pty Ltd(b).......... Aust
Normandy Carrington Pty Ltd(b)............. Aust
Normandy Cayman Hold Co Inc................ Cayman Is
Normandy Central Pty Ltd(b)................ Aust
Normandy Chile Holdings.................... Cayman Is
Normandy Company (Malaysia) Sdn Bhd........ Malaysia
Normandy Consolidated Gold Holdings Pty Ltd Aust
Normandy Exploration Pty Ltd(b)............ Aust
Normandy Finance Limited................... Aust
Normandy French Holdings SAS............... France
Normandy GMK Holdings Pty Ltd.............. Aust
Normandy Gold Exploration Pty Ltd(b)....... Aust
Normandy Gold Holdings Pty Ltd(b).......... Aust
Normandy Gold Investments Pty Ltd(b)....... Aust
B-42
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
Normandy Gold Management Pty Ltd(b)............. Aust
Normandy Gold Marketing & Finance Pty Ltd(b),(c) Aust
Normandy Gold Services Pty Ltd(b)............... Aust
Normandy Gold Treasury Pty Ltd.................. Aust
Normandy Golden Grove Operations Pty Ltd........ Aust
Normandy Group Finance Limited.................. Aust
Normandy Group Gold Pty Ltd(b).................. Aust
Normandy Group Searches Pty Ltd(b).............. Aust
Normandy Group Trading Pty Ltd(b)............... Aust
Normandy GRPL Pty Ltd(b)........................ Aust
Normandy Holdings BV............................ Netherlands
Normandy Insurance Pte Ltd...................... Singapore
Normandy International Exploration Pty Ltd(b)... Aust
Normandy International Group BV................. Netherlands
Normandy International Holdings Pty Ltd......... Aust
Normandy Investments BV......................... Netherlands
Normandy Kaltails Pty Ltd(b).................... Aust
Normandy Latin America Holdings Inc............. Cayman Is
Normandy Latin America Inc...................... Canada
Normandy LaSource Kazakstan BV.................. Netherlands
Normandy LaSource SA............................ France
Normandy Lore Pty Ltd(b)........................ Aust
Normandy Madencilik AS(c)....................... Turkey
Normandy Metals Pty Ltd......................... Aust
Normandy Midas Operations Inc(d)................ USA
Normandy Mildite Pty Ltd(b)..................... Aust
Normandy Minerals Pty Ltd(b).................... Aust
Normandy Mining Finance Pty Ltd................. Aust
Normandy Mining Holdings Pty Ltd................ Aust
Normandy Mining Investments Pty Ltd(b).......... Aust
Normandy Mining Kazakstan Pty Ltd(b)............ Aust
Normandy Mining Services (Canada) Inc........... Canada
Normandy Mining Services Pty Ltd................ Aust
Normandy Mt Keith Pty Ltd(b).................... Aust
Normandy NGL Holdings Pty Ltd................... Aust
Normandy US Inc(d).............................. USA
Normandy Overseas Holding Company Sdn Bhd....... Malaysia
Normandy Pacific Energy Pty Ltd(b).............. Aust
Normandy Pacific Pty Ltd(b)..................... Aust
Normandy Pajingo Pty Ltd........................ Aust
Normandy Pastoral Pty Ltd(b).................... Aust
Normandy Pipelines Finance Pty Ltd(b)........... Aust
Normandy Pipelines Pty Ltd(b)................... Aust
Normandy Power Pty Ltd.......................... Aust
Normandy PT Pty Ltd(b).......................... Aust
B-43
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
Normandy Resources Ltd(b)..................... UK
Normandy Shelf (No. 3) Pty Ltd(b),(d)......... Aust
Normandy Spain Holdings SL(b)................. Spain
Normandy Treasury Pty Ltd(b).................. Aust
Normandy Wiluna Gold Pty Ltd(b),(e)........... Aust
Normandy Wiluna Metals Pty Ltd(b),(e)......... Aust
Normandy Wiluna Mines Pty Ltd(b),(e).......... Aust
Normandy Woodcutters Pty Ltd(b)............... Aust
Normandy Wownaminya Pty Ltd................... Aust
Normandy Yandal Operations Limited(e)......... Aust
North Kalgurli Mines Pty Ltd.................. Aust
NP Kalgoorlie Pty Ltd......................... Aust
Oberon Oil Pty Ltd(b)......................... Aust
Orelia Pty Ltd(b)............................. Aust
Pacific Minerals & Metals Pty Ltd(b),(f)...... Aust
Pacific-Nevada Mining Pty Ltd(b),(d).......... Aust
Pan Ocean Finance Pty Ltd(b),(f).............. Aust
Pan Ocean Resources Pty Ltd(b)................ Aust
Paringa Mining and Exploration Company Limited UK
Perpleks Pty Ltd (b).......................... Aust
Petrocarb Exploration Pty Ltd(b).............. Aust
Phillip Creek Pastoral Co Pty Ltd(b).......... Aust
Posor Pty Ltd(b).............................. Aust
Posdale Pty Ltd(b)............................ Aust
PT Normandy Indonesia......................... Indonesia
Quotidian No. 117 Pty Ltd(b)(e)............... Aust
Ranas Bruks AB................................ Sweden
Sanworth Pty Ltd(b)........................... Aust
Sater Pty Ltd(b).............................. Aust
Sharevest Pty Ltd(b).......................... Aust
Shenreef Pty Ltd(b)........................... Aust
Tennant Creek Pastoral Co Pty Ltd(b).......... Aust
Utal Pty Ltd(b)............................... Aust
Waihi Gold Mining Company Ltd................. NZ
Welcome Gold Mines Ltd........................ NZ
Wirralie Gold Mines Pty Ltd.(b)............... Aust
Yandal Gold Pty Ltd........................... Aust
Yandal Gold Holdings Pty Ltd.................. Aust
Martha Holdings Limited....................... NZ
B-44
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
Waihi Financing Limited NZ
Waihi Resources Limited NZ
Waihi Mines Limited.... NZ
OWNERSHIP%
COUNTY OF -----------
PARTLY OWNED* ENTITY INCORPORATION/FORMATION 2001 2000
-------------------- ----------------------- ----- -----
Australian Magnesium Corporation(d)................ Aust 62.4 36.9
Australian Magnesium Investments Pty Ltd......... Aust 100.0 100.0
Australian Magnesium Operations Pty Ltd.......... Aust 95.0 95.0
Enviromag (Marketing) Pty Ltd.................... Aust 100.0 100.0
MG Magnesium Pty Ltd............................. Aust 95.0 95.0
NIM Magmetal Pty Limited......................... Aust 100.0 100.0
Penhale Investments Pty Ltd...................... Aust 100.0 100.0
QMC Biotechnology Pty Ltd........................ Aust 90.0 90.0
QMC (Enviromag) Pty Ltd.......................... Aust 100.0 100.0
QMC Finance Pty Ltd.............................. Aust 100.0 100.0
QMC (Flamemag) Pty Ltd........................... Aust 100.0 100.0
QMC Investments Pty Ltd.......................... Aust 100.0 100.0
QMC (Kunwarara) Pty Ltd.......................... Aust 100.0 100.0
QMC Refmag Pty Ltd............................... Aust 100.0 100.0
QMC Refmag (Financing) Pty Ltd................... Aust 100.0 100.0
Queensland Magnesia Pty Ltd...................... Aust 100.0 100.0
Queensland Magnesia (Marketing) Pty Ltd.......... Aust 100.0 100.0
Stanwell Finance Pty Ltd......................... Aust 100.0 100.0
Banff Resources Ltd................................ Canada 85.6 85.6
Kasese Cobalt Company Limited.................... Uganda 63.0 63.0
Companie Minera LJB Normandy Peru SA............... Peru 49.0 49.0
Comstaff Proprietary Limited(b).................... Aust 81.4 81.4
Golden Ridge Resources Ltd......................... Ghana 80.0 80.0
GPS Finance (No2) Pty Ltd(b)....................... Aust 66.7 66.7
GPS Finance Pty Ltd(b)............................. Aust 66.6 66.6
Hampton Australia Limited(a)....................... Aust 100.0 100.0
Kentau Exploration and Mining Co................... Kazakstan 61.0 61.0
LaSource Bolivia Ltd............................... Bolivia 99.0 99.0
Martha Mining Limited.............................. NZ 33.5 33.5
Mayflower Gold Mines Pty Ltd....................... Aust 80.0 80.0
Minera LaSource Peru SA(a)......................... Peru 100.0 100.0
Normandy Ghana Gold Ltd(c)......................... Ghana 92.0 92.0
Normandy LaSource Resources Ltd.................... UK 99.9 99.9
B-45
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
OWNERSHIP %
COUNTY OF -----------
ENTITY INCORPORATION/FORMATION 2001 2000
------ ----------------------- ----- -----
Normandy Mt Leyshon Limited............................. Aust 76.4 76.4
Balletto Pty Limited(b)................................ Aust 100.0 100.0
Normandy NFM Limited.................................... Aust 87.5 84.9
NP Finance (No2) Pty Ltd(b)............................. Aust 66.7 66.7
NP Finance Pty Ltd(b)................................... Aust 66.6 66.6
Sociedade de Exploracao de Recursos Minieros Limitada(a) Portugal 100.0 100.0
Societe des Mines D'lty................................. Ivory Coast 51.0 51.0
Thracean Gold Mining.................................... Greece 80.0 80.0
Ownership interest refers to the ownership interest held by the parent
entity as listed immediately above the controlled entity.
--------
(a) Ownership percentage has been rounded up to 100 percent.
(b) These companies are classified as 'small' proprietary companies under the
Corporations Act 2001 and, accordingly, are relieved from the requirement
to prepare audited financial reports under the Corporations Act 2001.
(c) Entities which underwent a change of name during the year:
Normandy Shelf (No. 1) Pty Ltd to Normandy Gold Marketing & Finance Pty Ltd
Normandy Shelf (No. 2) Pty Ltd to Australian Gold Alliance Pty Ltd
Eurogold Madencilik AS to Normandy Madencilik AS
Centenary Gold Mining Ltd to Normandy Ghana Gold Ltd
B-46
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
(d) During the year the economic entity acquired and disposed of the following
entities:
PROPORTION
DATE OF OF SHARES
ENTITY ACQUIRED ACQUISITION A$M ACQUIRED %
--------------- ----------- --------- ----------
Australian Magnesium Corporation................... 26.7.00 49.7 25.5
Australian Magnesium Investments Pty Ltd
Australian Magnesium Operations Pty Ltd
Enviromag (Marketing) Pty Ltd
MG Magnesium Pty Ltd
NIM Magmetal Pty Ltd
Penhale Investments Pty Ltd
QMC Biotechnology Pty Ltd
QMC (Enviromag) Pty Ltd
QMC Finance Pty Ltd
QMC (Flamemag) Pty Ltd
QMC Investments Pty Ltd
QMC (Kunwarara) Pty Ltd
QMC Refmag Pty Ltd
QMC Refmag (Financing) Pty Ltd
Queensland Magnesia Pty Ltd
Queensland Magnesia (Marketing) Pty Ltd
Stanwell Finance Pty Ltd
Little River (Resources) Pty Ltd................... 31.05.01 15.4 100.0
HTA Pty Ltd
Pacific-Nevada Mining Pty Ltd
Normandy Shelf (No. 2) Pty Ltd..................... 1.3.01 -- 100.0
Normandy Shelf (No. 3) Pty Ltd..................... 1.3.01 -- 100.0
Normandy US Inc.................................... 31.5.01 -- 100.0
Normandy Midas Operations Inc...................... 31.5.01 317.8 100.0
Normandy Anglo Asian Pty Ltd....................... 31.3.01 -- 50.0
Normandy Anglo Pte Ltd............................. 31.3.01 -- 50.0
Pt Horas Nauli
PHU Bra Mining Ltd
PROFIT ON REMAINING
DATE OF DISPOSAL INTEREST
DISPOSAL A$M HELD %
----------- --------- ----------
ENTITY DISPOSED
---------------
Hampton Gold Mining Areas Limited.................. 1.7.00 3.5 --
Larvik Pigment (Asia Pacific) Sdn Bhd.............. 31.1.01 (i) --
Larvik Pigment (Australia) Limited................. 31.1.01 (i) --
Larvik Pigment (Norway) AS......................... 31.1.01 (i) --
Normandy Tennant Creek Pty Ltd..................... 8.6.01 7.5 --
(i) These companies were disposed of for a total profit on sale of A$4.1
million.
(e) These wholly owned controlled entities have entered into a deed of cross
guarantee with Normandy Yandal Operations Limited pursuant to ASIC Class
Order 98/1418 (as amended) dated 13 August 1998 and are relieved from the
Corporations Act 2001 requirements for preparation, audit, and lodgement of
financial reports.
B-47
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
Normandy Yandal Operations Limited and its Controlled Entities represent a
'Closed Group' for the purposes of the Class Order, and as there are no other
parties to the Deed of Cross Guarantee that are controlled by Normandy Mining
Limited, they also represent the 'Extended Closed Group'.
(f) The entity has been deregistered since 30 June 2001.
29 JOINT VENTURE OPERATIONS
The consolidated entity's interests in material unincorporated joint venture
operations are as follows:
% INTEREST
----------
NAME OF JOINT VENTURE OPERATIONS 2001 2000
-------------------------------- ---- ----
KCGM
-- Fimiston/Paringa Joint Venture.................... 50.0 50.0
-- Kalgoorlie Mining Associates Joint Venture........ 50.0 50.0
-- Mt Percy Joint Venture............................ 50.0 50.0
Boddington Gold Mine Joint Venture................... 44.4 44.4
Goldfields Power Joint Venture....................... 50.0 50.0
Goldfields Power Joint Venture Number Two............ 50.0 50.0
Kalgoorlie Tailings Retreatment Project Joint Venture 90.0 90.0
Martha Hill Joint Venture............................ 28.4 28.4
Pajingo Joint Venture................................ 50.0 50.0
These joint venture operations are involved in exploration and mining,
except for the Goldfields Power Joint Ventures which are involved in the
operation of a power station.
The consolidated entity's interest in assets employed in the joint venture
operations and in other exploration joint ventures which individually are not
material, are included in the statements of financial position under the
following classifications:
2001 2000
----- -----
A$M A$M
CURRENT ASSETS
Cash assets........................... 7.5 6.4
Receivables........................... 10.5 29.5
Inventories........................... 67.0 55.7
Other................................. 22.5 9.9
----- -----
107.5 101.5
----- -----
NON-CURRENT ASSETS
Receivables........................... 0.7 0.7
Exploration and evaluation expenditure 40.3 40.4
Property, plant and equipment......... 277.9 340.7
Other................................. 24.8 21.7
----- -----
343.7 403.5
----- -----
TOTAL ASSETS....................... 451.2 505.0
===== =====
SHARE OF CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The consolidated entity's share of joint venture operations capital
expenditure commitments at balance date was A$19.8 million (2000: A$12.8
million) and of contingent liabilities was A$15.8 million (2000: A$15.7
million).
B-48
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
30 JOINT VENTURE ENTITIES
The consolidated entity has a significant non-controlling interest in the
following joint venture entities:
BENEFICIAL INTEREST
-------------------
NAME OF JOINT VENTURE ENTITY AND PRINCIPAL ACTIVITY 2001 2000
--------------------------------------------------- ---- ----
% %
Australian Magnesium Investments Pty Ltd (iii) Investment.... -- 50.0
BRGM Perou SAS (ii) Mining Investment........................ -- 49.0
Campagnie Miniere Internationale Or SA (ii) Mining Investment -- 49.0
TVX Normandy Americas (Canada) Inc. (i) Gold Mining.......... 49.9 49.9
TVX Normandy Americas (Cayman) Inc. (i) Gold Mining.......... 49.9 49.9
--------
(i) Balance date 31 December.
(ii) During the year the consolidated entity disposed of its interest in this
entity.
(iii) During the year this entity was consolidated into the consolidated
entity for the first time.
These joint venture entities are involved in exploration and mining.
EQUITY ACCOUNTED INVESTMENT
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
MOVEMENTS IN CARRYING AMOUNT OF JOINT VENTURE ENTITIES
Carrying amount at the beginning of the financial year...... 370.4 418.5
Share of operating profits/(losses) after income tax........ (0.6) 7.4
Share of dividend income.................................... -- (19.3)
Pre-acquisition dividends................................... (42.6) --
Acquisition of additional interest in joint venture entities -- 2.1
Disposal of interest in joint venture entities.............. (83.2) (38.3)
----- -----
Carrying amount at the end of the financial year............ 244.0 370.4
===== =====
SUMMARISED FINANCIAL POSITION OF JOINT VENTURE ENTITIES
SHARE OF ASSETS AND LIABILITIES
Current assets.............................................. 59.9 89.8
Non-current assets.......................................... 351.2 321.5
Current liabilities......................................... 17.0 52.8
Non-current liabilities..................................... 92.0 53.9
------ ------
SHARE OF OPERATING PROFIT
Revenue from ordinary activities............................ 104.8 171.6
Expenses from ordinary activities........................... (106.7) (162.5)
------ ------
Profit/(loss) from ordinary activities before income tax.... (1.9) 9.1
Income tax (expense)/benefit relating to ordinary activities 1.3 (1.7)
------ ------
Net profit/(loss)........................................... (0.6) 7.4
====== ======
B-49
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
CONSOLIDATED
-----------
2001 2000
---- -----
A$M A$M
SHARE OF RESERVES
Accumulated losses
at the beginning of the financial year. (0.3) (10.4)
at the end of the financial year....... (0.6) (0.3)
Asset revaluation reserve
at the beginning of the financial year. 1.9 1.9
at the end of the financial year....... -- 1.9
31 ASSOCIATED ENTITIES
The consolidated entity has a significant non-controlling interest in the
following entities:
CARRYING
BENEFICIAL INTEREST AMOUNT
------------------- ---------
NAME OF ASSOCIATED ENTITY AND PRINCIPAL ACTIVITY 2001 2000 2001 2000
------------------------------------------------ ---- ---- ---- ----
% % A$M A$M
Australian Magnesium Corporation Limited (i)
--Mining of industrial minerals............... -- 36.9 -- 76.4
--------
(i) Australian Magnesium Corporation Limited ("AMC") became a controlled entity
from 26 July 2000. Share of results reflects the period AMC was an
associated entity.
CONSOLIDATED ENTITY'S SHARE OF RESULTS ATTRIBUTABLE TO ASSOCIATES:
CONSOLIDATED
-------------
2001 2000
----- ------
A$M A$M
Operating profit(loss) before income tax............................................ (4.4) (66.2)
Income tax (expense)/benefit........................................................ -- 18.6
----- ------
Operating profit/(loss) after income tax............................................ (4.4) (47.6)
===== ======
SHARE OF POST-ACQUISITION ACCUMULATED LOSSES ATTRIBUTABLE TO ASSOCIATES:
Accumulated losses attributable to associates at the beginning of the financial year (25.3) (63.5)
Share of net profit/(loss) of associates............................................ (4.4) (47.6)
Dividends from associates........................................................... -- --
Share of retained earnings on consolidation......................................... 29.7 85.8
----- ------
Losses attributable to associates at the end of the financial year.................. -- (25.3)
===== ======
MOVEMENTS IN CARRYING AMOUNTS OF INVESTMENTS IN ASSOCIATES:
Carrying amount at the beginning of the financial year.............................. 76.4 200.1
Acquisitions at cost................................................................ -- 71.8
Former associates now consolidated.................................................. (72.0) (147.9)
Share of operating profits/(losses) after income tax................................ (4.4) (47.6)
----- ------
Carrying amount at the end of the financial year.................................... -- 76.4
===== ======
SUMMARISED FINANCIAL POSITION OF ASSOCIATES:
Net profits/(losses) after income tax............................................... -- (17.8)
Assets.............................................................................. -- 189.7
Liabilities......................................................................... -- 73.7
B-50
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
32 FINANCIAL INSTRUMENTS
(A) OBJECTIVES OF DERIVATIVE FINANCIAL INSTRUMENTS
The consolidated entity employs derivative financial instruments, including
forward sales contracts, option contracts, swaps and forward rate agreements to
manage risk emanating from actual exposures to commodity price risk, foreign
exchange risk and interest rate risk. The consolidated entity does not trade
derivative financial instruments.
(B) GOLD HEDGING
The consolidated entity maintains hedging positions to provide certainty
over future cash flows and protect revenue against periods of falling prices.
As at 30 June 2001, the consolidated entity had committed to the following
types of hedging contracts:
FORWARD SALES CONTRACTS
Gold forward sale contracts outstanding are of two types--outright forwards
with a floating gold leasing rate and short term rolling contracts.
Under an outright forward the forward price for the gold sale is fixed at
the time of entering into the contract. Gold leasing fees are charged for the
life of the contract and are set on a periodic basis at the discretion of the
consolidated entity. The net price realised is the fixed contract price net of
accrued gold leasing fees (paid at maturity of the contract).
Under a short term rolling contract a spot transaction has been entered into
and is being rolled periodically, with the new contract price being calculated
on a net contango basis at each maturity date.
The 90 day gold lease rate and the 12 month gold lease rate at 30 June 2001
were 1.66% and 1.99% respectively (2000: 0.88% and 1.51%). Over the 12 months
to 30 June 2001 the 90 day lease rate has been in the range 0.58% to 4.23%
(2000: 0.62% to 9.14%) and averaged 1.29% (2000: 1.876%) and the 12 month lease
rate has been in the range 1.25% to 2.69% (2000: 1.30% to 6.56%) and averaged
1.61% (2000: 2.29%).
The consolidated entity normally settles gold forward sale contracts by
delivery of the underlying commodity.
OPTIONS
If exercised, gold put options are normally settled by delivery of gold.
FORWARD RATE AGREEMENTS
Forward rate agreements are used to fix future gold leasing rate exposures
resulting from the outright forward positions described above. The agreements
swap floating gold leasing rates for fixed rates with the transaction net
settled at maturity in gold ounces.
B-51
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
(C) BASE METALS HEDGING
Outright forward contracts and participating forward contracts have been
entered into by the consolidated entity.
FORWARD SALES CONTRACTS
Base metals contracts are net settled against the average price of the
pricing month of the physical shipment (in US dollars). A net amount is paid or
received by the consolidated entity.
FOREIGN EXCHANGE CONTRACTS
Outright forward sales contracts are entered into to hedge US dollar
receipts associated with base metals activities.
OPTIONS
If exercised, base metals put and call options are net settled against
monthly market averages.
The costs of entering into these contracts and any realised or unrealised
gains or losses are deferred until the underlying shipment occurs. The gains
and losses deferred as at balance date and the periods to which they relate are
set out in the table.
(D) HEDGING OF OTHER COMMITMENTS DENOMINATED IN FOREIGN CURRENCIES
Contracts to purchase and sell foreign exchange are entered into to hedge
certain commitments denominated in foreign currencies.
(E) CREDIT RISK
The consolidated entity is exposed to credit related losses in the event of
non-performance by counterparties (banks) with respect to the financial
instruments; however exposures to individual counterparties are limited in
accordance with policy set by the Board.
The maximum credit risk on financial assets, which have been recognised on
the balance sheet, other than investments in shares, is generally the carrying
amount of the asset. For off balance sheet financial assets which are
deliverable, including derivatives, credit risk also arises from the potential
failure of counterparties to meet their obligations under the respective
contracts at maturity. A material exposure arises from gold hedging and the
consolidated entity is exposed to loss in the event that counterparties fail to
settle on contracts, which are favourable to the consolidated entity.
Unrealised gains on these contracts, net of master netting agreements, at
balance date are A$178.8 million (2000: A$73.3 million). In order to mitigate
these risks, the Board has approved a list of banks as appropriate
counterparties, all rated A- or better by Standard and Poors.
B-52
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
32 FINANCIAL INSTRUMENTS (CONT.)
2001-2002 2002-2003 2003-2004 2004-2012 TOTAL
------------ ------------ ------------ ------------- -------------
QTY AVG QTY AVG QTY AVG QTY AVG QTY AVG
PRECIOUS METALS HEDGING HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE
----------------------- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
('000 (PER ('000 (PER ('000 (PER ('000 (PER ('000 (PER
AS AT 30 JUNE 2001 OZ) OZ) OZ) OZ) OZ) OZ) OZ) OZ) OZ) OZ)
FORWARD SALE CONTRACTS
Gold outright forwards
($A sold).............. 1,241 552 1,587 574 986 603 3,510 636 7,324 604
($US sold)............. -- -- -- -- -- -- 175 494 175 494
Silver outright forwards
($A sold).............. 1,307 8.08 408 7.83 65 7.87 -- -- 1,780 8.02
($NZ sold)............. 317 10.13 297 9.42 232 9.53 -- -- 846 9.72
OPTIONS
Gold option positions
(bought $A put)........ 619 542 167 549 9 572 468 599 1,263 564
(bought EUR put)....... -- -- -- -- -- -- -- -- -- --
(bought $US put)....... 133 299 128 299 130 299 347 343 738 320
(convertible $A put)... -- -- -- -- -- -- 1,736 646 1,736 646
AGGREGATE DEFERRED LOSSES
(A$M)................... (17.9) (44.2) (25.9) (338.4) (426.4)
2000-2001 2001-2002 2002-2003 2003-2010 TOTAL
------------ ------------ ------------ ------------- -------------
QTY AVG QTY AVG QTY AVG QTY AVG QTY AVG
PRECIOUS METALS HEDGING HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE
----------------------- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
('000 (PER ('000 (PER ('000 (PER ('000 (PER ('000 (PER
AS AT 30 JUNE 2000 OZ) OZ) OZ) OZ) OZ) OZ) OZ) OZ) OZ) OZ)
FORWARD SALE CONTRACTS
Gold outright forwards
($A sold).............. 1,407 529 1,189 557 980 594 4,200 610 7,776 585
($NZ sold)............. 14 634 -- -- -- -- -- -- 14 634
(EUR sold)............. 13 301 -- -- -- -- -- -- 13 301
($US sold)............. -- -- -- -- -- -- 175 494 175 494
Silver outright forwards
($A sold).............. 78 8.05 56 7.97 79 7.92 36 7.94 249 7.97
($NZ sold)............. 585 10.03 -- -- 297 9.42 232 9.53 1,114 9.76
OPTIONS
Gold option positions
(bought $A put)........ 612 499 303 537 164 557 607 599 1,686 547
(bought EUR put)....... 13 280 -- -- -- -- -- -- 13 280
(bought $US put)....... 129 299 132 299 128 301 477 291 866 295
(convertible $A put)... 62 569 74 575 200 576 2,050 630 2,386 622
(bought $A call)(i)...... 230 504 -- -- -- -- -- -- 230 504
(sold $A call)(i)........ 4 640 45 545 46 550 525 547 620 548
(sold EUR call)(ii)...... 13 335 -- -- -- -- -- -- 13 335
AGGREGATE DEFERRED LOSSES
(A$M)................... (38.6) (17.9) (19.3) (187.6) (263.4)
--------
(i) Bought gold $A call options are matched against gold outright forwards ($A
sold) to create synthetic put options.
(ii) The majority of sold gold call options are matched against bought gold put
options to create collar structures.
B-53
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
2001-2002 2002-2003 2003-2004 2004-2005 TOTAL
---------------- ---------------- ---------------- ---------------- ----------------
QTY AVG QTY AVG QTY AVG QTY AVG QTY AVG
BASE METALS HEDGING HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE
------------------- -------- ------- -------- ------- -------- ------- -------- ------- -------- -------
AS AT 30 JUNE 2001 (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T)
FORWARD SALE CONTRACTS
Copper sale contracts outright
forwards ($US sold).......... 2,150 1,855 -- -- -- -- -- -- 2,150 1,855
OPTIONS
Zinc sale contracts outright
forwards ($US sold).......... 1,500 1,180 -- -- -- -- -- -- 1,500 1,180
A$M RATE A$M RATE A$M RATE A$M RATE A$M RATE
FORWARD EXCHANGE CONTRACTS
Sell US dollars--buy
Australian dollars........... 108.7 0.6663 99.3 0.6549 42.0 0.6474 52.9 0.6320 302.9 0.6540
AGGREGATE DEFERRED GAINS/
(LOSSES) (A$M)............... (33.0) (28.2) (10.9) (11.8) (83.9)
2001-2001 2001-2002 2002-2003 2003-2010 TOTAL
---------------- ---------------- ---------------- ---------------- ----------------
QTY AVG QTY AVG QTY AVG QTY AVG QTY AVG
BASE METALS HEDGING HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE
------------------- -------- ------- -------- ------- -------- ------- -------- ------- -------- -------
AS AT 30 JUNE 2000 (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T)
FORWARD SALE CONTRACTS
Copper sale contracts outright
forwards ($US sold).......... 425 2,092 -- -- -- -- -- -- 425 2,092
Zinc sale contracts outright
forwards ($US sold).......... 3,575 1,161 -- -- -- -- -- -- 3,575 1,161
OPTIONS
Copper option positions
(bought $US put)............ 775 1,720 -- -- -- -- -- -- 775 1,720
(sold $US call)* (i)........ 775 1,960 -- -- -- -- -- -- 775 1,960
A$M RATE A$M RATE A$M RATE A$M RATE A$M RATE
FORWARD EXCHANGE CONTRACTS
Sell US dollars--buy
Australian dollars........... 105.6 0.68 112.5 0.67 116.8 0.66 75.2 0.63 410.1 0.66
AGGREGATE DEFERRED LOSSES
(A$M)........................ (8.6) (9.5) (12.0) (9.8) (39.9)
--------
(i) Sold copper $US call options are matched against bought copper $US put
options to create collar structures.
B-54
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
32 FINANCIAL INSTRUMENTS (CONT.)
(F) INTEREST RATE RISK
The consolidated entity's exposure to interest rate risk at 30 June 2001 is
set out below:
FIXED INTEREST MATURING IN
-----------------------------
FLOATING LESS GREATER NON-
INTEREST THAN THAN INTEREST
RATE 1 YEAR 1-5 YEARS 5 YEARS BEARING TOTAL
-------- ------ --------- ------- -------- -------
FINANCIAL ASSETS
Cash assets.......................... 239.4 239.4
Bank bills........................... 65.8 65.8
Gold bullion......................... 39.6 39.6
Receivables.......................... 24.9 106.0 139.0 269.9
Investments.......................... 338.7 338.7
----- ----- ----- ----- ----- -------
953.4
Weighted average interest rate (%)... 4.4 6.1 3.0 --
FINANCIAL LIABILITIES
Trade creditors...................... 249.8 249.8
Bank overdrafts and bank loans....... 102.1 206.0 308.1
Gold denominated debt................
US dollar guaranteed notes........... 417.7 125 333.0 875.7
Other borrowings..................... 70.4 32.8 103.2
Other liabilities....................
----- ----- ----- ----- ----- -------
1,536.8
Weighted average interest rate (%)... 5.09 5.87 8.61 7.97 --
===== ===== ===== ===== ===== =======
The consolidated entity's exposure to interest rate risk at 30 June 2000 is set out below:
FINANCIAL ASSETS
Cash assets.......................... 101.5 34.8 16.4 152.7
Bank bills........................... 69.4 69.4
Gold bullion......................... 23.3 23.3
Receivables.......................... 15.9 76.1 22.7 103.6 183.0 401.3
Investments.......................... 585.6 585.6
----- ----- ----- ----- ----- -------
1,232.3
Weighted average interest rate (%)... 5.45 6.30 9.25 3.00
FINANCIAL LIABILITIES
Trade creditors...................... 159.9 159.9
Bank overdrafts and bank loans....... 636.0 5.4 641.4
Gold denominated debt................ 5.0 5.0
US dollar guaranteed notes........... 141.8 303.2 100.0 330.9 875.9
Other borrowings..................... 3.8 26.1 29.9
Other liabilities.................... 87.3 87.3
----- ----- ----- ----- ----- -------
1,799.4
Weighted average interest rate (%)... 2.70 7.31 7.45 6.73 --
===== ===== ===== ===== ===== =======
--------
Amounts are disclosed net of provisions.
B-55
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
(G) NET FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
(I) RECORDED ON STATEMENT OF FINANCIAL POSITION
The net fair value of cash and cash equivalents and non-interest bearing
monetary financial assets and financial liabilities of the consolidated entity
approximates their carrying value.
The net fair value of other monetary financial assets and financial
liabilities is based upon market prices where a market exists or by discounting
the expected future cash flows by the current interest rates for assets and
liabilities with similar risk profiles.
Listed equity investments have been valued by reference to market prices
prevailing at balance date.
The carrying amounts of all financial assets and financial liabilities
approximate net fair value, with the following exceptions:
The market value of listed investments as at 30 June 2001 is A$6 million
(2000: A$86.8 million). The carrying amount of A$6.3 million has not been
reduced as it does not exceed recoverable amount.
(II) NOT RECORDED ON STATEMENT OF FINANCIAL POSITION
Commodity forward sale contracts, foreign exchange contracts, options and
swaps have been valued at the mark-to-market gain or loss, which would arise if
the contract were terminated at balance date. These values are disclosed under
"Gold hedging", "Base metals hedging" and "Other commitments denominated in
foreign currencies" above.
33 CONTINGENT LIABILITIES
(A) GUARANTEES AND INDEMNITIES
The consolidated entity has given bank guarantees totalling A$56.8 million
(2000: A$48.8 million) to banks, mining departments and other public utilities.
Normandy Mining Limited and several of its wholly-owned entities have
guaranteed a A$650 million multi-option, revolving facility provided by a
syndicate of banks to Normandy Group Finance Limited, a wholly owned entity of
Normandy Mining Limited. At 30 June 2001, the facility was drawn down by A$200
million (2000: A$170 million).
Normandy Mining Limited and a number of wholly owned entities have
guaranteed the obligations of Normandy Mining Finance Limited pursuant to the
issue of US$250 million guaranteed unsecured notes.
Normandy Mining Limited and several of its wholly owned entities have
provided guarantees over a fully drawn financing facility totalling A$38.6
million (2000: A$44.1 million) and foreign currency hedging facilities that a
syndicate of banks has provided on behalf of Australian Magnesium Corporation
Limited ("AMC"), formerly Queensland Metals Corporation Limited. Of the foreign
currency hedging facilities totalling a face value of US$155 million (2000:
US$155 million) US$124.5 million (2000: US$149 million) is utilised and has a
marked to market deficiency of A$73.6 million as at 30 June 2001 (2000: A$37.4
million).
B-56
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
Normandy Mining Limited and AMC have jointly and severally agreed to
indemnify The Ford Motor Company ("Ford") in respect of an obligation of AMC to
reimburse, in certain circumstances, part or all of the US$30 million
investment provided by Ford in the Magmetal project. As a result of the
transactions completed during the year 2000, AMC has indemnified Normandy
Mining Limited in respect of liability under this arrangement in two of the
four circumstances in which Normandy Mining Limited may be liable to Ford.
Kasese Cobalt Company Limited, a controlled entity, has arranged loan
finance agreements for US$50.7 million with a syndicate of banks. Normandy
Mining Limited has provided a guarantee over the facility to the syndicate of
banks.
Normandy Mining Limited has guaranteed the obligations of Kasese Cobalt
Company Limited in relation to a Cobalt Floor Price Support Agreement with
Royal Bank of Scotland.
Controlled entities have provided indemnities to third parties relating to
the sale of wholly owned entities of Normandy Mining Limited.
Normandy Mining Limited and several of its wholly owned entities have
guaranteed the obligations of a wholly owned entity both to Esso Australia
Resources Limited and SG Australia Limited. The guarantee is in relation to the
deferred purchase consideration obligations of the wholly owned entity for the
purchase of an additional 35 percent interest in the Golden Grove Joint Venture
from Esso Australia Resources Limited. The discounted liability of A$6.1
million (2000: A$12.2 million) is included in payables in the consolidated
statements of financial position.
Wholly owned entities have provided guarantees over the treasury obligations
of other wholly owned entities. As at 30 June 2001, the aggregate marked to
market deferred loss in respect of these obligations is A$510.3 million (2000:
A$303.3 million). Normandy Mining Limited has provided guarantees over the
foreign exchange and base metal hedging obligations of various wholly owned
entities.
Normandy Mining Limited has given written confirmation of its present
intention to support the operation of certain wholly owned entities which have
a net asset deficiency.
In an action brought by ASIC against Yandal Gold Pty Ltd, the Federal Court
found the defendants to have committed various breaches of the Corporations Act
2001 and ordered payment by Edensor Nominees Pty Ltd ("Edensor") to ASIC of
A$28.5 million for distribution to former Normandy Yandal Operations Limited
shareholders. An appeal by Edensor to the Full Court of the Federal Court, to
which Normandy became a party on the application of ASIC, was allowed on the
basis that the Federal Court lacked jurisdiction to make the order. This
decision was appealed to the High Court, which overturned the Full Federal
Court decision. The High Court held that the Federal Court did have
jurisdiction to hear and determine the matter and make orders under the
Corporations Act 2001. The High Court has sent the matter back to the Full
Federal Court to determine Edensor's appeal on the merits. Prior to the Federal
Court appeal and in order to get a stay in enforcement of the original
judgement, Normandy paid A$28.5 million into Court and Edensor agreed to bear
half this amount if it was paid out of Court to former Normandy Yandal
Operations Limited shareholders. Following the High Court appeal, the amount
paid into Court has been recovered, but if the Full Federal Court determines
Edensor's appeal against Edensor, the consolidated entity will be obliged to
pay that amount plus interest to ASIC. Edensor remains bound to the
consolidated entity to bear half that amount.
B-57
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
During the year Normandy Mining Limited provided a A$90.0 million contingent
equity commitment under which AMC may call upon Normandy Mining Limited to
subscribe for AMC shares in the event that the Stanwell Magnesium Project does
not achieve certain specified production and operating criteria by no later
than September 2006.
(B) DISPUTES
A dispute exists between Thiess Contractors Pty Ltd ("Thiess") and Normandy
Golden Grove Operations Pty Ltd ("NGGO"), a wholly owned entity, in respect of
a claim for additional and unexpected costs arising from the development of the
Gossan Hill Project decline. Conciliation procedures have failed to resolve the
dispute. Thiess claimed approximately A$11 million in damages. NGGO has made a
counterclaim of A$0.9 million and made an offer of A$2.1 million. Litigation in
the Supreme Court of Western Australia is proceeding.
Disputes exist between a controlled entity, Banff Resources Ltd, and a third
party in respect of a claim for part-ownership in the Kilembe mine. The third
party has lodged a claim for specific performance and damages with courts in
Uganda and Canada. The disputes are currently awaiting hearing and the
controlled entity intends to defend the action.
Orica Australia Limited has commenced proceedings against a former
controlled entity Normandy Industrial Minerals Limited ("NIML"), in respect of
the supply of sand used in the manufacture of paints. A controlled entity has
indemnified the purchaser of NIML in respect of this claim.
Disputes exist between a controlled entity and contractors in respect of the
Kasese Cobalt project. Claims have been lodged by contractors for additional
payment in respect of extensions of time and additional costs. Claims have
either been settled, or are subject to arbitrary proceeding, or are being
evaluated.
(C) OTHER
Normandy Mining Limited provided a guarantee to the Commonwealth Bank of
Australia relating to the sale for an amount of A$5 million, amortising to nil
over a period of 10 years from 1999.
Normandy Mining Limited has agreed to make an additional payment of US$8
million to Inmet Mining Corporation, in relation to the purchase of its
interest in Autin Investments B.V., contingent upon certain conditions relating
to construction of mine facilities at Perama Hill being met. Normandy Mining
Limited has agreed to make an additional payment of US$3.6 million to Inmet
Mining Corporation in relation to the purchase of its interest in Autin
Investments BV, contingent upon certain conditions relating to production at
the Ovacik Mine being met.
A wholly owned entity has agreed to purchase all the shares in Normandy
Anglo Pte Ltd and Normandy Anglo Asia Pty Ltd from Amcorp Exploration
(South-East Asia) Limited (Amcorp) under the following terms and conditions,
US$1.5 million paid upon the completion of a Bankable Feasibility Study, US$2.5
million paid upon the commencement of commercial production in a designated
area, US$2.50 per ounce for the first 200,000 ounces sold by Normandy and
thereafter US$5.00 for every ounce sold by Normandy after the initial 200,000
ounces. Normandy Mining Limited has also contracted to make payments for
exploration based on the production and exploration results of a controlled
entity.
B-58
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
34 COMMITMENTS
CONSOLIDATED
-----------------------
2001 2000
----- -----
A$M A$M
COMMITMENTS NOT OTHERWISE PROVIDED FOR IN THE FINANCIAL STATEMENTS AT BALANCE DATE:
CAPITAL EXPENDITURE
Payable not later than 1 year............................................................ 21.5 26.5
Later than 1 year and not later than 5 years............................................. -- 0.2
----- -----
21.5 26.7
===== =====
NON-CANCELLABLE OPERATING LEASES
Payable not later than 1 year............................................................ 9.5 9.8
Later than 1 year and not later than 5 years............................................. 34.1 34.4
Later than 5 years....................................................................... 5.7 13.5
----- -----
49.3 57.7
===== =====
The operating lease commitments include a 7 year lease of various open pit mining and auxiliary equipment
at the Kalgoorlie operations. The lease commitments are subject to change if interest rates are different to that
assumed in the lease model.
EXPLORATION AND MINERAL LEASES (I)
Payable not later than 1 year............................................................ 19.8 45.4
Later than 1 year and not later than 5 years............................................. 47.5 98.8
Later than 5 years....................................................................... 0.1 12.0
----- -----
67.4 156.2
===== =====
OTHER COMMITMENTS (II)
Payable not later than 1 year............................................................ 33.5 28.1
Later than 1 year and not later than 5 years............................................. 108.5 88.4
Later than 5 years....................................................................... 33.7 44.3
----- -----
175.7 160.8
===== =====
--------
(i) The consolidated entity has certain obligations to perform minimum
exploration work and expend minimum amounts of money in order to maintain
rights of tenure over mining and exploration tenements. The annual minimum
expenditure will vary from time to time due to the acquisition or
relinquishment of licences or mining department variations of the
commitment levels by the various mining departments.
(ii) The consolidated entity has entered into agreements with public utilities
under which they supply electricity in several states. Pursuant to those
agreements, the entities concerned are liable, or severally liable in the
case where a joint venture exists, to pay the respective public utility a
line charge for the service. The consolidated entity has also entered into
an agreement for minimum use of Goldfields Gas Transmission capacity,
equivalent to a total of A$102.3 million to 2008.
During the year, a controlled entity provided a US$1 million (2000: US$150
million) committed debt and hedging facility to TVX Cayman Inc. ("TVX"), a
controlled entity of TVX Gold Inc. Drawdowns under the facility are subject to
normal commercial lending covenants. The facility is currently undrawn.
B-59
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
The consolidated entity has commitments for the payment to Mr RJ Champion de
Crespigny of salaries and other remuneration under a ten-year employment
contract commencing from 1 July 1999. Obligations arising under this contract
are recognised as an expense, and included in Directors' and Executives'
remuneration, as services are provided to the consolidated entity under the
contract. The contract provides for future payments recognising performance,
plus an incentive arrangement based on growth in value of the consolidated
entity's investments in the Americas above an agreed benchmark.
Total annual payments under the contract are capped at A$3.5 million. During
the year, no performance or incentive payments were made but, at 30 June 2001,
the economic entity recognised A$1.5 million (2000:A$1.5 million) as an expense
by providing pro-rata for the minimum amount due under the ten-year term. As at
30 June 2001, the total accrued was A$3.0 million (2000: A$1.5 million).
These commitments will be met out of the surplus cash generated by existing
operations.
35 RECEIVABLES AND PAYABLES DENOMINATED IN FOREIGN CURRENCIES
The Australian dollar equivalents of foreign currency receivables and
payables included in the financial statements, which are not effectively
hedged, are as follows:
CONSOLIDATED
------------
2001 2000
----- -----
A$M A$M
BORROWINGS
CURRENT
--US Dollars (i)................................................. 39.2 33.4
NON-CURRENT
--U S Dollars (ii)............................................... 227.9 193.5
===== =====
--------
(i) Represents the unhedged portion of the US$40.0 million loan facility in
respect of the Ovacik mine, net of the US$20.0 million cash deposit being
held as security for the loan (2000: A$33.4 million), translated at an
exchange rate of AS1.00: US$0.51 (2000: A$1.00: US$0.60).
(ii) Represents the unhedged potion of the US$300.0 million senior unsecured
notes (see Note 18).
36 EMPLOYEE ENTITLEMENTS
Accrued wages and salaries...................... 0.6 2.3
PROVISION FOR EMPLOYEE ENTITLEMENTS
--Current (Note 19)............................. 31.7 18.3
Non-current (Note 19)........................... 12.5 9.7
----- -----
44.8 30.3
===== =====
EMPLOYEE NUMBERS 2001 2000
---------------- ----- -----
Number of employees at the end of financial year 2,613 2,760
===== =====
B-60
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
THE EMPLOYEE SHARE INVESTMENT PLAN
The Company's Employee Share Investment Plan was approved by special
resolution at the annual general meeting of the Company held on 26 November
1991.
Under this plan employees of the consolidated entity are eligible to acquire
an annual allocation of 2,000 fully paid ordinary shares after one year of
service which rises to 5,000 shares after three years service. The shares are
offered at a price determined by the Board (at a discount of up to 5 percent of
the prevailing market price) and employees may elect to pay cash for the shares
or apply for a loan from the parent entity. Such loans are repayable over a
maximum period of 10 years at a concessional rate of interest which is
currently 4 percent. Shares issued under the scheme are non-transferable for a
period of one year from the date of issue after which time an application is
made for official quotation of the shares.
DETAILS OF SHARES OFFERED AND ISSUED TO EMPLOYEES UNDER THE PLAN ARE AS
FOLLOWS:
2001 2000 PLAN TO DATE
------------- ----------- ------------
Offer date.................................... 4 Dec 2000 9 Nov 1999
Total shares offered.......................... 5,763,000 7,718,000 32,479,000
Number of eligible employees.................. 1,448 1,864
Offer price................................... A$0.86 A$1.11
Acceptance required by........................ 17 Jan 2001 14 Jan 2000
Shares issued................................. 1,453,350 484,300 5,257,614
Number of employees to whom shares were issued 381 138
Issue date.................................... 31 Jan 2001 31 Jan 2000
Consideration received........................ A$ 1,249,881 A$537,573 A$6,542,735
Market value of the shares on date of issue... A$ 1,380,682 A$503,672 A$7,137,989
The market price of a Normandy Mining Limited ordinary share at 30 June 2001
was A$1.24 (2000: A$0.90).
The issue price of shares issued under the plan is recognised as issued
capital at the date of issue. Amounts recognised in relation to the year ended
30 June were as follows:
2001 2000
----- -----
A$000 A$000
Issued capital 1,258 538
At 30 June 2001 loans arising from the Employee Share Investment Plan to
employees who are also Directors of controlled entities totaled A$38,943 (2000:
A$39,613). Loans totaling A$20,640 were made during the year to R Greenslade, D
Hillier, C Swensson, P Dowd, KG Williams, C O'Connor (2000: A$5,550--M Nossal).
Instalments and repayments totalling A$30,166 were made during the year by R
Auld, T Cutbush, J Fehon, P Hastie, R Greenslade, D Hillier, M Nossal, S
Sherwood, C Swensson, P Dowd, KG Williams, C O'Connor (2000: A$23,825--R Auld,
ST Carty, T Cutbush, A de Vere, J Fehon, R Greenslade, P Hastie, I Hershman, D
Hillier, M Nossal, S Sherwood, D Smith and C Swensson).
EXECUTIVE SHARE INCENTIVE PLAN
The Company's Executive Share Incentive Plan was approved by special
resolution at the annual general meeting of the Company held on 26 October 1998.
B-61
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
36 EMPLOYEE ENTITLEMENT (CONT.)
Under this plan Executive Directors, Executives and Employees of the Company
and associated entities may be eligible, at the discretion of the Board, to an
allocation of rights to unlisted options. These rights vest once certain
performance hurdles are met. During and since the end of the financial year an
aggregate of 4,112,500 options over shares in Normandy Mining Limited were
granted.
Options are granted for nil consideration. Each option carries a right to
subscribe for one ordinary share in the Company in certain periods. The
exercise price of the option is the weighted average market per share during
the 60 trading days prior to the date of acceptance of the rights to options,
less the total amount of dividend per share. The dividend per share is
calculated as the higher of the actual dividend per share for the period from
the date of acceptance of the rights to options and the exercise date, and the
average dividend per share paid by the Company for the 3 years preceding. The
minimum exercise price is A$1.00. An application is made for official quotation
of the shares at the time of issue.
At 30 June 2001 no options had been granted under this plan.
THE EMPLOYEE SHARE BONUS PLAN
The Company's Employee Share Bonus Plan was established on 26 November 1991.
Each year the Board determines whether eligible persons will receive a bonus.
The bonus is calculated as a percentage of salary package and is apportioned
into two tranches; 50 percent as an allocation of rights to options and 50
percent as cash or as additional allocation of rights to options. Rights to
options allocated in lieu of cash vest upon the eligible person's acceptance of
the Company's offer. Rights to the balance of the options allocated each year
vest over the following three years.
Options are granted for nil consideration. Each option carries a right to
subscribe for fully paid ordinary shares on any business day up until its
expiry date, being five years from the date of issue. For all options which
were vested before 1 May 1996, the employee is entitled to receive 1.101
Normandy shares for each option exercised. For all options, which were vested
after 1 May 1996, the employee is entitled to receive one Normandy share for
each option exercised. The exercise price of the option is at 5 percent
discount to the market price ruling when the allocations are made.
It is management's intention that no further allocation of rights to options
will be made under the plan.
DETAILS OF OPTIONS VESTED AND OUTSTANDING UNDER THE PLAN ARE AS FOLLOWS:
2001 2000
------------------- ------------------
NUMBER AVERAGE NUMBER AVERAGE
ISSUED PRICE ISSUED PRICE
---------- ------- --------- -------
Opening balance.................. 8,129,915 1.69 7,042,765 1.69
Options issued during the period. 783,802 1.38 1,572,291 1.67
Options exercised during the year (8,173) 1.10 -- --
Options cancelled during the year (1,826,406) 1.22 (485,141) 1.61
---------- ---- --------- ----
Closing balance (i).............. 7,079,138 1.76 8,129,915 1.69
========== ==== ========= ====
--------
(i) 1,032,168 (2000: 1,954,478) of these options are convertible to 1.101
shares per option held.
B-62
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
The issue price of shares issued under the plan is recognised as issued
capital at the date of issue. Amounts recognised in relation to the year ended
30 June were as follows:
PARENT ENTITY
-------------
2001 2000
----- -----
A$000 A$000
Issued capital 9 --
37 REMUNERATION OF DIRECTORS AND EXECUTIVES
CONSOLIDATED
------------
2001 2000
----- -----
A$000 A$000
(A) NON-EXECUTIVE DIRECTORS
Amounts paid or payable, or otherwise made available to Directors of entities in the
Normandy Mining Limited consolidated entity from entities in the consolidated entity 693 789
The following income bands apply in respect of non-executive Directors of
Normandy Mining Limited:
NUMBER
---------
2001 2000
---- ----
A$0.000--A$9,999..... 1 --
A$40,000--A$49,999... 1 --
A$70,000--A$79,999... 1 --
A$80,000--A$89,999... 1 1
A$90,000--A$99,999... 1 1
A$110,000--A$119,999. -- 1
A$120,000--A$129,999. 1 --
A$130,000--A$139,999. -- 1
A$210,000--A$219,999* -- 1
--------
* A$Nil (2000A$180,000) was paid on retirement of non-executive Directors
during the year.
These bands include the remuneration received by non-executive Directors of
Normandy Mining Limited from other companies in the Normandy Mining Limited
consolidated entity as a result of their directorships and/or membership of
communities of Directors.
CONSOLIDATED
------------
2001 2000
----- -----
A$000 A$000
(B) EXECUTIVE DIRECTORS
Amounts paid or payable, or otherwise made available to executive officers who are or were
Directors of entities in the Normandy Mining Limited consolidated entity from entities in
the consolidated entity.................................................................. 4,976 6,504
B-63
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
The following income bands apply in respect of Executive Directors of
Normandy Mining Limited:
CONSOLIDATED
NUMBER
------------
2001 2000
---- ----
A$2,290,000--A$2,299,999*. -- 1
A$2,670,000--A$2,679,999** -- 1
A$2,790,000--A$2,799,999** 1 --
--------
* A$NiI (2000: AS$1,664, 000) was paid to executive Directors on retirement or
resignation during the year.
** Includes AS 1,500, 000 accrued but not yet paid
CONSOLIDATED
------------
2001 2000
----- -----
A$000 A$000
(C) EXECUTIVE OFFICERS
Amounts received or due and receivable by executive officers who are not Directors of
Normandy Mining Limited. Executive Officers are those persons within the consolidated
entity who have responsibility for the management of affairs of the consolidated entity
and the Company and its strategic direction............................................ 5,731 4,337
The following income bands apply in respect of executive officers:
2001 2000
---- ----
A$130,000--A$139,999* 1 --
A$240,000--A$249,999* -- 1
A$250,000--A$259,999. -- 1
A$280,000--A$289,999. -- 2
A$290,000--A$299,999. 1 --
A$310,000--A$319,999* -- 1
A$340,000--A$349,999. -- 1
A$350,000--A$359,999. 1 --
A$360,000--A$369,999. -- 2
A$450,000--A$459,999. 1 1
A$470,000--A$479,999. 1 --
A$490,000--A$499,999. 1 --
A$520,000--A$529,999. 1 --
A$590,000--A$599,999. 1 --
A$660.000--A$669,999. -- 1
A$740,000--A$749,999. 1 --
A$760,000--A$769,999* -- 1
A$770,000--A$779,999* 1 --
A$870,000--A$879,999* 1 --
--------
* A$1,380,000 (2000: A$726,000) was paid to executive officers on retirement
or resignation during the year.
B-64
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
38 OTHER RELATED PARTY INFORMATION
Information in respect of related entities of the consolidated entity not
disclosed elsewhere in this financial report is as follows:
DIRECTORS
The directors of Normandy Mining Limited during the year were:
Mr R J Champion de Crespigny
Mr M S Hamson
Dr P Lassonde (appointed 31 May 2001)
Mr B G McKay
Mr J B Prescott
Mr K H Spencer (appointed 1 December 2000)
Mr B Wheelahan
Remuneration paid or payable or otherwise made available to the Directors of
Normandy Mining Limited and its controlled entities is disclosed in Note 37.
TRANSACTIONS WITH RELATED ENTITIES
All transactions with related entities are made on normal commercial terms
and conditions.
TRANSACTIONS WITH DIRECTOR-RELATED ENTITIES
Loans have been made to an entity associated with the following directors;
Mr R J Champion de Crespigny, Mr M S Hamson, Mr B G McKay, Mr B Wheelahan, Mr K
H Spencer, Mr D Hillier, Mr B D Kay, Mr J Reynolds, Mr P J Dowd, Mr J B
Prescott, Mr K G Williams, Mr C O'Connor and Mr H Umlauff (2000: Mr R J
Champion de Crespigny, Rt Hon J D Anthony, Dr I G Gould, Mr M S Hamson, Mr B G
McKay, Mr B Wheelahan, Mr L Baertl, Mr M Cutifani, Mr D Hillier, Mr B D Kay, Mr
J Reynolds, Mr J Richards, Mr R Robinson and Mr D J Smith).
Interest accrues on the loan at 5% per annum and is payable monthly. The
principal amount is repayable on 8 December 2008. The loan is secured over the
assets of the related entity.
Amounts recorded in the statement of financial performance and statement of
financial position in respect of the above transactions are set out below.
2001 2000
------ ------
A$000 A$000
Non-current loans receivable.................................. 10,866 14,477
Provision for doubtful debts.................................. (1,387) (5,000)
------ ------
9,479 9,477
Accrued interest.............................................. 670 686
Interest revenue.............................................. 670 686
Additions/(reductions) to provision for doubtful debts........ (2,829) 1,000
Repayments made............................................... 4,691 3,587
Advances made................................................. 1,080 4,583
B-65
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
TRANSACTIONS WITH OTHER RELATED PARTIES
2001 2000
------ ------
A$'000 A$'000
(a) During the previous year loans of A$33.5 million were made to Yandal Gold Holdings Pty
Ltd ("YGH"), a former associated entity. YGH subsequently became a controlled entity.
Interest recorded in respect of the period for which YGH was an associated entity is set out
below.
Interest revenue.................................................................................. -- 1,997
(b) During the previous year a loan of A$12 million was made to Australian Magnesium
Investments Pty Ltd, a former associated entity. Interest accrued on the loan at the 3 month
bank bill swap rate plus a margin of 3%. The loan was repaid in May 2000.
Interest revenue.................................................................................. -- 420
(c) During the previous year guarantee fees were received by Normandy Mining Limited from
Australian Magnesium Corporation (AMC), a former associated entity. AMC subsequently
became a controlled entity. Revenue in respect of the period for which AMC was an
associated entity is set out below.
Other revenue..................................................................................... 326 865
(d) During the previous year loans were made to Normandy Anglo Asian group companies for
mineral exploration.
Loans receivable--associates...................................................................... -- 2,196
Additions to provision for doubtful debts......................................................... -- 699
(e) During the previous year interest was charged to BRGM Perou, an associated entity, in
respect of loans made.
Interest revenue.................................................................................. -- 1,035
(f) During the year fees were paid for a range of legal services to a firm of which Mr R A
Fisher (a Director of controlled entities) is one of a number of partners.
Fees paid......................................................................................... 152 175
Trade creditors................................................................................... 18 19
OWNERSHIP INTEREST IN RELATED ENTITIES
Interests held in joint venture operations, joint venture entities,
controlled entities and associated entities are set out in Notes 28, 29, 30 and
31 to the financial statements.
AMOUNTS RECEIVABLE FROM RELATED ENTITIES
Details of amounts receivable from related entities are set out in Note 8 to
the financial statements.
B-66
NORMANDY MINING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2001
SHARE AND SHARE OPTIONS
Details of all share and share option transactions between Directors of
Normandy Mining Limited and any entity in the consolidated entity are as
follows:
NUMBER
---------------------
2001 2000
---------- ----------
AGGREGATE NUMBER ISSUED DURING THE YEAR:
Ordinary shares
--Normandy Mining Limited (i)............................ 3,118,064 2,795,142
AGGREGATE NUMBER HELD AT 30 JUNE:
Ordinary shares
-- Normandy Mining Limited............................... 73,298,532 69,429,743
Ordinary share options
-- Normandy Mining Limited (ii).......................... -- 28,858,264
--------
(i) Includes Share Investment Plan issues and Dividend Reinvestment Plan issues.
(ii) Listed options expired in April 2001.
Other movements in aggregate balances arise through normal on market
transactions.
There were no buy-backs of shares or share options during the financial year.
39 SUBSEQUENT EVENTS
Since the end of the financial year, a proposed equity raising by a
controlled entity, Australian Magnesium Corporation Ltd. was initially
unsuccessful. Following additional negotiations in relation to alternate
funding sources, it is the Directors' expectation that the equity raising will
successfully proceed. No adjustment is required to the reported results and no
material impact on the financial results for the subsequent period is expected.
B-67
NORMANDY MINING LIMITED--2000 MANAGEMENT DISCUSSION AND ANALYSIS
(EXCERPT FROM 2000 ANNUAL SHAREHOLDER REPORT)
PROFIT AND LOSS
OPERATING CONTRIBUTIONS
Consolidated sales revenue was A$1,323.6 million, a decrease of 2.4 percent
compared to 1999 revenue of A$1,356.1 million.
Gold sales revenue was A$936 million, an increase of 2.3 percent. This
excludes revenue attributable to non-controlled interests, TVX Normandy
Americas and Great Central Mines Limited (prior to consolidation in April 2000)
but does include A$91.4 million revenue from Yandal Operations in the last
quarter. Consolidated sales increased from 1.53 million ounces in 1999 to 1.62
million ounces, with acquisition of Yandal Operations outweighing the sale of
Big Bell and cessation of operations at Tennant Creek and Kaltails. The average
realised price for the consolidated gold division decreased from A$596 per
ounce to A$576 per ounce (average spot price for the year, A$448 per ounce).
The decrease was mainly due to Mt Leyshon, Martha and Yandal that have their
own hedge books at relatively lower forward prices.
Average gold division total cash costs decreased by A$25 per ounce to A$310
per ounce mainly due to lower unit costs at Normandy NFM and Pajingo which both
achieved significantly higher throughput following plant upgrades. The combined
cash cost for Yandal Operations in the fourth quarter was A$322 per ounce,
lower than the average cash cost of discontinued gold operations they
effectively replaced.
As a consequence of the net A$5 per ounce improvement in cash margin to
A$266 per ounce, the gold division contribution increased 10.3 percent to
A$425.7 million (before interest, tax, depreciation, amortisation and mine
completion provisions).
Metals revenue decreased 23.1 percent to A$178.1 million reflecting closures
of Woodcutters and Gecko. Golden Grove zinc concentrate production increased
4.9 percent. The operating contribution increased 84 percent to A$49.8 million
mainly as a result of higher spot metals prices. The average realised zinc
price was up 11 cents to 80c/lb and the average realised copper price was up 8
cents to 129c/lb.
Revenue from sales of industrial minerals remained unchanged at A$179
million. This does not include the equity interest sales from Australian
Magnesium Corporation Limited (formerly Queensland Metals Corporation Limited).
The A$21.1 million operating contribution from Normandy Industrial Minerals was
14.2 percent lower than last year mainly due to competitive market conditions
in Europe.
EXPENSES
Exploration provisions and write-offs totalled A$46.6 million for statutory
reporting purposes, with a further A$5.6 million in additional provisions
against loans for exploration expenditure and investments in seed exploration
companies in South East Asia and the Americas.
Consolidated amortisation and depreciation decreased by 11.9 percent to
A$140.7 million mainly as a result of reduced rates to reflect increases in
mineable reserves, principally at Boddington.
Mine closure provisions and costs increased from A$22.0 million to A$28.5
million, principally due to additional provisions required for discontinued
operations.
Net financing costs increased from A$17.0 million to A$41.5 million. This
was partly due to the lower proportion of gold denominated borrowings giving
rise to an increase in the average cost of funds, as well as the
B-68
additional interest expense associated with the Yandal Group debt which was
consolidated from April 2000. Interest revenue decreased by A$6.4 million to
A$25.2 million due to the higher cash balances in 1999 immediately following
the hedge book restructure.
Administration costs for Australia increased by 8.7 percent to A$48.7
million mainly due to once-off staff restructure costs, while overseas
administration costs decreased from A$20.7 million to A$11.7 million reflecting
rationalisation at LaSource. Other net income/(expenses) includes a A$2.7
million realised exchange loss on the repayment of the US$65 million
convertible notes compared to last year's A$7.6 million unrealised gain.
Management and guarantee fees charged to entities outside of the Group
decreased by A$0.9 million to A$8.4 million.
Income tax expense was A$37.3 million for the year after recognition of an
A$8.5 million benefit from restating deferred tax balances at the new corporate
tax rates applicable from 1 July 2000.
Outside equity interest was a charge of A$17.6 million due to the net
profits recorded by Normandy Mt Leyshon Limited and Normandy NFM Limited.
The net profit after tax before abnormals of A$138.4 million was 36 percent
higher than last year's result of A$101.7 million, principally reflecting the
benefit of the reduced total production costs for gold during the year.
Following the acquisition of 100 percent of Yandal Operations, a total of
A$413.8 million in abnormal writedowns was made to adjust the former Great
Central Mines Limited balance sheet to Normandy accounting policies and to
write purchased assets down to reflect fair values. Other abnormal losses
included a A$96.0 million reduction in the carrying value of projects,
principally Kasese (due to lower cobalt price), less A$58.0 million outside
equity interest.
Partially offsetting these abnormal losses are abnormal gains of A$36.6
million arising from the sale of the industrial minerals businesses and the
Group's 50 percent interest in Omya Southern Pty Limited.
The effect of the abnormal gains and losses detailed above was a net loss of
A$420.7 million.
B-69
SIMPLIFIED CONSOLIDATED FINANCIAL RESULTS
FOR THE TWELVE MONTHS ENDED 30 JUNE 2000
----------------------------------------
A$M
GOLD
Kalgoorlie Operations.................................... 114.2
Yandal Operations........................................ 36.4
Boddington............................................... 27.8
Big Bell Consolidated.................................... 9.3
Kaltails................................................. 3.4
Tanami Operations(1)..................................... 82.4
Tennant Creek Operations................................. 11.8
Mt Leyshon(1)............................................ 73.4
Pajingo Operations....................................... 45.5
Martha................................................... 14.2
Ity...................................................... 7.3
Total.................................................... 425.7
NON-GOLD
Golden Grove............................................. 49.8
Industrial Minerals...................................... 21.1
Discontinued businesses.................................. (0.3)
Total.................................................... 70.6
TOTAL OPERATIONS(2)......................................... 496.3
OTHER INCOME/(EXPENSES)
Exploration provisions & write-offs...................... (52.2)
Amortisation & depreciation.............................. (140.7)
Mine closure provisions & costs.......................... (28.5)
Financing (net).......................................... (41.5)
Administration--Australia............................ (48.7)
Administration--Overseas............................. (11.7)
Other income/(expenses).............................. (1.7)
PROFIT BEFORE TAX & ABNORMALS............................... 171.3
Income tax expense.......................................... (37.3)
Share of associates' profits................................ 22.0
Outside equity interests.................................... (17.6)
PROFIT AFTER TAX & OUTSIDE EQUITY INTERESTS BEFORE ABNORMALS 138.4
Abnormal losses............................................. (478.7)
Outside equity interests.................................... 58.0
Net abnormal items.......................................... 420.7
NET PROFIT.................................................. (282.3)
--------
(1) Contributions from Normandy Mt Leyshon Limited and Normandy NFM Limited
(Tanami Operations) have been consolidated at 100 percent. Consequently,
23.6 percent and 15.1 percent in their respective after tax profits have
been deducted as outside equity interest.
(2) Before depreciation and amortisation charges and provisions for mine
completion costs.
CASH FLOWS
Net cash inflow from mining operations decreased by 15 percent to A$311.9
million, mainly due to the absence of cash hedge gains following the
restructure of the hedge book, completed in February 1999. The loss of cashflow
from discontinued and sold mining operations was offset by higher cashflow
generated by Pajingo and Normandy NFM as well as inclusion of Yandal Operations
in the final quarter.
B-70
Capital expenditure reduced 4.7 percent to A$248.5 million and mainly
comprised expenditure on development projects including Kasese, Yamfo-Sefwi and
Perama together with expenditure on existing operations including expansions at
Martha and Pajingo. Proceeds from the sale of mining assets included A$22.0
million received on the sale of Millmerran, the profit of which was accrued in
the 1999 results.
Net proceeds from the sale of investments of A$37.4 million mainly comprised
A$40.0 million proceeds on sale of Omya Southern and A$23.7 million proceeds on
sale of other listed and unlisted investments offset by purchases totalling
A$21.5 million of which the rights issue by Australian Magnesium Corporation
Limited was A$13.5 million.
Net repayment of borrowings of A$223.7 million comprised repayment of the
500,000 ounce gold denominated notes for A$246.1 million and the US$65 million
convertible bond, offset by a draw down of A$170 million on the syndicated
corporate facility.
Net proceeds received on sale and acquisition of businesses principally
represented the sale of Commercial Minerals for A$110 million plus A$65 million
in cash balances acquired from Great Central Mines Limited, less A$18.7 million
cash consideration for the acquisition.
Dividends of A$80.0 million were paid, comprising the 1999 final dividend
and the 2000 interim dividend of Normandy Mining Limited and Normandy Mt
Leyshon Limited to outside shareholders.
In summary, cash and bullion decreased by A$202.6 million to A$245.4 million
at year end.
SIMPLIFIED CONSOLIDATED CASH FLOWS
FOR THE TWELVE MONTHS ENDED 30 JUNE 2000
----------------------------------------
A$M
OPERATING ACTIVITIES
Net cash inflow from mining operations.............................. 311.9
Expenditure on mining property and plant............................ (248.5)
Exploration expenditure............................................. (58.5)
Proceeds from sale of mining assets................................. 39.0
Net operating cash flow......................................... 43.9
INVESTING, FINANCING & OTHER ACTIVITIES
Net payments for investments........................................ 37.4
Proceeds on disposal of businesses.................................. 152.4
Net repayment of borrowings......................................... (223.7)
Net loans to other entities......................................... (36.4)
Net interest paid................................................... (37.2)
Administration & other costs........................................ (27.5)
Dividends paid...................................................... (80.0)
Income tax paid..................................................... (31.5)
Net investing, financing & other activities cash flow........... (246.5)
NET (DECREASE)/INCREASE IN CASH HELD................................... (202.6)
Cash at beginning of period............................................ 439.9
Exchange rate effect on cash held in foreign currencies at beginning of
period............................................................... 8.1
CASH AT END OF PERIOD(1)............................................... 245.4
BALANCE SHEET
Mining property and plant increased by A$559.6 million principally due to
the full acquisition of the former Great Central Mines Limited. The increase
mainly represents the fair values of non-current mining assets
B-71
associated with the operations at Jundee, Bronzewing and Wiluna. The
consolidation of Yandal Operations also results in the decrease in investments,
with the A$175 million initial investment in Great Central Mines Limited
eliminated.
Investments principally comprise: TVX Normandy Americas (49.9 percent
interest--A$275.8 million), AMC (36.9 percent interest--A$76.4 million) and
BRGM Perou/Mine Or (49 percent interest--A$94.6 million). In July 2000, the
sale of Normandy's 50 percent share of the magnesium metal project to
Australian Magnesium Corporation ("AMC") in return for shares lifted Normandy's
interest in AMC to 62 percent.
Development projects comprise capitalised expenditure on the Ovacik and
Mastra projects in Turkey, Perama in Greece, Yamfo-Sefwi in Ghana and the
Kasese cobalt project in Uganda.
The Group's overall gearing increased from 28.4 percent to 57.0 percent due
to the combined effect of higher debt following the consolidation of Great
Central Mines Limited and reduced shareholder equity following the abnormal
writedowns. Despite having repaid over A$350 million in debt during the year,
being the gold denominated notes and the US convertible notes, the Great
Central Mines Limited acquisition brought the US$300 million Senior Notes onto
the balance sheet together with the Yandal Gold Holdings fully drawn facility
of A$285 million.
SIMPLIFIED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2000
------------------
A$M
ASSETS
Cash, bank bills & gold bullion.... 245.4
Receivables........................ 401.3
Inventories........................ 129.6
Mining property & plant............ 1,415.8
Development projects............... 310.7
Exploration expenditure............ 129.0
Investments........................ 518.1
Other.............................. 476.3
Total assets................... 3,626.2
LIABILITIES
Accounts payable................... 159.9
Borrowings......................... 1,552.2
Provisions......................... 840.8
Other.............................. 87.3
Total liabilities.............. 2,640.2
NET ASSETS............................ 986.0
EQUITY
Share capital...................... 1,155.5
Reserves........................... 45.0
Retained profits................... (251.9)
Outside equity interest............ 37.4
Total shareholders' equity..... 986.0
GOLD HEDGING POSITION
Normandy has hedged gold production each year since the Company was formed
and maintains one of the largest positions in the Australian industry. This has
allowed Normandy to achieve the best possible price for its
B-72
gold and to ensure cash flow margins in the current gold price environment.
Normandy's position at 30 June 2000 totalled 13.32 million ounces, including
forward sales contracts and put options at a gross average deliverable price of
A$591.43 per ounce (A$552 per ounce net of metal fees).
The present value (audited) of the gold hedging book, (Normandy and share of
subsidiaries), mark-to-market, is negative A$266.2 million (USD 159.4 million),
or negative A$20 per ounce. The value varies from 30 June 1999 and reflects a
number of adverse factors, including:
. An Australian dollar spot price of A$482 per ounce which is A$87 higher
than the previous year end;
. Advancing value of pre-existing contracts which mature one year sooner;
. Delivery into high priced forward contracts during the year;
. Inclusion of the former Great Central Mines hedge positions; and
. Higher interest rates (3 year and 5 year, 6.50 percent and 6.62 percent
respectively compared with 6.07 percent and 6.44 percent respectively).
AT 30 JUNE 2000
---------------------------------------
GOLD HEDGING POSITION NORMANDY(1) SUBSIDIARIES
--------------------- ------------------- -------------------
('000OZ) (A$/OZ)(2) ('000OZ) (A$/OZ)(2)
FORWARD CONTRACTS
2000-01............ 786 511 406 542
2001-02............ 827 517 362 568
2002-03............ 686 537 294 601
2003-10............ 3,597 585 603 593
Total.............. 5,896 560 1,665 577
PUT OPTIONS
2000-01............ 845 491 140 429
2001-02............ 367 513 69 449
2002-03............ 293 503
2003-10............ 1,084 519
Total.............. 2,589 507
CONVERTIBLE PUTS
2000-01............ 62 559
2001-02............ 74 558
2002-03............ 200 551
2003-10............ 2,050 569
Total.............. 2,386 567
CALL OPTIONS
2000-01............ 4 640
2001-02............ 0 0
2002-03............ 46 550
2003-10............ 525 544
Total.............. 575 545
--------
(1) Normandy wholly-owned, excluding share of subsidiaries.
(2) Contract price is net of actual (where fixed) or estimated lease fees.
(3) Normandy wholly-owned and 100 percent of subsidiaries.
BASE METALS HEDGING POSITION
At year end, Golden Grove had 3,575 tonnes of zinc hedged at an average US53
cents per pound and 425 tonnes of copper hedged at an average US95 cents per
pound.
[END OF EXCERPT]
B-73
NORMANDY MINING LIMITED
PROFIT AND LOSS STATEMENT
FOR THE YEAR ENDED 30 JUNE 2000
CONSOLIDATED
--------------
NOTES 2000 1999
----- ------ ------
A$M A$M
OPERATING PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION................ 400.7 360.3
Depreciation and amortisation....................................................... 3 (140.7) (159.5)
------ ------
OPERATING PROFIT BEFORE INTEREST AND TAX............................................ 260.0 200.8
Interest expense and borrowing costs................................................ 3 (66.7) (48.4)
------ ------
OPERATING PROFIT BEFORE ABNORMAL ITEMS AND INCOME TAX............................... 193.3 152.4
Abnormal items...................................................................... 3 (478.7) (39.6)
------ ------
OPERATING PROFIT/(LOSS) BEFORE INCOME TAX........................................... 3 (285.4) 112.8
Income tax benefit/(expense) attributable to operating profit....................... 4 (37.3) 8.7
------ ------
OPERATING PROFIT/(LOSS) AFTER INCOME TAX............................................ (322.7) 121.5
Outside equity interest in operating profit/(loss) after income tax................. 40.4 (17.7)
------ ------
OPERATING PROFIT/(LOSS) AFTER INCOME TAX ATTRIBUTABLE TO MEMBERS OF NORMANDY
MINING LIMITED.................................................................... (282.3) 103.8
Retained profits at the beginning of the financial year............................. 124.4 169.3
Adjustment to retained profits at 1 July 1998 as a result of the adoption of revised
Accounting Standard AASB 1016 "Accounting for Investments in Associates".......... -- (67.8)
------ ------
Total available for appropriation................................................... (157.9) 205.3
Dividends provided for or paid...................................................... 5 (94.0) (80.9)
------ ------
Retained profits/(accumulated losses) at the end of the financial year.............. (251.9) 124.4
====== ======
B-74
NORMANDY MINING LIMITED
BALANCE SHEET
AS AT 30 JUNE 2000
CONSOLIDATED
----------------
NOTES 2000 1999
----- ------- -------
A$M A$M
CURRENT ASSETS 7 245.4 448.7
Receivables............................................................ 8 173.6 158.3
Inventories............................................................ 9 103.7 143.2
Investments............................................................ 10 -- 15.9
Total current assets................................................... 15 123.5 71.5
------- -------
646.2 837.6
------- -------
NON-CURRENT ASSETS
Receivables............................................................ 8 227.7 267.9
Inventories............................................................ 9 25.9 16.8
Investments............................................................ 10 585.6 746.5
Exploration and evaluation expenditure................................. 11 129.0 143.6
Development properties................................................. 12 310.7 287.0
Property, plant and equipment.......................................... 13 1,382.2 814.8
Intangibles............................................................ 14 47.5 69.8
Other.................................................................. 15 271.4 213.3
------- -------
Total non-current assets............................................... 2,980.0 2,559.7
------- -------
Total assets........................................................... 3,626.2 3,397.3
======= =======
CURRENT LIABILITIES
Accounts payable....................................................... 16 159.9 154.4
Borrowings............................................................. 17 113.6 471.0
Provisions............................................................. 18 249.8 281.8
Total current liabilities.............................................. 523.3 907.2
NON-CURRENT LIABILITIES
Borrowings............................................................. 17 1,438.6 523.0
Provisions............................................................. 18 591.0 588.2
Other.................................................................. 19 87.3 5.8
Total non-current liabilities.......................................... 2,116.9 1,117.0
------- -------
TOTAL LIABILITIES...................................................... 2,640.2 2,024.2
------- -------
NET ASSETS............................................................. 986.0 1,373.1
------- -------
SHAREHOLDERS' EQUITY
Issued capital......................................................... 20 1,155.5 1,130.3
Reserves............................................................... 21 45.0 28.0
Retained profits/(accumulated losses).................................. (251.9) 124.4
------- -------
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO MEMBERS OF NORMANDY MINING LIMITED 948.6 1,282.7
Outside equity interests in controlled entities........................ 22 37.4 90.4
------- -------
TOTAL SHAREHOLDERS' EQUITY............................................. 986.0 1,373.1
======= =======
B-75
NORMANDY MINING LIMITED
STATEMENT OF CASH FLOWS
AS AT 30 JUNE 2000
CONSOLIDATED
------------------
NOTES 2000 1999
----- -------- --------
A$M A$M
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from sales............................................................. 1,302.7 1,315.5
Payments to suppliers and employees............................................. (1,051.0) (1,014.1)
Interest received............................................................... 27.7 25.6
Dividends received.............................................................. 19.3 6.6
Other receipts.................................................................. 13.6 25.3
Income tax paid................................................................. (31.5) (34.9)
Interest and other costs of finance paid........................................ (64.9) (52.0)
-------- --------
NET CASH INFLOW FROM OPERATING ACTIVITIES....................................... 23(d) 215.9 272.0
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment...................................... (130.9) (237.1)
Interest capitalised on qualifying assets....................................... (15.7) (4.0)
Payments for development projects............................................... (101.9) (19.7)
Payments for exploration........................................................ (58.6) (110.1)
Payments for investments........................................................ (26.4) (482.3)
Proceeds from sale of non-current assets........................................ 39.0 16.0
Proceeds from sale of investments............................................... 63.7 24.7
Repayment of loans by other entities............................................ 0.1 24.7
Realisation of hedge book....................................................... -- 659.9
Loans to other entities......................................................... (36.4) (43.3)
Businesses acquired............................................................. 23(e) 46.4 (44.2)
Businesses disposed............................................................. 23(f) 105.9 196.8
-------- --------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES...................................... (114.8) (18.6)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings......................................................... (647.8) (626.0)
Proceeds from borrowings........................................................ 424.1 608.8
Dividends paid to outside equity interests in controlled entities............... (11.9) (8.3)
Dividends paid.................................................................. 5 (68.1) (51.7)
PROCEEDS FROM ISSUE OF SHARES AND OPTIONS....................................... -- 0.1
-------- --------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES...................................... (303.7) (77.1)
-------- --------
Net increase/(decrease) in cash held............................................ (202.6) 176.3
Cash at the beginning of the financial year..................................... 439.9 256.1
Effect of changes in the exchange rate on cash held in foreign currencies at the
beginning of the financial year............................................... 8.1 7.5
-------- --------
Cash at the end of the financial year........................................... 23(a) 245.4 439.9
======== ========
B-76
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2000
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This general purpose financial report has been prepared in accordance with
applicable Accounting Standards, Urgent Issues, Group Consensus Views and the
Corporations Law. It is prepared in accordance with the historical cost
convention, except for certain assets which are noted as at valuation. The
accounting policies adopted are consistent with those of the previous year.
Comparative information is reclassified where appropriate to enhance
comparability.
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are presented as one set of financial
statements and include all entities which comprise the Normandy Mining Limited
consolidated entity, being the parent entity and its controlled entities. There
are no controlled entities in the consolidated entity other than those listed
in Note 27. The effects of all transactions between entities within the
consolidated entity are eliminated in full.
(B) FOREIGN CURRENCIES
Transactions denominated in foreign currencies have been brought to account
at the exchange rates ruling at the time of the transactions. At balance date,
foreign currency receivables and payables are translated at exchange rates
ruling at that date.
Exchange gains and losses and hedging costs arising on contracts entered
into as hedges of specific revenue or expense transactions are deferred until
the date of such transactions at which time they are included in the
determination of such revenues or expenses.
Assets and liabilities of self-sustaining overseas controlled entities are
translated at exchange rates ruling at balance date and any exchange gain or
loss arising on translation is carried directly to a foreign currency
translation reserve.
(C) REVENUE
Gold bullion is taken up as a sale in the period during which it is shipped
from the mine, provided it is either sold or delivered to a gold refinery
within the normal time span. Bullion delivered against forward sales contracts
is accounted for at the contract rate. Base metal concentrate sales are
recognised at estimated sales value when shipped and adjusted for variations in
metal prices, assay, weight and currency. Other sales are taken up when title
has passed.
Gold bullion held at year end is valued at the contract rates for those
hedges it is expected to be delivered into. Base metal concentrate debtors are
valued at the relevant forward contract US dollar rate.
Gains or costs arising upon entry into a hedging transaction intended to
hedge the sale of goods, together with subsequent exchange gains or losses
resulting from those transactions are deferred up to the date of sale and
included in the measurement of the sale.
If the hedging transaction is terminated prior to its maturity date and the
hedged transaction is still expected to occur, deferral of any gains and losses
which arose prior to termination continues and those gains and losses are
included in the measurement of the hedged transaction.
In those circumstances where a hedging transaction is terminated prior to
maturity because the hedged transaction is no longer expected to occur, any
previously deferred gains and losses are recognised in the profit and loss at
the date of termination.
B-77
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
If a hedge transaction relating to a commitment for the sale of goods or
services is redesignated as a hedge of another specific commitment and the
original transaction is still expected to occur, the gains and losses that
arise on the hedge prior to its redesignation are deferred and included in the
measurement of the original sale when it takes place. If the hedge transaction
is redesignated as a hedge of another commitment because the original sale
transaction is no longer expected to occur, the gains and losses that arise on
the hedge prior to its redesignation are recognised in the profit and loss at
the date of the redesignation.
(D) DERIVATIVES
Derivative financial instruments are not recognised in the financial
statements on inception. The costs associated with entering hedge transactions
in respect of commodity sales together with gains or losses to the date of sale
are deferred and included in the measurement of the final sale price.
Additional information in respect of hedging is set out in Note 29.
The amount received or paid under interest rate swaps is recognised as an
adjustment to interest rate expense when the cash flow takes place.
(E) INCOME TAX
Income tax has been brought to account using the liability method of tax
effect accounting. No provision has been made for any taxes on capital gains
which could arise in the event of a sale of certain revalued non-current assets
for the amount at which they are stated in the financial statements as it is
not expected that any such liability will crystallise.
(F) GOODWILL
Goodwill is measured as the excess of the cost of acquisition over the fair
value of the identifiable net assets acquired. Amortisation is provided on a
straight line basis over the period during which the benefits are expected to
arise based on life of mine or over a period of twenty years whichever is the
lesser.
(G) INVENTORIES
Inventories are valued at the lower of cost and net realisable value. Costs
are assigned to inventories on hand by the method most appropriate to each
class of inventory with the majority being valued on an average cost basis.
Costs of production include fixed and variable direct costs and an appropriate
portion of fixed overhead expenditure, depreciation and mine amortisation.
(H) INVESTMENTS
The consolidated entity's interests in companies are carried at the lower of
cost and recoverable amount. Dividend income is recognised in profits when
received, except for associated entities which are accounted for using the
equity method.
(I) JOINT VENTURES
The consolidated entity's interest in the assets and liabilities of joint
venture operations is included under the relevant balance sheet headings.
Interests in joint venture entities are accounted for using the equity method.
Additional information is provided in Notes 25 and 26 respectively.
B-78
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
(J) EXPLORATION AND EVALUATION EXPENDITURE
Exploration and evaluation expenditure incurred by the consolidated entity
is accumulated for each area of interest and recorded as an asset, if either:
(i) it is expected to be recouped through successful development of and
production from the area, or by its sale; or
(ii) significant exploration or evaluation of the area is continuing.
A provision for unsuccessful exploration and evaluation is created against
each area of interest by means of a charge to the profit and loss. The
expenditure incurred in areas of interest located around existing milling
facilities is provided for over the life of the milling facilities. Expenditure
on all other areas of interest is fully provided for as the expenditure is
incurred other than for exploration assets acquired, which are initially
recorded at cost.
The recoverable amount of each area of interest is determined on a bi-annual
basis and the provision recorded in respect of that area adjusted so that the
net carrying amount does not exceed the recoverable amount. For areas of
interest which are not considered to have any commercial value, or where
exploration rights are no longer current, the capitalised amounts are written
off against the provision and any remaining amounts are charged against profit.
(K) DEVELOPMENT PROPERTIES
Where it has been established to the satisfaction of Directors that ore
reserves or mineral resources exist, development expenditure is accumulated as
development properties. No amortisation is provided in respect of development
properties until they are reclassified as mine properties following
commencement of production.
(L) DEPRECIATION AND AMORTISATION
Mine properties are amortised on a units of production basis once production
has commenced. Property, plant and equipment is depreciated using a units of
production basis or a straight line basis over the useful life of the asset.
The units of production method causes rates of depreciation and amortisation to
vary according to the rate at which production has depleted the estimated
future mineable reserves of the respective mines.
(M) MINING COSTS PREPAID AND PROVIDED
Direct expenditure on surface mining is brought to account at the life of
mine ratio of ore to waste for each pit. A prepayment or provision is booked
whenever the stripping ratio for a period differs from the mine plan.
Costs incurred in developing drives in underground mines which are expected
to be used for periods shorter than the mine life are apportioned over the life
of the mine using a ratio of development metres to tonnes of ore reserve. A
prepayment or provision is booked whenever the metres developed for a period
differs from the mine life ratio.
(N) RECOVERABLE AMOUNT OF NON-CURRENT ASSETS
Each reporting period, the recoverable amount of all non-current assets is
assessed.
B-79
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Where the carrying amount of a non-current asset is greater than its
recoverable amount, the asset is revalued down to its recoverable amount. Where
net cash inflows are derived from a group of assets working together, such as
at a mining operation, recoverable amount is determined on the basis of the
relevant group of assets. To the extent that the revaluation decrement reverses
a revaluation increment previously credited to, and still included in the
balance of, the asset revaluation reserve, the decrement is debited directly to
that reserve. Otherwise, the decrement is recognised as an expense in the
profit and loss.
The expected net cash flows included in determining recoverable amounts of
non-current assets are discounted to their present values using a
market-determined, risk-adjusted discount rate. The effect of capital gains tax
has not been taken into account.
(O) MINE COMPLETION COSTS
Provision is made for estimated rehabilitation expenditure, decommissioning
and closure costs using the incremental method on a units of production basis
over the life of the mine from the time production commences. Future total mine
completion costs are estimated annually on an undiscounted basis taking into
account all current environmental and legal requirements and are adjusted on a
prospective basis.
Rehabilitation costs recognised include regarding of waste dumps,
revegetation and erosion and drainage control, in order to allow for
relinquishment of mining titles with no ongoing maintenance costs. Closure
costs recognised include employee redundancy payments and costs incurred in
auctioning remaining spares and consumables. Rehabilitation costs associated
with exploration and evaluation activities are treated as exploration and
evaluation expenditure.
(P) EMPLOYEE ENTITLEMENTS
Provision is made for all known obligations in respect of employees. Annual
leave, long service leave and vested sick leave are provided at the current
rate of pay as per the relevant awards and employee contracts. Provisions for
long service leave commence at the anniversary of three years of service, with
further amounts being provided as the entitlement grows beyond three years. It
is expected that the resultant provision for long service leave will
approximate the present value of the estimated future cash outflows associated
with long service leave.
Additional information in respect of employee entitlements including
ownership based remuneration schemes is provided in Note 33.
B-80
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
2 REVENUE
CONSOLIDATED
----------------
2000 1999
------- -------
A$M A$M
SALES REVENUE
-- precious and base metals, and industrial minerals. 1,323.6 1,356.1
------- -------
OTHER OPERATING REVENUE
Gain on redesignation of gold hedging................... -- 147.7
Proceeds on sale of non-current assets.................. 16.3 14.0
Insurance claims proceeds received...................... 1.5 11.2
Interest revenue........................................ 25.2 31.6
Equity share of joint venture entities' profit (Note 26) 7.4 1.4
Equity share of associates profit/(loss) (Note 28)...... (47.6) 0.8
------- -------
2.8 206.7
------- -------
NON-OPERATING REVENUE
Proceeds on sale of:
-- property, plant and equipment..................... 23.3 159.4
-- investments....................................... 173.4 72.5
Loan forgiveness........................................ -- 8.9
Gain on refinancing of gold debt........................ 1.5 5.4
Other................................................... 17.1 15.8
------- -------
215.3 262.0
------- -------
1,541.7 1,824.8
======= =======
B-81
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
3 OPERATING PROFIT
THE OPERATING PROFIT/(LOSS) BEFORE INCOME TAX HAS BEEN DETERMINED AFTER:
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
CREDITING
Interest revenue................................................... 25.2 31.6
Profit on sale of:
--investments................................................... 2.0 9.7
--property, plant and equipment................................. 6.8 2.8
Net foreign exchange gain.......................................... 0.4 3.1
Deferred hedge gain amortisation................................... 91.4 92.3
CHARGING
Amortisation(i)
--mine properties............................................... 57.9 54.5
--goodwill...................................................... 6.5 5.2
--other......................................................... 1.7 0.8
Depreciation(i)....................................................
--plant and equipment........................................... 74.1 97.2
--land and buildings............................................ 0.5 1.8
----- -----
Total depreciation and amorisation................................. 140.7 159.5
Exploration and evaluation expenditure written off and provided for 46.6 78.0
--less: abnormal items.......................................... -- (7.1)
----- -----
46.6 70.9
Royalties.......................................................... 14.9 14.1
Loss on sale of
--investment.................................................... 0.3 10.3
--property, plant and equipment................................. 2.7 --
Borrowing costs
--interest and finance charges.................................. 82.4 52.4
--less: amount capitalized(ii).................................. (15.7) (4.0)
----- -----
Borrowing costs expensed........................................... 66.7 48.4
Rental expense on operating leases................................. 5.0 4.3
Addition to/(reductions in) provisions for
--Director's entitlements....................................... 1.3 0.2
--employee entitlements......................................... (1.7) (3.3)
--mine completion costs......................................... 17.3 56.7
--doubtful debts................................................ (15.0) 15.5
--other......................................................... 8.0 0.7
B-82
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
CONSOLIDATED
--------------
2000 1999
------ ------
A$M A$M
ABNORMAL ITEMS COMPRISE:
Gain on redesignation on hedging................................................................ -- 147.7
Income tax expense........................................................................... -- (13.5)
Gain on sale of non-current assets.............................................................. 36.6 43.6
Income tax expense........................................................................... -- (4.7)
Write-down in asset carrying values............................................................. (96.0) (149.9)
Income tax benefit........................................................................... -- 33.7
Purchase consideration expenses................................................................. (359.0) --
Provision for mine closure...................................................................... -- (60.0)
Income tax benefit........................................................................... -- 18.6
Provision for doubtful debts.................................................................... -- (21.0)
Income tax benefit........................................................................... -- 7.6
Equity share of abnormal write-downs of associates.............................................. (60.3) --
------ ------
Abnormal loss before tax and outside equity interests........................................... (478.7) (39.6)
Applicable income tax benefit................................................................... -- 41.7
------ ------
Abnormal gain/(loss) before outside equity interests............................................ (478.7) 2.2
Outside equity interests........................................................................ 58.0 --
------ ------
Abnormal gain/(loss) after tax and outside equity interests..................................... (420.7) 2.2
------ ------
AUDITORS' REMUNERATION A$'000 A$'000
---------------------- ------ ------
Remuneration for audit or review of the financial reports of entities in the consolidated entity
--Deloitte Touche Tohmatsu Australia ("DTT Australia")....................................... 748 675
--International associates of DTT Australia.................................................. 547 376
--Other auditor of contolled entities........................................................ 112 85
------ ------
1,407 1,136
Remuneration for other services
--DTT Australia.............................................................................. 382 266
--International associates of DTT Australia.................................................. 32 53
--Other auditors of controlled entities...................................................... 20 --
------ ------
434 319
====== ======
--------
(i) Amortisation and depreciation rates were recalculated during the year to
reflect the increase in mineable reserves. The effect has been to reduce
these expenses by A$27.0 million (1999: a reduction of A$6.2 million).
(ii) The consolidated entity has capitalised A$15.7 million (1999: A$4.0
million) of borrowing costs during the financial year relating to
qualifying assets.
B-83
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
4 INCOME TAX
CONSOLIDATED
-------------
2000 1999
------ -----
A$M A$M
THE AGGREGATE AMOUNT OF INCOME TAX ATTRIBUTABLE TO THE FINANCIAL YEAR DIFFERS FROM THE
AMOUNT CALCULATED ON THE OPERATING PROFIT.
THE DIFFERENCES ARE RECONCILED AS FOLLOWS:
Operating profit before income tax.................................................... (285.4) 112.8
------ -----
Income tax calculated at applicable tax rate.......................................... (102.7) 40.6
TAX EFFECT OF PERMANENT DIFFERENCES
--non-deductible depreciation and amortisation..................................... 3.2 7.8
--adjustment to carrying value of assets........................................... 34.6 22.6
--purchase consideration expensed.................................................. 129.2 --
--equity accounted results......................................................... 14.5 (0.8)
--research and development and investment allowances............................... (0.9) (0.1)
--rebateable dividends............................................................. (3.6) (0.6)
--capital losses recognized........................................................ (45.8) (79.3)
--non-assessable revenue items..................................................... (11.9) (1.3)
--non-deductible exploration....................................................... 0.2 1.0
--other non-deductible items....................................................... 9.4 14.1
------ -----
Income tax adjusted for permanent differences......................................... 26.2 4.0
Tax effect of timing differences not previously recognised............................ 30.5 --
Change in company tax rates from 1 July 2000.......................................... (8.5) --
Losses not recognised/(recognised).................................................... 2.4 (11.0)
------ -----
50.6 (7.0)
Over provision in previous years...................................................... (13.3) (1.7)
------ -----
Income tax (benefit)/expense attributable to operating profit......................... 37.3 (8.7)
====== =====
UNBOOKED FUTURE INCOME TAX BENEFITS
The consolidated entity has unbooked future income tax benefits in respect
of tax losses of A$82.5 million as at 30 June 2000 (1999: A$75.3 million).
The potential future income tax benefit will only be realised if:
(i) the consolidated entity derives future assessable income of a nature
and of an amount sufficient to enable the benefit from the losses and
deductions to be realised;
(ii) the consolidated entity continues to comply with the conditions for
deductibility imposed by the law; and
(iii) no changes in tax legislation adversely affect the consolidated entity in
realising the benefit from the deductions for the losses.
B-84
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
5 DIVIDENDS
PARENT ENTITY
------------
2000 1999
----- -----
A$M A$M
Interim dividend paid (2.5 cents per share)
--Franked at 36 percent..................................................................... 18.3 21.3
--Unfranked................................................................................. 25.2 21.2
----- -----
43.5 42.5
Final dividend declared (3.5 cents per share)
--Franked at 36 percent..................................................................... -- 30.1
--Franked at 34 percent..................................................................... 27.0 --
--Unfranked................................................................................. 34.3 30.0
----- -----
61.3 60.1
Total dividends provided for or paid (6.0 cents per share)..................................... 104.8 102.6
Overprovision arising from shareholders electing to take shares in lieu of cash dividends under
the parent entity's Share Investment Plan.................................................... (10.8) (21.7)
----- -----
94.0 80.9
===== =====
Dividends satisfied by the issue of shares under the Dividend Reinvestment and Share
Investment Plans............................................................................. 35.5 49.3
Dividends paid in cash......................................................................... 68.1 51.7
----- -----
103.6 101.0
===== =====
The aggregate balance of the franking accounts of entities in the
consolidated entity as at 30 June 2000, after adjusting for the effects of
payment of income tax payable and dividends proposed, and franking credits that
the parent entity may be prevented from distributing in the 30 June 2001 year,
is A$11.9 million (1999: A$16.3 million). The portion of this balance available
for members of the parent entity, after allowing for planned payment of
dividends by controlled entities, is A$10.1 million (1999: A$16.0 million).
6 EARNINGS PER SHARE (EPS)
CONSOLIDATED
------------------
2000 1999
------- -------
CENTS CENTS
BASIC EPS (CENTS)
--before abnormal items..................................................... 8.0 6.0
--after abnormal items...................................................... (16.2) 6.1
A$M A$M
------- -------
RECONCILIATION OF EARNINGS USED IN THE CALCULATION OF EARNINGS PER SHARE
Earnings before abnormal items................................................. 138.4 101.7
Abnormal items................................................................. (420.7) 2.1
======= =======
Earnings after abnormal items.................................................. (282.3) 103.8
MILLIONS OF SHARES
------------------
2000 1999
------- -------
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES USED IN THE CALCULATION OF BASIC EPS 1,738.5 1,701.7
B-85
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Diluted earnings per share is not materially different from basic earnings
per share and therefore is not disclosed.
7 CASH
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
Cash........ 152.7 382.5
Bank bills.. 69.4 49.6
Gold bullion 23.3 16.6
----- -----
245.4 448.7
===== =====
8 RECEIVABLES
CURRENT
Trade debtors............................. 28.7 68.3
Provision for doubtful debts.............. -- (0.5)
----- -----
28.7 67.8
----- -----
Deposits in respect of bank guarantees.... 15.9 --
----- -----
Other debtors............................. 80.3 69.0
----- -----
Provision for doubtful debts.............. (0.9) (0.5)
----- -----
79.4 68.5
----- -----
Amounts owing by associated entities...... 49.6 0.5
----- -----
Amounts owing by director-related entities -- 30.0
Provision for doubtful debts.............. -- (8.5)
----- -----
-- 21.5
----- -----
173.6 158.3
===== =====
NON-CURRENT
Amounts owing by associated entities...... 81.5 89.6
Provision for doubtful debts.............. (21.9) (20.6)
----- -----
59.6 69.0
----- -----
Other debtors............................. 164.2 43.2
Provision for doubtful debts.............. (5.6) (5.8)
----- -----
158.6 37.4
----- -----
Amounts owing by director-related entities 14.5 174.0
Provision for doubtful debts.............. (5.0) (12.5)
----- -----
9.5 161.5
----- -----
227.7 267.9
===== =====
B-86
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
9 INVENTORIES
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
ALL INVENTORIES ARE STATED AT COST UNLESS OTHERWISE INDICATED
CURRENT
Stores....................................................... 30.3 36.1
Work in progress
--gold ore stocks......................................... 32.6 33.4
--gold ore stocks at net realisable value................. 1.7 8.8
--industrial minerals..................................... -- 3.4
--base metals............................................. 1.2 0.9
--gold in circuit......................................... 17.9 19.7
--gold in circuit at net realisable value................. -- 5.3
----- -----
53.4 71.5
----- -----
Finished goods
--industrial minerals..................................... -- 25.4
--base metals concentrate................................. 2.9 --
--base metals concentrate at net realisable value......... 13.1 6.4
--other................................................... 4.0 3.8
----- -----
20.0 35.6
----- -----
103.7 143.2
===== =====
NON-CURRENT
Stores....................................................... 4.3 3.5
Work in progress............................................. 21.4 6.2
--gold ore stocks......................................... 0.2 7.1
----- -----
--gold ore stocks at net realisable value................. 21.6 13.3
----- -----
25.9 16.8
===== =====
B-87
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
10 INVESTMENTS
All investments are stated at cost unless otherwise indicated
CURRENT
UNLISTED SHARES
Other corporations......................................... -- 15.9
----- -----
NON-CURRENT
LISTED SHARES
Associated entities (equity accounted)..................... 76.4 200.1
Other corporations......................................... 62.1 59.9
Provision for diminution................................... (10.1) (9.7)
----- -----
52.0 50.2
----- -----
128.4 250.3
----- -----
UNLISTED SHARES
Joint venture entities (equity accounted).................. 370.4 418.5
Other corporations......................................... 30.9 16.6
Provision for diminution................................... (11.6) (6.4)
----- -----
19.3 10.2
----- -----
Investment in mining tenements at Directors' valuation 1995 67.5 67.5
----- -----
457.2 496.2
----- -----
585.6 746.5
----- -----
11 EXPLORATION AND EVALUATION EXPENDITURE
CONSOLIDATED
-------------
2000 1999
------ -----
A$M A$M
Balance brought forward...................... 143.60 125.4
--Expenditure incurred during the year.... 58.5 99.8
--Expenditure written off during the year. (46.6) (78.0)
--Transferred to development properties... (28.4) (14.3)
--Transferred to mine properties.......... (3.2) (10.0)
--Acquisitions and disposals.............. (0.7) 27.5
--Foreign exchange movements.............. 5.8 (6.8)
------ -----
Balance carried forward...................... 129.0 143.6
====== =====
B-88
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
12 DEVELOPMENT PROPERTIES
Balance brought forward................................... 287.0 253.4
--Expenditure incurred during the year................. 62.8 104.4
--Disposals............................................ -- (35.0)
--Acquisitions......................................... 30.4 --
--Transferred from explorations and evaluation......... 28.4 14.3
--Expenditure written off/provided for during the year. (104.0) (29.0)
--Transferred to mine properties....................... -- (12.1)
--Foreign exchange movements........................... 6.3 (9.0)
------ -----
Balance carried forward................................... 310.7 287.0
====== =====
13 PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED
-----------------------------------------------------------------
2000 1999
-------- ------------- --------- -------- ------------- ---------
GROSS ACCUMULATED NET GROSS ACCUMULATED NET
VALUE OF DEPRECIATION/ VALUE VALUE OF DEPRECIATION/ VALUE
ASSETS AMORTISATION OF ASSETS ASSETS AMORTISATION OF ASSETS
-------- ------------- --------- -------- ------------- ---------
A$M A$M A$M A$M A$M A$M
MINING PROPERTY, PLANT AND EQUIPMENT
Land and buildings at cost................. 57.1 (27.3) 29.8 87.9 (30.9) 57.0
Mine properties at cost.................... 1,477.7 (587.7) 890.0 973.7 (559.7) 414.0
Plant and equipment at cost................ 801.4 (411.8) 389.6 926.5 (646.4) 280.1
Capital work in progress................... 38.9 -- 38.9 37.6 -- 37.6
------- -------- ------- ------- -------- -----
2,375.1 (1,026.8) 1,348.3 2,025.7 (1,237.0) 788.7
------- -------- ------- ------- -------- -----
Non-mining property, plant and equipment at
cost..................................... 48.9 (15.0) 33.9 41.5 (15.4) 26.1
------- -------- ------- ------- -------- -----
2,424.0. (1,041.8) 1,382.2 2,067.2 (1,252.4) 814.8
======= ======== ======= ======= ======== =====
B-89
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
14 INTANGIBLES
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
Goodwill at cost................................. 94.2 98.6
Accumulated amortisation......................... (46.7) (44.0)
----- -----
47.5 54.6
----- -----
Larvik Processing Technology at cost............. -- 15.2
----- -----
47.5 69.8
===== =====
15 OTHER ASSETS
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
CURRENT
Prepaid mining costs............................. 58.9 56.9
Prepaid hedging fees............................. 5.2 0.6
Other prepaid expenses........................... 7.9 14.0
Assets held for resale........................... 51.5 --
----- -----
123.5 71.5
===== =====
NON-CURRENT
Future income tax benefit-timing differences..... 86.4 104.6
Prepaid mining costs............................. 94.7 50.0
Purchase price paid in advance................... -- 34.7
Deferred expenses................................ 12.0 19.8
Prepaid hedging fees............................. 20.5 1.4
Prepaid interest................................. 10.2 --
Accrued hedge gains.............................. 37.6 --
Other............................................ 10.0 2.8
----- -----
271.4 213.3
===== =====
16 ACCOUNTS PAYABLE
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
CURRENT
Trade creditors.................................. 65.8 92.8
Other creditors and accruals..................... 94.1 61.6
----- -----
159.9 154.4
===== =====
B-90
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
17 BORROWINGS
CURRENT
UNSECURED
Bank overdraft (ii)................ -- 8.8
Bank loans (ii).................... 11.0 28.0
Gold-denominated debt.............. 2.5 250.2
US dollar convertible bonds (iii).. -- 96.5
Amounts owing to other parties (iv) 10.1 8.6
------- -----
23.6 392.1
------- -----
SECURED
Bank loans (v)..................... 90.0 78.9
------- -----
113.6 471.0
======= =====
NON-CURRENT
UNSECURED
Bank loans (ii).................... 170.0 --
Gold-denominated debt.............. 2.5 5.1
US dollar guaranteed notes (iii)... 875.9 403.2
Amounts owing to other parties (iv) 19.8 28.4
------- -----
1,068.2 436.7
------- -----
SECURED
Bank loans (v)..................... 370.4 86.3
------- -----
1,438.6 523.0
======= =====
Details of the financing facilities of the consolidated entity are as
follows:
AVAILABLE AT USED AT UNUSED AT
BALANCE DATE BALANCE DATE BALANCE DATE
------------ ------------ ------------
2000 1999 2000 1999 2000 1999
----- ----- ----- ----- ----- -----
A$M A$M A$M A$M A$M A$M
Uncommitted short term money market 50.0 50.0 -- -- 50.0 50.0
Unsecured bank loans............... 710.0 760.0 181.0 36.8 529.0 723.2
Secured bank loans................. 460.4 167.1 460.4 165.2 -- 1.9
(I) SHORT TERM MONEY MARKET
The consolidated entity has uncommitted short term money market facilities
from a number of banks. At 30 June 2000 these facilities were undrawn (1999:
undrawn) and have not been redrawn as at the date of this report.
(II) UNSECURED BANK LOANS
Normandy Group Finance Ltd, a wholly owned entity, established a A$700
million committed revolving multi-option facility with a syndicate of banks in
November 1997, which was subsequently renegotiated in November 1999 to A$650
million. The renegotiated facility consists of three tranches. Tranche 1 is a
364 day
B-91
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
facility to a maximum of A$130 million, Tranche 2 is a term facility of two
years to a maximum of A$240 million and Tranche 3 is a term facility of four
years to a maximum of A$280 million. All tranches are at an interest rate
dependent on the currency drawn plus a margin of 0.60 percent. Interest is paid
at the end of each interest period nominated by the borrower, to a maximum of
180 days. As at 30 June 2000, Tranche 1 was undrawn, the amount drawn down
under Tranche 2 was A$60 million and the amount drawn down under Tranche 3 was
A$110 million. As at 30 June 1999 the facility was undrawn.
Normandy NFM Limited, a controlled entity, had a A$50 million one year
committed revolving multi-option facility, subsequently renegotiated in August
2000 for A$25 million and now maturing in May 2001. As at 30 June 2000, A$11.0
million was drawn down under the facility (1999: A$28.0 million). Interest is
paid at an interest rate dependent on the currency drawn plus a margin of 0.7
percent at the end of each interest period nominated by the borrower, to a
maximum of 180 days.
Normandy NFM Limited has a committed short term A$10 million overdraft
facility which at 30 June 2000 was undrawn (1999: A$8.6 million).
The consolidated entity has two unsecured credit facility agreements of
A$12.5 million each, expiring 31 March 2003. At 30 June 2000 these facilities
were undrawn.
(III) US DOLLAR DENOMINATED DEBT
On 1 July 1998, Normandy Finance Limited ("NFL") issued US$100 million of
seven year 7.5 percent and US$150 million of ten year 7.625 percent guaranteed
notes. Interest on the notes is paid semi-annually in arrears. Certain
financial instruments were entered into whereby NFL has agreed to exchange the
US dollar fixed interest amounts payable on the seven and ten year notes, with
the 90 day Australian dollar bank bill rate plus a margin of 1.70 percent and
1.76 percent respectively. Subsequently, the 90 day Australian dollar bank bill
rate in respect of A$100 million of the notes was fixed at an average rate of
5.715 percent for the two year period ending June 2001.
The US$250 million has been recorded at A$403.2 million (1999: A$403.2
million) reflecting the future exchange rate at the time of the hedge
transaction.
In April 1998, Normandy Yandal Operations Limited (formerly Great Central
Mines Limited) issued US$300 million of ten year 8.875 percent senior unsecured
notes. Interest on the notes is paid semi-annually in arrears. Certain
financial instruments were entered into whereby Normandy Yandal Operations
Limited has agreed to exchange US dollar fixed interest amounts payable with
gold interest rate exposure, which is partially fixed and partially variable in
nature. Of the total, US$183.6 million has been swapped into a gold interest
rate exposure, of which half is fixed at 3.87% and half is floating. The
floating rate at 30 June 2000 was 1.49%.
US$65 million of unsecured subordinated convertible bonds were issued in
February 1990. The bonds were convertible at the option of the bond holders on
or after 28 February 1999 up until 13 February 2000, into fully paid ordinary
shares at the rate of 672.875 ordinary Normandy Mining Limited shares for each
US$1,000 in principal amount of bonds. The bonds were redeemed by a wholly
owned entity at their principal amount on 28 February 2000.
(IV) AMOUNTS OWING TO OTHER PARTIES
A controlled entity has recognised a current liability of A$7.5 million
(1999: A$7.5 million) and a non-current liability of A$4.7 million (1999:
A$10.8 million), for the consideration payable to Esso Australia
B-92
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Resources Ltd, for the purchase of that company's interest in the Golden Grove
Joint Venture. The liability has been discounted and is payable in two annual
installments.
(V) SECURED BANK LOANS
Bank loans are secured by registered charges over the land, buildings and
other assets to which the loans relate.
In February 1999 Yandal Gold Holdings Pty Ltd, a controlled entity, entered
into a A$285 million secured term debt facility. At 30 June 2000 the facility
is fully drawn. Interest is payable at the bank bill swap rate plus a margin of
1%.
A controlled entity has a loan facility in respect of the Ovacik mine for
US$40.0 million, established in December 1996, subsequently refinanced in May
1998 and in April 2000. As at 30 June 2000, the facility was fully drawn (1999:
fully drawn), has an interest rate of LIBOR plus 1.0 percent and is due to
mature in October 2000.
A controlled entity has project financing facilities in respect of the
Kasese project totaling US$58.2 million from a number of parties. At 30 June
2000 these facilities were fully drawn (1999: fully drawn to US$66 million),
and are at varying interest rates dependent upon the term of each facility.
18 PROVISIONS
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
CURRENT
Deferred hedge gain............................................. 100.7 100.8
Directors' entitlements......................................... 2.4 1.1
Dividends....................................................... 61.3 60.1
Employee entitlements........................................... 18.3 20.8
Income tax...................................................... 27.4 25.3
Mine completion costs........................................... 32.1 62.2
Other........................................................... 7.6 11.5
----- -----
249.8 281.8
===== =====
NON-CURRENT
Deferred hedge gain............................................. 242.0 333.3
Deferred mining costs........................................... 17.3 17.9
Deferred income tax............................................. 189.3 163.9
Employee entitlements........................................... 9.7 8.9
Mine completion costs........................................... 110.2 62.8
Deferred income................................................. 9.2 --
Other........................................................... 13.3 1.4
----- -----
591.0 588.2
===== =====
B-93
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
19 OTHER LIABILITIES
NON-CURRENT
Deferred exploration liability(i) 81.3 --
Other............................ 6.0 5.8
---- ---
87.3 5.8
==== ===
--------
(i) The consolidated entity has contracted to make payments for exploration
based on the production and exploration results of a controlled entity.
20 ISSUED CAPITAL
PARENT ENTITY
---------------
2000 1999
------- -------
A$M A$M
1,751,558,731 (1999: 1,717,179,710) ordinary shares fully paid 1,155.5 1,130.3
======= =======
During the year the following changes to share capital occurred:
NUMBER
OF SHARES 2000 1999
------------- ------- -------
A$M A$M
Balance at beginning of financial year 1,717,179,710 1,130.3 334.1
Transfer from reserves(i)............. -- -- 765.7
Exercise of unlisted options..........
--1:1.101 basis.................... -- -- 0.1
Exercise of listed options(ii)........ --
--1:1 basis........................ -- -- --
Employee share investment plan issue.. 484,300 0.5 2.5
Dividend Reinvestment Plan issue(iii). 23,427,339 24.7 27.9
Share Investment Plan issue(iii)...... 10,467,382 -- --
------------- ------- -------
Balance at end of financial year...... 1,751,558.731 1,155.5 1,130.3
============= ======= =======
(I) TRANSFER FROM RESERVES
The balance of the Share Premium Reserve (A$761.2 million) and the Capital
Redemption Reserve (A$4.5 million) as at 1 July 1998 were reclassified to Share
Capital in accordance with revisions to the Corporations Law.
(II) LISTED OPTIONS
At 30 June 2000 there were 248,537,609 listed 2001 options on issue. The
2001 options are exercisable at A$2.50 per option on any business day during
the months of January, April, July and October each year, until 30 April 2001.
When exercised, each option entitles the holder to one fully paid ordinary
share in Normandy Mining Limited.
B-94
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
(III) SHARE INVESTMENT AND DIVIDEND REINVESTMENT PLANS
Under the parent entity's dividend alternatives, holders of ordinary shares
may elect to have all or part of their dividend entitlements satisfied by the
issue of new fully paid ordinary shares rather than by being paid in cash.
21 RESERVES
CONSOLIDATED
-----------
2000 1999
---- ------
A$M A$M
Asset revaluation reserve............. 1.9 1.9
Foreign currency translation reserve.. 43.1 26.1
---- ------
45.0 28.0
==== ======
MOVEMENT IN RESERVES
SHARE PREMIUM RESERVE
Balance at beginning of financial year -- 761.2
Transfer to share capital............. -- (761.2)
---- ------
Balance at end of financial year...... -- --
==== ======
Capital redemption reserve
Balance at beginning of financial year................................ -- 4.5
Transfer to share capital............................................. -- (4.5)
---- -----
Balance at end of financial year...................................... -- --
==== =====
Asset revaluation reserve
Balance at beginning of financial year................................ 1.9 --
Opening adjustment for adoption of AASB 1016.......................... -- 1.9
---- -----
Balance at end of financial year...................................... 1.9 1.9
==== =====
Foreign currency translation reserve
Balance at beginning of financial year................................ 26.1 41.4
Net exchange difference on translation of overseas controlled entities 17.0 (15.3)
---- -----
Balance at end of financial year...................................... 43.1 26.1
==== =====
22 OUTSIDE EQUITY INTERESTS
CONSOLIDATED
------------
2000 1999
----- ----
A$M A$M
Issued capital........................ 30.4 46.7
Retained earnings/(accumulated losses) (31.2) 19.3
----- ----
Other reserves........................ 38.2 24.4
===== ====
37.4 90.4
===== ====
B-95
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
23 NOTES TO STATEMENT OF CASH FLOWS
(A) RECONCILIATION OF CASH
For the purpose of the statement of cash flows, cash includes cash on hand,
investments in money market instruments and gold bullion on hand net of
outstanding bank overdrafts. Cash at the end of the financial year, as shown in
the statement of cash flows, is reconciled to the related items in the balance
sheet as follows:
CONSOLIDATED
-----------
2000 1999
----- -----
A$M A$M
Cash.......... 152.7 382.5
Bank bills.... 69.4 49.6
Gold bullion.. 23.3 16.6
Bank overdraft -- (8.8)
----- -----
245.4 439.9
----- -----
(B) FINANCING FACILITIES
Refer to Note 17 for details of the credit standby arrangements and loan
facilities available to the consolidated entity.
(C) NON-CASH FINANCING AND INVESTING ACTIVITIES
During the year, the Big Bell gold operations were sold to New Hampton
Goldfields Limited, with A$11.0 million proceeds received in the form of
ordinary shares in New Hampton Goldfields Limited. In addition, A$40.9 million
of the acquisition of 100% of Normandy Yandal Operations Ltd from Edensor
Nominees Pty Ltd was financed by the conversion of a loan to Edensor into
shares in Normandy Yandal Operations Limited.
B-96
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
(D) RECONCILIATION OF NET CASH INFLOW FROM OPERATING ACTIVITIES TO OPERATING
PROFIT/(LOSS) AFTER INCOME TAX
2000 1999
------ ------
$AM $AM
Operating (loss)/profit after income tax................................................ (322.7) 121.5
Bad and doubtful debts expense.......................................................... 0.3 25.5
Depreciation and amortisation........................................................... 140.7 159.5
Exploration and evaluation written off/provided for..................................... 46.6 78.0
Unrealised foreign exchange gain........................................................ (0.4) (7.7)
Share of equity accounted (profit)/loss................................................. 40.2 (2.2)
Dividends received from associates...................................................... 19.3 8.4
(Gain)/loss on loan forgiveness......................................................... 2.8 (8.9)
Profit on sale of investments........................................................... (2.0) (9.7)
Profit on sale of other non-current assets.............................................. (43.4) (46.4)
Profit on refinancing of gold loans..................................................... (1.5) (5.4)
Gain on redesignation of hedging........................................................ -- (147.7)
Write down in carrying values of assets................................................. 521.0 142.8
Loss on sale of investments............................................................. 0.3 10.3
Changes in net assets and liabilities, net of effects from businesses acquired/disposed:
(Increase)/decrease in receivables..................................................... 21.6 (23.8)
Decrease in inventories................................................................ 15.3 0.9
Increase in future income tax benefit.................................................. (7.6) (29.1)
Increase in other assets............................................................... (39.8) (4.6)
CONSOLIDATED
-------------
2000 1999
------ -----
A$M A$M
Increase/(decrease) in accounts payable........ (44.4) 67.4
Increase/(decrease) in provision for income tax 7.4 (1.1)
------ -----
Decrease in provision for deferred income tax.. (5.3) (30.5)
Decrease in other provisions................... (132.5) (25.2)
------ -----
Net cash in flow from operating activities..... 215.9 272.0
====== =====
(E) BUSINESSES ACQUIRED
During the year, Normandy Yandal Operations Limited (formerly Great Central
Mines Limited) and its controlled entities, and Yandal Gold Holdings Pty Ltd
and its controlled entity were consolidated into the consolidated entity for
the first time. Centenary Gold Mining was acquired during the previous year.
B-97
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Details of the acquisition are as follows:
CONSIDERATION
CONSOLIDATED
-------------
2000 1999
------ -----
$AM $AM
Cash................................. 18.7 44.6
Conversion of loan receivable........ 40.9 --
Deferred exploration liability....... 83.2 --
------ -----
Total................................ 142.8 44.6
------ -----
FAIR VALUE OF NET ASSETS ACQUIRED
Current assets
Cash.............................. 65.1 0.4
Receivables....................... 18.6 0.2
Inventories....................... 19.8 --
Other............................. 3.1 --
Non-current assets
Mine properties................... 563.9 --
Plan and equipment................ 110.4 0.5
Other............................. 61.8 67.2
Current liabilities
Accounts payable.................. (72.0) (3.0)
Non-current liabilities
Borrowings........................ (834.5) (27.6)
Provisions........................ (61.5) --
Other............................. (1.4) --
Foreign currency translation reserve. -- 6.9
------ -----
Net assets acquired.................. (126.7) 44.6
Prior investment..................... (89.5) --
Purchase consideration expensed(i)... 359.0 --
------ -----
Consideration........................ 142.8 44.6
------ -----
CASH (INFLOW)/OUTFLOW FOR ACQUISITION
Cash consideration................... 18.7 44.6
Less: cash balances acquired......... (65.1) (0.4)
------ -----
Net (inflow)/outflow of cash......... (46.4) 44.2
------ -----
--------
(i) This represents the purchase consideration greater than the fair value of
the identifiable net assets acquired and, as the amount does not represent
goodwill, it has been expensed.
(F) BUSINESSES DISPOSED
During the year, the consolidated entity disposed of its Big Bell gold
operations, its 50% interest in Australian Magnesium Investments Pty Ltd and
its interests in various industrial minerals businesses. During the previous
year the consolidated entity disposed of its 25.5% interest in the Goldfields
Gas Transmission Joint Venture, the assets of Normandy Bow River Diamond Mine
Ltd and interests in several controlled entities of Normandy LaSource SA.
B-98
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Details of disposals are as follows:
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
CONSIDERATION
Cash....................................................... 114.6 205.5
Shares..................................................... 11.0 --
Deferred settlement receivable............................. 4.7 --
----- -----
Total...................................................... 130.3 205.5
===== =====
BOOK VALUE OF ASSETS AND LIABILITIES DISPOSED
Current assets
Cash.................................................... 8.7 8.7
Receivables............................................. 19.2 12.8
Inventories............................................. 34.6 4.0
Non-current assets
Receivables............................................. -- 7.1
Investments............................................. 0.2 39.2
Property, plant and equipment........................... 60.7 121.5
Other................................................... 33.7 26.4
Current liabilities
Accounts payable........................................ (6.6) (29.4)
Borrowings.............................................. -- (5.2)
Provisions.............................................. (20.7) (0.5)
Non-current liabilities
Borrowings.............................................. -- (14.2)
Provisions.............................................. (6.9) (8.1)
Outside equity interest.................................... -- 1.8
----- -----
Net assets disposed........................................ 122.9 164.1
Net profit on disposal..................................... 7.4 32.7
----- -----
Consideration.............................................. 130.3 196.8
===== =====
CASH INFLOW FOR DISPOSAL
Cash consideration......................................... 114.6 205.5
Less: cash balances disposed............................... (8.7) (8.7)
----- -----
Net inflow of cash......................................... 105.9 196.8
===== =====
(G) CASH NOT AVAILABLE
A balance of US$20.0 million (1999: US$20.0 million) is being held as
security in respect of a project loan facility of a controlled entity.
B-99
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
24 SEGMENT INFORMATION
Details of industry segments are as follows:
SALES REVENUE TOTAL ASSETS SEGMENT PROFIT
---------------- --------------- -------------
2000 1999 2000 1999 2000 1999
------- ------- ------- ------- ------ -----
$M $M $M $M $M $M
Gold..................... 936.0 914.6 2,445.9 2,214.2 198.3 115.9
Metals................... 178.1 231.6 428.8 456.4 26.6 12.0
Industrial minerals...... 179.7 179.0 101.0 326.3 11.8 9.7
Power and gas............ 62.5 64.0 44.5 43.3 3.1 3.7
Finance and corporate.... -- -- 606.0 357.1 (101.4) (39.6)
------- ------- ------- ------- ------ -----
1,356.3 1,389.2 3,626.2 3,397.3 138.4 101.7
Intersegment eliminations (32.7) (33.1) -- -- -- --
Abnormal items........... -- -- -- -- (420.7) 2.1
------- ------- ------- ------- ------ -----
Consolidated total....... 1,323.6 1,356.1 3,626.2 3,397.3 (282.3) 103.8
======= ======= ======= ======= ====== =====
Electricity sales from the power and gas segment to the gold segment of
$32.7 million (1999: $33.1 million) are on normal commercial terms.
DETAILS OF GEOGRAPHICAL SEGMENTS ARE AS FOLLOWS:
Australia................ 1,187.1 1,217.0 2,564.8 2,202.3 157.5 134.0
Asia..................... 23.9 23.8 5.8 27.0 3.0 (7.0)
Europe................... 46.5 46.4 358.2 315.7 (41.4) (36.4)
New Zealand.............. 43.8 46.7 86.6 83.3 3.6 6.2
Africa................... 20.3 22.2 246.7 415.8 11.3 2.7
North and South America.. 2.0 -- 364.1 353.2 4.4 2.2
------- ------- ------- ------- ------ -----
1,323.6 1,356.1 3,626.2 3,397.3 138.4 101.7
Intersegment eliminations -- -- -- -- -- --
Abnormal items........... -- -- -- -- (420.7) 2.1
------- ------- ------- ------- ------ -----
Consolidated total....... 1,323.6 1,356.1 3,626.2 3,397.3 (282.3) 103.8
======= ======= ======= ======= ====== =====
B-100
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
25 JOINT VENTURE OPERATIONS
THE CONSOLIDATED ENTITY'S INTERESTS IN MATERIAL UNINCORPORATED JOINT VENTURE
OPERATIONS ARE AS FOLLOWS:
NAME OF JOINT VENTURE OPERATION % INTEREST
------------------------------- ----------
2000 1999
---- ----
KCGM
--Fimiston/Paringa Joint Venture........................ 50.0 50.0
--Kalgoorlie Mining Associates Joint Venture............ 50.0 50.0
--Mt Percy Joint Venture................................ 50.0 50.0
Boddington Gold Mine Joint Venture......................... 44.4 44.4
Goldfields Power Joint Venture............................. 50.0 50.0
Goldfields Power Joint Venture Number Two.................. 50.0 50.0
Kalgoorlie Tailings Retreatment Project Joint Venture...... 90.0 90.0
Martha Hill Joint Venture.................................. 28.4 28.4
Pajingo Joint Venture...................................... 50.0 50.0
==== ====
These joint venture operations are involved in exploration and mining,
except for the Goldfields Power Joint Ventures which are involved in the
operation of a power station.
The consolidated entity's interest in assets employed in the joint venture
operations and in other exploration joint ventures which individually are not
material, are included in the balance sheet under the following classifications:
2000 1999
----- -----
A$M A$M
CURRENT ASSETS
Cash....................................................... 6.4 12.7
Receivables................................................ 29.5 25.2
Inventories................................................ 45.3 46.1
Other...................................................... 9.9 25.2
----- -----
91.1 109.2
===== =====
NON-CURRENT ASSETS
Receivables................................................ 0.7 0.7
Inventories................................................ 10.4 14.7
Exploration and evaluation expenditure..................... 40.4 30.5
Property, plant and equipment.............................. 340.7 278.4
Other...................................................... 21.7 15.7
----- -----
413.9 340.0
----- -----
TOTAL ASSETS............................................... 505.0 449.2
===== =====
SHARE OF CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The consolidated entity's share of joint venture operations capital
expenditure commitments at balance date was A$12.8 million (1999: A$67.9
million) and of contingent liabilities was A$15.7 million (1999: A$2.0 million).
B-101
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
26 JOINT VENTURE ENTITIES
THE CONSOLIDATED ENTITY HAS A SIGNIFICANT NON-CONTROLLING INTEREST IN THE
FOLLOWING JOINT VENTURE ENTITIES:
BENEFICIAL
NAME OF JOINT VENTURE ENTITY AND PRINCIPAL ACTIVITY INTEREST
--------------------------------------------------- ----------
2000 1999
---- ----
% %
Australian Magnesium Investments Pty Ltd(i)
Investment................................................... 50.0 50.0
BRGM Perou SAS(ii)
Mining Investment............................................ 49.0 49.0
Campagnie Miniere Internationale Or SA(ii)
Mining Investment............................................ 49.0 49.0
Omya Southern Pty Ltd(iii)
Processing and Distribution of Industrial Minerals........... -- 50.0
TVX Normandy Americas (Canada) Inc.(ii)
Gold Mining.................................................. 49.9 49.9
TVX Normandy Americas (Cayman) Inc.(ii)
Gold Mining.................................................. 49.9 49.9
Yandal Gold Holdings Pty Ltd(iv)
Mining Investment............................................ -- 49.9
==== ====
--------
(i) Subsequent to year end Australian Magnesium Corporation Limited ("AMC"),
formerly Queensland Metals Corporation Limited, completed the acquisition
of NIM Magmetal Limited, a controlled entity that held the investment in
Australian Magnesium Investments Pty Ltd. As consideration the consolidated
entity received shares in AMC such that the consolidated entity's
percentage shareholding in AMC is 62%.
(ii) Balance date 31 December.
(iii) During the year the consolidated entity disposed of its interest in this
entity.
(iv) During the year this entity was consolidated into the consolidated entity
for the first time.
B-102
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
EQUITY ACCOUNTED INVESTMENT
CONSOLIDATED
------------------
2000 1999
------------ -----
A$M A$M
Carrying amount at the beginning of the financial year....... 418.5 193.8
Share of operating profits/(losses) after income tax......... 7.4 1.4
Share of dividend income..................................... (19.3) (4.0)
Provision for diminution..................................... -- (8.0)
Adjustment on adoption of equity accounting as at 1 July 1998 -- (6.0)
Acquisition of additional interest in joint venture entities. 2.1 294.1
Disposal of interest in joint venture entities............... (38.3) (52.8)
----- -----
Carrying amount at the end of the financial year............. 370.4 418.5
===== =====
CONSOLIDATED
------------
2000
------------
A$M
SHARE OF ASSETS AND LIABILITIES
Current assets............................................... 89.8
Non-current assets........................................... 321.5
Current liabilities.......................................... 52.8
Non-current liabilities...................................... 53.9
SHARE OF OPERATING PROFIT
Operating revenue............................................ 171.6
Operating expenses........................................... 162.5
-----
Operating profit............................................. 9.1
Income tax attributable to operating profit.................. 1.7
-----
Operating profit after income tax............................ 7.4
Profit on extraordinary items after income tax............... --
-----
Operating profit and extraordinary items after income tax.... 7.4
=====
SHARE OF RESERVES
Accumulated losses
at the beginning of the financial year.................... (10.4)
at the end of the financial year.......................... (0.3)
Asset revaluation reserve
at the beginning of the financial year.................... 1.9
at the end of the financial year.......................... 1.9
B-103
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
27 CONTROLLED ENTITIES
Details of controlled entities are shown below. For entities where the
parent entity has less than 50 percent ownership, control is determined through
the capacity to dominate decision making in relation to the financial and
operating policies of the entity.
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
PARENT ENTITY
Normandy Mining Limited.......................... Aust
WHOLLY OWNED ENTITIES OF NORMANDY MINING LIMITED
ACM (New Zealand) Ltd............................ NZ
ACM Exploration Pty Ltd(b)....................... Aust
ACM Gold Pty Ltd(c).............................. Aust
ACM Mines Pty Ltd(b)............................. Aust
Armada Resources Pty Ltd(b)...................... Aust
Ausdev Investments Pty Ltd(b).................... Aust
Australian Consolidated Minerals Pty Ltd......... Aust
Australian Metals Corporation Pty Limited(e)..... Aust
Autin Investments BV............................. Netherlands
Aztec Finance Pty Ltd(b)......................... Aust
Aztec Mining Company Ltd(f)...................... Aust
Aztec Nominees Pty Ltd(b)........................ Aust
Bardini Pty Ltd(b)............................... Aust
Big Bell Mines Pty Ltd(b)........................ Aust
Blackhill Minerals Ltd........................... NZ
Clave Pty Ltd(b)................................. Aust
Clynton Court Pty Limited(e)..................... Aust
Commercial Minerals Beteiligungs-gesellschaft mbH Germany
Dafrico (Overseas) Ltd(e)........................ Cyprus
Eagle Mining Pty Limited(e)...................... Aust
Eurogold Madencilik AS........................... Turkey
Gastro Cl(e)..................................... Ivory Coast
GMK Finance Pty Ltd(c)........................... Aust
GMK Investments Pty Ltd.......................... Aust
Golden Grove Group Investment Holdings Pty Ltd(b) Aust
Golden Grove Group Investment Unit Trust......... Aust
Great Central Holdings Pty Ltd(e)................ Aust
Great Central Investments Pty Ltd(e)............. Aust
Grillo Zincoll GmbH.............................. Germany
Hampton Areas Australia Pty Ltd(b)............... Aust
Hampton Gold Mining Areas Limited................ UK
Hampton Jubilee Pty Ltd(b)....................... Aust
Hunter Resources Pty Limited(e).................. Aust
Kalgoorlie Lake View Pty Ltd..................... Aust
La Source Development SAS........................ France
Lachlan Zinc Pty Ltd (c)......................... Aust
B-104
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
Larvik Pigment (Asia Pacific) Sdn Bhd...... Malaysia
Larvik Pigment (Australia) Limited......... Aust
Larvik Pigment (Norway) AS................. Norway
Linfast Pty Ltd(b)......................... Aust
Macapa Pty Ltd(b).......................... Aust
Martha Hill Gold Mines Ltd................. NZ
Matlock Castellano Pty Limited(e).......... Aust
Matlock Descanso Pty Limited(e)............ Aust
Matlock Mining Pty Limited(e).............. Aust
Metal Traders Australasia Pty Ltd(b)....... Aust
Metals Exploration Pacific Pty Ltd(b)...... Aust
Millmerran Coal Pty Ltd(b)................. Aust
Minera Normandy Argentina SA............... Argentina
Minera Normandy Chile Limitada............. Chile
Murchison Zinc Pty Ltd..................... Aust
National Shareholder Services Pty Ltd(b)... Aust
NGF Ltd(c)................................. Cayman Is
Nicron Resources (US) Pty Ltd(b)........... Aust
NIM Australia Pty Ltd...................... Aust
NIM Magmetal Pty Ltd(h).................... Aust
NIM Overseas Pty Ltd....................... Aust
Norkal Pty Ltd............................. Aust
Normandie Service SAS...................... France
Normandy ACM Management Pty Ltd(b)......... Aust
Normandy ACM Pty Ltd....................... Aust
Normandy Americas Holding Limited(e)....... Canada
Normandy Asia Pty Ltd(b)................... Aust
Normandy Asia (Philippines) Inc............ Philippines
Normandy Boddington Holdings Pty Ltd....... Aust
Normandy Boddington Investments Pty Ltd.... Aust
Normandy Boddington Pty Ltd................ Aust
Normandy Bow River Diamond Mine Ltd........ Aust
Normandy Capital Group Pty Ltd(c).......... Aust
Normandy Carrington Pty Ltd(b)............. Aust
Normandy Cayman Hold Co Inc(e)............. Cayman Is
Normandy Central Pty Ltd(b)................ Aust
Normandy Chile Holdings.................... Cayman Is
Normandy Company (Malaysia) Sdn Bhd........ Malaysia
Normandy Consolidated Gold Holdings Pty Ltd Aust
Normandy Exploration Pty Ltd(c)............ Aust
Normandy Finance Limited................... Aust
Normandy French Holdings SAS............... France
Normandy GMK Holdings Pty Ltd.............. Aust
Normandy Gold Exploration Pty Ltd(b)....... Aust
Normandy Gold Holdings Pty Ltd............. Aust
B-105
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
Normandy Gold Investments Pty Ltd(b)......... Aust
Normandy Gold Management Pty Ltd(b).......... Aust
Normandy Gold Services Pty Ltd(b)............ Aust
Normandy Gold Treasury Pty Ltd............... Aust
Normandy Golden Grove Operations Pty Ltd..... Aust
Normandy Group Finance Limited............... Aust
Normandy Group Gold Pty Ltd(b)............... Aust
Normandy Group Searches Pty Ltd(b)........... Aust
Normandy Group Trading Pty Ltd(b)............ Aust
Normandy GRPL Pty Ltd(b)..................... Aust
Normandy Holdings BV(e)...................... Netherlands
Normandy Insurance Pty Ltd................... Singapore
Normandy International Exploration Pty Ltd(b) Aust
Normandy International Group BV.............. Netherlands
Normandy International Holdings Pty Ltd...... Aust
Normandy Investments BV(e)................... Netherlands
Normandy Kaltails Pty Ltd.................... Aust
Normandy Latin America Holdings Inc.......... Cayman Is
Normandy Latin American Inc.................. Canada
Normandy LaSource Kazakstan BV............... Netherlands
Normandy LaSource SA......................... France
Normandy Lore Pty Ltd(b)(c).................. Aust
Normandy Metals Pty Ltd(c)................... Aust
Normandy Mildite Pty Ltd(b).................. Aust
Normandy Minerals Pty Ltd(c)................. Aust
Normandy Mining Finance Pty Ltd(c)........... Aust
Normandy Mining Holdings Pty Ltd............. Aust
Normandy Mining Investments Pty Ltd(b)....... Aust
Normandy Mining Kazakstan Pty Ltd(b)......... Aust
Normandy Mining Services (Canada) Inc........ Canada
Normandy Mining Services Pty Ltd............. Aust
Normandy Mt Keith Pty Ltd(b)................. Aust
Normandy NGL Holdings Pty Ltd................ Aust
Normandy Overseas Holding Company Sdn Bhd.... Malaysia
Normandy Pacific Energy Pty Ltd(c)........... Aust
Normandy Pacific Pty Ltd(c).................. Aust
Normandy Pajingo Pty Ltd..................... Aust
Normandy Pastoral Pty Ltd(b)................. Aust
Normandy Pipelines Finance Pty Ltd(b)........ Aust
Normandy Pipelines Pty Ltd................... Aust
Normandy Power Pty Ltd....................... Aust
Normandy PT Pty Ltd(b)....................... Aust
Normandy Resources Ltd....................... UK
Normandy Shelf (No. 1) Pty Ltd(b)............ Aust
Normandy Spain Holdings SL(e)................ Spain
B-106
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
COUNTRY OF
ENTITY INCORPORATION/FORMATION
------ -----------------------
Normandy Tennant Creek Pty Ltd................ Aust
Normandy Treasury Pty Ltd(c).................. Aust
Normandy Wiluna Gold Pty Ltd(c)(e)............ Aust
Normandy Wiluna Metals Pty Ltd(c)(e).......... Aust
Normandy Wiluna Mines Pty Ltd(c)(e)........... Aust
Normandy Woodcutters Pty Ltd(c)............... Aust
Normandy Wownaminya Pty Ltd................... Aust
Normandy Yandal Operations Limited(c)(e)...... Aust
North Kalgurli Mines Pty Ltd.................. Aust
NP Kalgoorlie Pty Ltd......................... Aust
Oberon Oil Pty Ltd(b)......................... Aust
Orelia Pty Ltd(b)............................. Aust
Oremet Pty Ltd(b)............................. Aust
Pacific Minerals &Metals Pty Ltd(c)........... Aust
Pan Ocean Finance Pty Ltd(b).................. Aust
Pan Ocean Resources Pty Ltd................... Aust
Paringa Mining and Exploration Company Limited UK
Perpleks Pty Ltd.............................. Aust
Petrocarb Exploration Pty Ltd(c).............. Aust
Philip Creek Pastoral Co Pty Ltd(b)........... Aust
Posor Pty Ltd(b).............................. Aust
Posdale Pty Ltd(b)............................ Aust
PT Normandy Indonesia......................... Indonesia
Quotidian No. 117 Pty Ltd(e).................. Aust
Ranas Bruks AB................................ Sweden
Sanworth Pty Ltd(b)........................... Aust
Sater Pty Ltd(b).............................. Aust
Sharevest Pty Ltd(b).......................... Aust
Shenreef Pty Ltd(b)........................... Aust
Tennant Creek Pastoral Co Pty Ltd(b).......... Aust
Utal Pty Ltd(b)............................... Aust
Waihi Gold Mining Company Ltd................. NZ
Welcome Gold Mines Ltd........................ NZ
Wirralie Gold Mines Pty Ltd................... Aust
Yandal Gold Pty Ltd(e)........................ Aust
Yandal Gold Holdings Pty Ltd(e)............... Aust
OTHER
Martha Holdings Limited....................... NZ
Waihi Financing Limited....................... NZ
Waihi Resources Limited....................... NZ
Waihi Mines Limited........................... NZ
B-107
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
OWNERSHIP %
COUNTRY OF -----------
PARTLY OWNED* ENTITY INCORPORATION/FORMATION 2000 1999
-------------------- ----------------------- ----- -----
Banff Resources Ltd..................................... Canada 85.6 85.6
Kasse Cobalt Company Limited............................ Uganda 63.0 63.0
Centenary Gold Mining Limited........................... Ghana 92.0 54.0
Companie Mineral LJB Normandy Peru SA................... Peru 49.0 49.0
Comstaff Proprietary Limited(b)......................... Aust 81.4 81.4
Golden Ridge Resources Ltd.............................. Ghana 80.0 40.0
GPS Finance (No2) Pty Ltd(b)............................ Aust 66.7 66.7
GPS Finance Pty Ltd(b).................................. Aust 66.6 66.6
Hampton Australia Limited(a)(d)......................... Aust 100.0 100.0
Kentau Exploration and Mining Co........................ Kazakstan 61.0 61.0
LaSource Bolivia Ltd.................................... Bolivia 99.0 99.0
Martha Mining Limited................................... NZ 33.5 33.5
Mayflower Gold Mines Pty Ltd............................ Aust 80.0 80.0
Minera LaSource Peru SA(a)(f)........................... Peru 100.0 100.0
Minera LaSource Resources Ltd(e)........................ UK 99.9 99.9
Normandy Mt Leyshon Limited............................. Aust 76.4 76.4
Baletto Pty Limited(b).................................. Aust 100.0 100.0
Normandy NFM Limited.................................... Aust 84.9 81.9
NP Finance (No2) Pty Ltd(b)............................. Aust 66.7 66.7
NP Finance Pty Ltd(b)................................... Aust 66.6 66.6
Sociedade de Exploracao de Recursos Minieros Limitada(a) Portugal 100.0 100.0
Societe des Mines D'lty................................. Ivory Coast 51.0 51.0
Thracean Gold Mining.................................... Greece 80.0 80.0
--------
* Ownership interest refers to the ownership interest held by the parent entity
as listed immediately above the controlled entity.
(a) Ownership percentage has been rounded up to 100 percent.
(b) These companies are classified as 'small' proprietary companies under
the Corporations Law and, accordingly, are relieved from the requirement
to prepare audited financial reports under the Corporations Law.
B-108
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
(c) Entities which underwent a change of name during the year:
ACM Gold Limited to ACM Gold Pty Ltd.
Bounty Gold Mine Pty Ltd to Normandy Lore Pty Ltd
GMK Finance Limited to GMK Finance Pty Ltd
Great Central Mines Limited to Normandy Yandal Operations Limited
Lachlan Zinc NL to Lachlan Zinc Pty Ltd
Normandy Capital Group Limited to Normandy Capital Group Pty Ltd
Normandy Exploration Limited to Normandy Exploration Pty Ltd
Normandy Metals Limited to Normandy Metals Pty Ltd
Normandy Minerals Limited to Normandy Minerals Pty Ltd
Normandy Mining Finance Limited to Normandy Mining Finance Pty Ltd
Normandy Pacific Energy Limited to Normandy Pacific Energy Pty Ltd
Normandy Pacific Limited to Normandy Pacific Pty Ltd
Normandy Peru Holdings Limited to NGF Limited
Normandy Treasury Limited to Normandy Treasury Pty Ltd
Normandy Woodcutters Limited to Normandy Woodcutters Pty Ltd
Pacific Minerals & Metals Limited to Pacific Minerals & Metals Pty Ltd
Petrocarb Exploration N.L. to Petrocarb Exploration Pty Ltd
Wiluna Gold Pty Ltd to Normandy Wiluna Gold Pty Ltd
Wiluna Metals Pty Ltd to Normandy Wiluna Metals Pty Ltd
Wiluna Mines Pty Ltd to Normandy Wiluna Mines Pty Ltd
--------
(d) At the date of this report, the entity is in members' voluntary liquidation
although the consolidated entity's interest in this entity as at 30 June
2000 is still 99.97 percent.
(e) During the year the economic entity acquired the following entities:
PROPORTION
OF SHARES
DATE OF ACQUIRED
ENTITY ACQUIRED: ACQUISITION A$M %
---------------- ----------- ---- ----------
Gatro Cl..................................... 1.7.99 2.2 100.0
Dafrico (Overseas) Ltd....................... 20.3.00 7.6 100.0
Great Central Mines Limited.................. 5.4.00 (I) 72.2
Australian Metals Corporation Pty Limited
Clynton Court Pty Limited
Eagle Mining Pty Limited
Great Central Holdings Pty Limited
Great Central Investments Pty Limited
Hunter Resources Pty Limited
Matlock Descanso Pty Limited
Mattock Castellano Pty Limited
Mattock Mining Pty Limited
Quotidian No. 117 Pty Limited
Wiluna Gold Pty Ltd
Wiluna Metals Pty Ltd
Wiluna Mines Pty Ltd
Normandy Americas Holdings Limited........... 1.7.99 -- 100.0
Normandy Cayman Hold Co Inc.................. 1.7.99 -- 100.0
Normandy Holdings BV......................... 1.7.99 -- 100.0
Normandy Investments BV...................... 1.7.99 -- 100.0
Normandy LaSource Resources Ltd.............. 1.7.99 -- 99.9
Normandy Spain Holdings SL................... 1.7.99 -- 100.0
Yandal Gold Holdings Py Ltd.................. 5.4.00 (II) 50.1
Yandal Gold Pty Ltd..........................
======= ==== =====
B-109
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
--------
Results are included from the date of acquisition.
(i) The additional 72.2% interest in the Great Central Mines Limited group
was acquired for consideration of A$414.0 million, comprising a A$271.2
million investment by a controlled entity of Yandal Gold Holdings Ply
Ltd and the A$142.8 million consideration paid by the consolidated
entity to gain control of Great Central Mines Limited and Yandal Gold
Holdings Pty Ltd.
(ii) These companies were acquired for a total cost of A$1.5 million.
(f) As at the date of this report, the entity is in members' voluntary
liquidation.
(g) During the year the economic entity disposed of the following entities:
PROFIT
ON REMAINING
DATE OF DISPOSAL INTEREST
ENTITY DISPOSED: DISPOSAL A$M HELD %
---------------- -------- -------- ---------
Cheni Resources Inc................... 26.2.00 4.0 --
Commercial Minerals (Malaysia) Sdn Bnd 30.6.00 (i) --
Commercial Minerals Asia Pte Ltd...... 30.6.00 (i) --
Commercial Minerals Limited........... 30.6.00 (i) --
Commercial Minerals Magnetite Ltd..... 30.6.00 (i) --
Commercial Minerals Talc Pty Ltd...... 30.6.00 (i) --
Normandy Industrial Minerals Limited.. 30.6.00 (i) --
Norox Mining Company Limited.......... 8.10.99 -- --
Talas Gold Company....................
Perth Office Unit Trust............... 18.1.00 0.5 --
======= === ==
-----
(i) These companies were disposed of for a total profit on sale of A$10.1
million.
(h) NIM Magmetal Pty Ltd was sold subsequent to year end (refer Note 26)
B-110
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
28 ASSOCIATED ENTITIES
THE CONSOLIDATED ENTITY HAS A SIGNIFICANT NON-CONTROLLING INTEREST IN THE
FOLLOWING ENTITIES:
BENEFICIAL CARRYING
INTEREST INTEREST
---------- ----------
NAME OF ASSOCIATED ENTITY ENTITY AND PRINCIPAL ACTIVITY 2000 1999 2000 1999
------------------------------------------------------- ---- ---- ---- -----
% % A$M A$M
Normandy Yandal Operations Limited (i) (ii)......
--GoldMining and Exploration..................... -- 27.8 -- 128.2
Australian Magnesium.............................
Corporation Limited (iii)........................
--Mining of Industrial Minerals.................. 36.9 36.9 76.4 71.9
---- ---- ---- -----
76.4 200.1
==== ==== ==== =====
--------
(i) Formerly Great Central Mines Limited.
(ii) During the year, this entity was consolidated into the consolidated entity
for the first time.
(iii) Formerly Queensland Metals Corporation Limited.
CONSOLIDATED ENTITY'S SHARE OF RESULTS ATTRIBUTABLE TO ASSOCIATES:
CONSOLIDATED
-------------
2000 1999
------ -----
A$M A$M
Operating profit before abnormal items and income tax............................... 5.5 8.2
Abnormal items...................................................................... (71.7) --
------ -----
Operating profit/(loss) before income tax........................................... (66.2) 8.2
Income tax (expense)/benefit........................................................ 18.6 (7.4)
------ -----
Operating profit/(loss) after income tax............................................ (47.6) 0.8
====== =====
Share of post-acquisition accumulated losses attributable to associates:
Accumulated losses attributable to associates at the beginning of the financial year (63.5) (59.9)
Share of net profit/(loss) of associates............................................ (47.6) 0.8
Dividends from associates........................................................... -- (4.4)
Share of retained earnings on consolidation......................................... 85.8
------ -----
Losses attributable to associates at the end of the financial year.................. (25.3) (63.5)
====== =====
Movements in carrying amounts of investments in associates:
Carrying amount at the beginning of the financial year.............................. 200.1 249.5
Acquisitions at cost................................................................ 71.8 14.1
Former associates now consolidated.................................................. (147.9) --
Share of operating profits/(losses) after income tax................................ (47.6) 0.8
Dividend income..................................................................... -- (4.4)
Adjustment on adoption of equity accounting as at 1 July 1998....................... -- (59.9)
Carrying amount at the end of the financial year.................................... 76.4 200.1
====== =====
Share of associates' contingent liabilities:
Guarantees.......................................................................... 0.8 3.9
====== =====
Share of associates' expenditure commitments:
Capital expenditure................................................................. 0.2 15.0
Non-cancellable operating leases.................................................... 0.1 0.5
Exploration and mineral leases...................................................... 0.1 115.3
Other commitments................................................................... 5.1 13.7
------ -----
5.5 144.5
====== =====
SUMMARIZED FINANCIAL POSITION OF ASSOCIATES:
CONSOLIDATED
- --------------
2000 1999
$M $M
----- -------
Net profits/(losses) after income tax (17.8) 12.4
Assets............................... 189.7 1,266.5
Liabilities.......................... 73.7 737.2
----- -------
B-111
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
29 FINANCIAL INSTRUMENTS
(A) OBJECTIVES OF DERIVATIVE FINANCIAL INSTRUMENTS
The consolidated entity employs derivative financial instruments, including
forward sales contracts, option contracts, swaps and forward rate agreements to
manage risk emanating from actual exposures to commodity price risk, foreign
exchange risk and interest rate risk. The consolidated entity does not trade
derivative financial instruments.
(B) GOLD HEDGING
The consolidated entity maintains hedging positions to provide certainty
over future cash flows and protect revenue against periods of falling prices.
As at 30 June 2000, the consolidated entity had committed to the following
types of hedging contracts:
FORWARD SALES CONTRACTS
Gold forward sale contracts outstanding are of two types--outright forwards
with a floating gold leasing rate and short term rolling contracts.
Under an outright forward the forward price for the gold sale is fixed at
the time of entering into the contract. Gold leasing fees are charged for the
life of the contract and are set on a periodic basis at the discretion of the
consolidated entity. The net price realised is the fixed contract price net of
accrued gold leasing fees (paid at maturity of the contract).
Under a short term rolling contract a spot transaction has been entered into
and is being rolled periodically, with the new contract price being calculated
on a net contango basis at each maturity date.
The 90 day gold lease rate and the 12 month gold lease rate at 30 June 2000
were 0.88% and 1.51% respectively (1999: 1.47% and 1.90%). Over the 12 months
to 30 June 2000 the 90 day lease rate had been in the range of 0.62% to 9.14%
(1999: 0.71% to 1.85%) and averaged 1.87% (1999: 1.06%) and the 12 month lease
rate has been in the range 1.30% to 6.56% (1999: 1.42% to 2.05%) and averaged
2.29% (1999: 1.66%).
The consolidated entity normally settles gold forward sale contracts by
delivery of the underlying commodity.
OPTIONS
If exercised, gold put options are normally settled by delivery of gold.
FORWARD RATE AGREEMENTS
Forward rate agreements are used to fix future gold leasing rate exposures
resulting from the outright forward positions described above. The agreements
swap floating gold leasing rates for fixed rates with the transaction net
settled at maturity in gold ounces.
B-112
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
(C) BASE METALS HEDGING
Outright forward contracts and participating forward contracts have been
entered into by the consolidated entity. Participating forwards enable
unlimited upside participation in prices above the contract price for 80
percent of the quantity of the forward.
FORWARD SALES CONTRACTS
Base metals contracts are net settled against the average price of the
pricing month of the physical shipment (in US dollars). A net amount is paid or
received by the consolidated entity.
FOREIGN EXCHANGE CONTRACTS
Both outright forward sales contracts and option contracts are entered into
to hedge US dollar receipts associated with base metals activities.
OPTIONS
If exercised, base metals put and call options are net settled against
monthly market averages.
The costs of entering into these contracts and any realised or unrealised
gains or losses are deferred until the underlying shipment occurs. The gains
and losses deferred as at balance date and the periods to which they relate are
set out in the table.
(D) HEDGING OF OTHER COMMITMENTS DENOMINATED IN FOREIGN CURRENCIES
Contracts to purchase and sell foreign exchange are entered into to hedge
certain commitments denominated in foreign currencies.
(E) CREDIT RISK
The consolidated entity is exposed to credit related losses in the event of
non-performance by counterparties (banks) with respect to the financial
instruments; however exposures to individual counterparties are limited in
accordance with policy set by the Board.
The maximum credit risk on financial assets which have been recognised on
the balance sheet, other than investments in shares, is generally the carrying
amount of the asset.
For off balance sheet financial assets which are deliverable, including
derivatives, credit risk also arises from the potential failure of
counterparties to meet their obligations under the respective contracts at
maturity. A material exposure arises from gold hedging and the consolidated
entity is exposed to loss in the event that counterparties fail to settle on
contracts which are favourable to the consolidated entity. Unrealised gains on
these contracts, net of master netting agreements, at balance date are A$73.3
million (1999: A$559.1 million). In order to mitigate these risks, the Board
has approved a list of banks as appropriate counterparties, all rated A- or
better by Standard and Poors.
B-113
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
2000-2001 2001-2002 2002-2003 2003-2010 TOTAL
------------------ ------------------ ------------------ ------------------ ------------------
QTY AVG QTY AVG QTY AVG QTY AVG QTY AVG
GOLD HEDGING HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE
------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
AS AT 30 JUNE 2000 ('000 OZ) (PER OZ) ('000 OZ) (PER OZ) ('000 OZ) (PER OZ) ('000 OZ) (PER OZ) ('000 OZ) (PER OZ)
Forward sale contracts
Gold outright forwards..
($A sold)............. 1,407 529 1,189 557 980 594 4,200 610 7,776 585
($NZ sold)............ 14 634 -- -- -- -- -- -- 14 634
(EUR sold)............ 13 301 -- -- -- -- -- -- 13 301
($US sold)............ -- -- -- -- -- -- 175 494 175 494
Silver outright forwards
($A sold)............. 78 8.05 56 7.97 79 7.92 36 7.94 249 7.97
($NZ sold)............ 585 10.03 -- -- 297 9.42 232 9.53 1,114 9.76
OPTIONS
Gold option positions
(bought $A put)....... 612 499 303 537 164 557 607 599 1,686 547
(bought EUR put)...... 13 280 -- -- -- -- -- -- 13 280
(bought $US put)...... 129 299 132 299 128 301 477 291 866 295
(convertible $A put).. 62 569 74 575 200 576 2,050 630 2,386 622
(bought $A call)(1)... 230 504 -- -- -- -- -- -- 230 504
(sold $A call) (1).... 4 640 45 545 46 550 525 547 620 548
(sold EUR call)(2).... 13 335 -- -- -- -- -- -- 13 335
AGGREGATE DEFERRED
LOSSES (A$M)........... (38.6) (17.9) (19.3) (187.6) (263.4)
--------
(1) Bought gold $A call options are matched against gold outright forwards ($A
sold) to create synthetic put options.
(2) The majority of sold gold call options are matched against bought gold put
options to create collar structures.
1999-2000 2000-2001 2001-2002 2002-2009 TOTAL
- ------------------ ------------------ ------------------ ------------------ ------------------
QTY AVG QTY AVG QTY AVG QTY AVG QTY AVG
GOLD HEDGING HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE
------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- --------
AS AT 30 JUNE 1999 ('000 OZ) (PER OZ) ('000 OZ) (PER OZ) ('000 OZ) (PER OZ) ('000 OZ) (PER OZ) ('000 OZ) (PER OZ)
FORWARD SALE
CONTRACTS
Gold outright forwards
($A sold)........... 1,717 516 1,244 524 953 560 2,237 636 6,151 568
($NZ sold).......... 62 586 18 644 -- -- -- -- 80 599
Silver outright
forwards
($A sold)........... 159 7.83 64 7.98 56 7.97 115 7.92 394 7.90
($NZ sold).......... 572 9.39 270 10.71 -- -- 529 9.47 1,371 9.68
OPTIONS
Gold option positions.
(bought $A put)..... 43 478 63 510 -- -- -- -- 106 497
(bought $A call).... 701 483 230 504 -- -- -- -- 931 488
AGGREGATE DEFERRED
GAINS (A$M).......... 168.2 101.1 75.7 123.2 468.2
B-114
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
2000-2001 2001-2002 2002-2003 2003-2010 TOTAL
---------------- ---------------- ---------------- ---------------- ----------------
QTY AVG QTY AVG QTY AVG QTY AVG QTY AVG
BASE METAL HEDGING HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE
------------------ -------- ------- -------- ------- -------- ------- -------- ------- -------- -------
AS AT 30 JUNE 2000 (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T)
Forward sale contracts.................
Copper sale contracts
outright forwards ($US sold).......... 425 2,092 -- -- -- -- -- -- 425 2,092
Zinc sale contracts
outright forwards ($US sold).......... 3,575 1,161 -- -- -- -- -- -- 3,575 1,161
OPTIONS
Copper option positions................
(bought $US put)..................... 775 1,720 -- -- -- -- -- -- 775 1,720
(sold $US call)(1)................... 775 1,960 -- -- -- -- -- -- 775 1,960
A$M RATE A$M RATE A$M RATE A$M RATE A$M RATE
FORWARD EXCHANGE CONTRACTS
Sell US dollars--buy Australian dollars 105.6 0.68 112.5 0.67 116.8 0.66 75.2 0.63 410.1 0.66
AGGREGATE DEFERRED LOSSES (A$M)........ (8.6) (9.5) (12.0) (9.8) (39.9)
--------
(1) Sold copper $US call options are matched against bought copper $US put
options to create collar structures.
1999-2000 2000-2001 2001-2002 2002-2009 TOTAL
---------------- ---------------- ---------------- ---------------- ----------------
QTY AVG QTY AVG QTY AVG QTY AVG QTY AVG
BASE METALS HEDGING HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE HEDGED PRICE
------------------- -------- ------- -------- ------- -------- ------- -------- ------- -------- -------
AS AT 30 JUNE 1999 (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T) (TONNES) (US$/T)
FORWARD SALE CONTRACTS
Copper sale contracts
outright forwards ($US sold).......... 5,375 1,824 -- -- -- -- -- -- 5,375 1,824
participating forward ($US sold)..... 350 1,815 -- -- -- -- -- -- 350 1,815
Zinc sale contracts
outright forwards ($US sold).......... 4,975 1,040 -- -- -- -- -- -- 4,975 1,040
OPTIONS
Copper option positions
($US call)........................... 280 1,815 -- -- -- -- -- -- 280 1,815
Zinc option positions
($US put)............................ 3,100 1,000 -- -- -- -- -- -- 3,100 1,000
($US call)........................... 3,100 1,095 -- -- -- -- -- -- 3,100 1,095
A$M RATE A$M RATE A$M RATE A$M RATE A$M RATE
FORWARD EXCHANGE CONTRACTS
Sell US dollars--buy Australian dollars 84.3 0.66 67.1 0.68 88.1 0.67 161.7 0.65 401.2 0.66
FORWARD EXCHANGE OPTIONS
($A call)............................ 17.5 0.80 -- -- -- -- -- -- 17.5 0.80
($A put)............................. 18.8 0.75 -- -- -- -- -- -- 18.8 0.75
AGGREGATE DEFERRED LOSSES (A$M)........ (16.7) (0.7) (0.4) (5.0) (22.8)
B-115
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
(F) INTEREST RATE RISK
The consolidated entity's exposure to interest rate risk at to June 2000 is
set out below:
FIXED
FLOATING INTEREST GREATER NON
INTEREST LESS THAN MATURING IN THAN INTEREST
NOTES RATE 1 YEAR 1-5 YEARS 5 YEARS BEARING TOTAL
----- -------- --------- ----------- ------- -------- -------
FINANCIAL ASSETS
Cash.................................. (7) 101.5 34.8 16.4 152.7
Bank bills............................ (7) 69.4 69.4
Gold bullion.......................... (7) 23.3 23.3
Receivables........................... (8) 15.9 76.1 22.7 103.6 183.0 401.3
Investments........................... (10) 585.6 585.6
----- ----- ----- ----- ------- -------
117.4 180.3 22.7 103.6 808.3 1,232.3
Weighted average interest rate........ (%) 5.45 6.30 9.25 3.00
FINANCIAL LIABILITIES
Accounts payable...................... (16) 159.9 159.9
Bank overdrafts and bank loans........ (17) 636.0 5.4 641.4
Gold denominated debt................. (17) 5.0 5.0
US dollar guaranteed notes............ (17) 141.8 303.2 100.0 330.9 875.9
Other borrowings...................... (17) 3.8 26.1 29.9
Other liabilities..................... (19) 87.3 87.3
----- ----- ----- ----- ------- -------
145.6 939.2 100.0 330.9 283.7 1,799.4
Weighted average interest rate........ (%) 2.70 7.31 7.45 6.73 --
===== ===== ===== ===== ======= =======
The consolidated entity's exposure to interest rate risk at 30 June 1999 is set out below:
FINANCIAL ASSETS
Cash.................................. (7) 189.2 193.3 382.5
Bank bills............................ (7) 49.6 49.6
Gold bullion.......................... (7) 16.6 16.6
Receivables........................... (8) 20.9 17.0 103.0 8.9 276.4 426.2
Investments........................... (10) 762.4 762.4
----- ----- ----- ----- ------- -------
210.1 259.9 103.0 8.9 1,055.4 1,637.3
Weighted average interest rate........ (%) 3.80 4.90 3.00 5.00 --
FINANCIAL LIABILITIES
Accounts payable...................... (16) 154.4 154.4
Bank overdrafts and bank loans........ (17) 141.8 60.2 202.0
Gold denominated debt................. (17) 247.7 7.6 255.3
US dollar convertible bonds........... (17) 96.5 96.5
US dollar guaranteed notes............ (17) 303.2 100.0 403.2
Other borrowings...................... (17) 37.0 37.0
Other liabilities..................... (19) 5.8 5.8
----- ----- ----- ----- ------- -------
141.8 707.6 100.0 204.8 1,154.2
Weighted average interest rate........ (%) 6.96 5.24 7.46 -- --
===== ===== ===== ===== ======= =======
(G) NET FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
(I) ON BALANCE SHEET
The net fair value of cash and cash equivalents and non-interest bearing
monetary financial assets and financial liabilities of the consolidated entity
approximates their carrying value.
B-116
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
The net fair value of other monetary financial assets and financial
liabilities is based upon market prices where a market exists or by discounting
the expected future cash flows by the current interest rates for assets and
liabilities with similar risk profiles.
Listed equity investments have been valued by reference to market prices
prevailing at balance date.
The carrying amounts of all financial assets and financial liabilities
approximate net fair value, with the following exceptions:
The market value of listed investments as at 30 June 2000 is A$86.8 million
(1999: A$217.3 million). The carrying amount has not been reduced as it does
not exceed recoverable amount.
(II) OFF BALANCE SHEET
Commodity forward sale contracts, foreign exchange contracts, options and
swaps have been valued at the mark-to-market gain or loss which would arise if
the contract were terminated at balance date. These values are disclosed under
"Gold hedging", "Base metals hedging" and "Other commitments denominated in
foreign currencies" above.
30 CONTINGENT LIABILITIES
(A) GUARANTEES AND INDEMNITIES
The consolidated entity has give bank guarantees totalling A$48.8 million
(1999: A$34.4 million) to banks, mining departments and other public utilities.
Normandy Mining Limited and several of its wholly owned entities have
guaranteed a A$650 million multi-option, revolving facility provided by a
syndicate of banks to Normandy Group Finance Limited, a wholly owned entity of
Normandy Mining Limited. At 30 June 2000, the facility was drawn down by A$170
million (1999: Nil).
Normandy Mining Limited and several of its wholly owned entities have
guaranteed the obligations of Normandy Mining Finance Limited and Normandy
Consolidated Gold Holdings Pty Limited, both wholly owned entities, in respect
of those entities' obligations under a Sponsor Support Deed relating to a A$285
million (1999: A$285 million) secured debt facility undertaken by Yandal Gold
Holdings Pty Ltd.
Normandy Mining Limited and a number of wholly owned entities have
guaranteed the obligations of Normandy Finance Limited pursuant to the issue of
US$250 million guaranteed unsecured notes.
Normandy Mining Limited and several of its wholly owned entities have
provided guarantees over a fully drawn financing facility totalling A$44.1
million (1999: A$46.1 million) and foreign currency hedging facilities that a
syndicate of banks has provided on behalf of Australian Magnesium Corporation
Limited ("AMC"), formerly Queensland Metals Corporation Limited. Of the foreign
currency hedging facilities totalling a face value of US$155 million (1999:
US$155 million) US$149 million (1999: US$155 million) is utilised and has a
marked to market deficiency of A$37.4 million as at 30 June 2000 (1999: A$16.9
million).
B-117
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Of this marked to market deficiency, A$14.8 million has been recorded as an
abnormal loss by AMC, and the consolidated entity's A$5.5 million equity
accounted share of this abnormal item is included in abnormal items in the
consolidated profit and loss statement.
Under the terms of an agreement relating to the Magmetal project, Normandy
Mining Limited has guaranteed to AMC the commitments of a wholly owned entity
to contribute to the project. As a result of transactions subsequent to 30 June
2000, those commitments and the guarantee have terminated.
Normandy Mining Limited and AMC have jointly and severally agreed to
indemnify Magmetal project partner The Ford Motor Company ("Ford") in respect
of an obligation of the jointly owned project company to reimburse, in certain
circumstances, part or all of the US$30 million investment provided by Ford. As
a result of the transactions completed subsequent to 30 June 2000, AMC has
indemnified Normandy Mining Limited in respect of liability under this
arrangement in two of the four circumstances in which Normandy Mining Limited
may be liable to Ford.
Kasese Cobalt Company Limited, a controlled entity, has arranged loan
finance agreements for US$58.2 million with a syndicate of banks. Normandy
Mining Limited has provided a guarantee over the facility to the syndicate of
banks.
Normandy Mining Limited has guaranteed the obligations of Kasese Cobalt
Company Limited in relation to a Cobalt Floor Price Support Agreement with
Royal Bank of Scotland.
Controlled entities have provided an indemnity to a third party relating to
the sale of wholly owned entities of Normandy Mining Limited. Normandy Mining
Limited also provided a guarantee to the Commonwealth Bank of Australia
relating to the sale. The guarantee provided to the bank is for an amount of
A$5 million, amortising to nil over a period of 10 years.
Normandy Mining Limited and several of its wholly owned entities have
guaranteed the obligations of a wholly owned entity both to Esso Australia
Resources Limited and SG Australia Limited. The guarantee is in relation to the
deferred purchase consideration obligations of the wholly owned entity for the
purchase of an additional 35 percent interest in the Golden Grove Joint Venture
from Esso Australia Resources Limited. The discounted liability of A$12.2
million is included in unsecured borrowings in the consolidated balance sheet.
Wholly owned entities have provided guarantees over the treasury obligations
of other wholly owned entities. As at 30 June 2000, the aggregate marked to
market deferred loss in respect of these obligations is A$303.3 million.
Normandy Mining Limited has provided guarantees over the foreign exchange and
base metal hedging obligations of various wholly owned entities.
Normandy Mining Limited is a party to an indemnity provided to Citibank
Limited in relation to bank overdrafts held by various wholly owned entities.
Normandy Mining Limited has given written confirmation of its present
intention to support the operation of certain wholly owned entities which have
a net asset deficiency.
Normandy Mining Limited has provided a shortfall guarantee in respect of
loans of A$0.1 million (1999: A$0.1 million) made by a Bank to an employee of
the consolidated entity (who is a Director of controlled entities as part of
their duties as an executive of the parent entity). The executive is not a
Director of the parent entity.
B-118
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
(B) DISPUTES
A dispute exists between Thiess Contractors Pty Ltd ("Thiess") and Normandy
Golden Grove Operations Pty Ltd ("NGGO"), a wholly owned entity, in respect of
a claim for additional and unexpected costs arising from the development of the
Gossan Hill Project decline. Conciliation procedures have failed to resolve the
dispute. Thiess claimed approximately A$11 million in damages. NGGO have made a
counterclaim of A$0.9 million and made an offer of A$2.1 million. These are
still to fully comply with an order by the court to reissue an amended
statement of claim. Litigation in the Supreme Court of Western Australia is
proceeding.
In a Federal Court action brought by ASIC against Yandal Gold Pty Ltd. the
judge found the defendants to have committed various breaches of the
Corporations Law and ordered payment by Edensor Nominees Pty Ltd ("Edensor") to
ASIC of A$28.5 million for distribution to former Normandy Yandal Operations
Limited shareholders. An appeal by Edensor to the Full Court of the Federal
Court, to which Normandy became a party on the application of ASIC, was allowed
on the basis that the Federal Court lacked jurisdiction to make the order. This
decision was appealed to the High Court, which decided that the Full Federal
Court was wrong. The High Court held that the Federal Court did have
jurisdiction to hear and determine the matter and make orders under the
Corporations law. The High Court has sent the matter back to the Full Federal
Court to determine Edensor's appeal on the merits. If that appeal is
unsuccessful then Edensor will be obligated to pay the A$28.5 million. The
consolidated entity has agreed to pay half of this amount.
Disputes exist between a controlled entity, Banff Resources Ltd. and a third
party in respect of a claim for part-ownership in the Kilembe mine. The third
party has lodged a claim for specific performance and damages with courts in
Uganda and Canada. The disputes are currently awaiting hearing and the
controlled entity intends to defend the action.
Orica Australia Limited has commended proceedings against a former
controlled entity Normandy Industrial Minerals Limited ("NIML"), in respect of
the supply of sand used in the manufacture of paints. A controlled entity has
indemnified the purchaser of NIML in respect of this claim.
Disputes exist between a controlled entity and contractors in respect of the
Kasese Cobalt project. Claims have been lodged by contractors for additional
payment in respect of extensions of time and additional costs. The claims are
in the process of being evaluated.
(C) OTHER
Normandy Mining Limited has agreed to make additional payment of US$8
million to Inmet Mining Corporation, in relation to the purchase of its
interest in Autin Investments B.V., contingent upon certain conditions relating
to construction of mine facilities at Perama Hill being met.
B-119
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
31 COMMITMENTS
CONSOLIDATED
------------
2000 1999
----- -----
A$M A$M
COMMITMENTS NOT OTHERWISE PROVIDED FOR IN THE FINANCIAL STATEMENTS AT
BALANCE DATE:
CAPITAL EXPENDITURE
Payable not later than 1 year...................................................................... 26.5 97.6
Later than 1 year and not later than 2 years....................................................... 0.2 --
----- -----
26.7 97.6
NON CANCELLABLE OPERATING LEASES
Payable not later than 1 year...................................................................... 9.8 2.7
Later than 1 year and not later than 2 years....................................................... 9.1 2.0
Later than 2 years and not later than 5 years...................................................... 25.3 3.5
Later than 5 years................................................................................. 13.5 0.8
----- -----
57.7 9.0
----- -----
The operating lease commitments include a 7 year lease of various open pit mining and
auxiliary equipment at the Kalgoorlie operations. The lease commitments are subject to change if
interest rates are different to that assumed in the lease model.
EXPLORATION AND MINERAL LEASES (I)
Payable not later than 1 year...................................................................... 45.4 16.7
Later than 1 year and not later than 2 years....................................................... 33.3 9.3
Later than 2 years and not later than 5 years...................................................... 65.5 16.7
Later than 5 years................................................................................. 12.0 2.9
----- -----
156.2 45.6
----- -----
OTHER COMMITMENTS (II)
Payable not later than 1 year...................................................................... 28.1 27.0
Later than 1 year and not later than 2 years....................................................... 23.0 25.8
Later than 2 years and not later than 5 years...................................................... 65.4 77.0
Later than 5 years................................................................................. 44.3 80.8
----- -----
160.8 210.6
===== =====
--------
(i) The consolidated entity has certain obligations to perform minimum
exploration work and expend minimum amounts of money in order to maintain
rights of tenure over mining and exploration tenements. The annual minimum
expenditure will vary from time to time due to the acquisition or
relinquishment of licences or mining department variations of the
commitment levels by the various mining departments.
(ii) The consolidated entity has entered into agreements with public utilities
to supply electricity in several states. Pursuant to those agreements, the
entities concerned are liable, or severally liable in the case where a
joint venture exists, to pay the respective public utility a line charge
for the service. The consolidated entity has also entered into an
agreement for minimum use of Goldfields Gas Transmission capacity,
equivalent to a total of A$102.3 million to 2008.
B-120
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
During the prior year, a controlled entity provided a US$150 million
committed facility to TVX Cayman Inc. ("TVX"), a controlled entity of TVX Gold
Inc. Drawdowns under the facility are subject to normal commercial lending
covenants. A deemed drawdown of US$16.9 million (1999: Nil) has been made in
respect of some hedging facilities provided to TVX in relation to the facility.
The facility reduces to US$75 million five years from its commencement and to
nil the following year.
The consolidated entity has commitments for the payment to Mr R J Champion
de Crespigny of salaries and other remuneration under a ten-year employment
contract commencing from 1 July 1999. Obligations arising under this contract
are recognised as an expense, and included in Directors' and Executives'
remuneration, as services are provided to the consolidated entity under the
contract.
The contract provides for future payments recognising performance, plus an
incentive arrangement based on growth in value of the consolidated entity's
investments in the Americas above an agreed benchmark. Total annual payments
under the contract are capped at A$3.5 million. During the year, no performance
or incentive payments were made but, at 30 June 2000, the economic entity
recognised A$1.5 million (1999: nil) as an expense by providing pro-rata for
the minimum amount due under the ten-year term.
These commitments will be met out of the surplus cash generated by existing
operations.
32 RECEIVABLES AND PAYABLES DENOMINATED IN FOREIGN CURRENCIES
The Australian dollar equivalents of foreign currency receivables and
payables included in the financial statements, which are not effectively
hedged, are as follows:
CONSOLIDATED
------------
2000 1999
- ----- -----
BORROWING A$M A$M
CURRENT
--US Dollars (i). 33.4 121.7
NON-CURRENT
--US Dollars (ii) 193.5 --
--------
(i) Represents the unhedged portion of the US$40.0 million loan facility in
respect of the Ovacik mine, net of the US$20.0 million cash deposit being
held as security for the loan (1999: A$25.2 million). Comparative figures
include the US Dollar convertible bonds which matured in February 2000 (see
Note 17).
(ii) Represents the unhedged potion of the US$300.0 million senior unsecured
notes (see Note 17).
33 EMPLOYEE ENTITLEMENTS
CONSOLIDATED
------------
2000 1999
---- ----
A$M A$M
Accrued wages and salaries (Note 16) 2.3 0.8
PROVISION FOR EMPLOYEE ENTITLEMENTS
--Current (Note 18)................. 18.3 20.8
Non-current (Note 18)............... 9.7 8.9
---- ----
30.3 30.5
==== ====
B-121
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
THE EMPLOYEE SHARE INVESTMENT PLAN
The Company's Employee Share Investment Plan was approved by special
resolution at the annual general meeting of the Company held on 26 November
1991.
Under this plan employees of the consolidated entity are eligible to acquire
an annual allocation of 2,000 fully paid ordinary shares after one year of
service which rises to 5,000 shares after three years service. The shares are
offered at a price determined by the Board (at a discount of up to 5 percent of
the prevailing market price) and employees may elect to pay cash for the shares
or apply for a loan from the parent entity. Such loans are repayable over a
maximum period of 10 years at a concessional rate of interest which is
currently 4 percent. Shares issued under the scheme are non-transferable for a
period of one year from the date of issue after which time an application is
made for official quotation of the shares.
DETAILS OF SHARES OFFERED AND ISSUED TO EMPLOYEES UNDER THE PLAN ARE AS FOLLOWS:
2000 1999 PLAN TO DATE
----------- ----------- ------------
Offer date.................................... 9 Nov 1999 1 Dec 1998
Total shares offered.......................... 7,718,000 9,540,000 26,716,000
Number of eligible employees.................. 1,864 2,361
Offer price................................... A$1.11 A$1.37
Acceptance required by........................ 14 Jan 2000 12 Jan 1999
Shares issued................................. 484,300 1,796,100 3,804,264
Number of employees to whom shares were issued 138 501
Issue date.................................... 31 Jan 2000 31 Jan 1999
Consideration received........................ A$537,573 A$2,460,657 A$5,292,854
Market value of the shares on date of issue... A$503,672 A$2,478,618 A$5,757,307
The market price of a Normandy Mining Limited ordinary share at 30 June 2000
was A$0.90 (1999: A$1.01).
The issue price of shares issued under the plan is recognised as issued
capital at the date of issue. Amounts recognised in relation to the year ended
30 June were as follows:
2000 1999
------ ------
A$'000 A$'000
Issued capital 538 2,461
At 30 June 2000 loans arising from the Employee Share Investment Plan to
employees who are also Directors of controlled entities totalled A$39,613
(1999: A$57,888). Loans totalling A$5,550 were made during the year to M Nossal
(1999: A$32,880--S Carty, D Constable, T Cutbush, J Fehon, I Hershman, D
Hillier, M Nossal, S Sherwood and D Smith). Installments and repayments
totalling A$23,825 were made during the year by R Auld, S T Carty, T Cutbush, A
de Vere, J Fehon, R Greenslade, P Hastie, I Hershman, D Hillier, M Nossal, S
Sherwood, D Smith and C Swensson (1999: A$23,079--D Bevan, S Carty, D
Constable, T Cutbush, P Dennis, A de Vere, J Fehon, J Gooding, R Greenslade, P
Hastie, I Hershman, D Hillier, M Nossal, S Sherwood, D Smith, and C Swensson).
B-122
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
EXECUTIVE SHARE INCENTIVE PLAN
The Company's Executive Share Incentive Plan was approved by special
resolution at the annual general meeting of the Company held on 26 October 1998.
Under this plan Executive Directors, Executives and Employees of the Company
and associated entities may be eligible, at the discretion of the Board, to an
allocation of rights to unlisted options. These rights vest once certain
performance hurdles are met.
Options are granted for nil consideration. Each option carries a right to
subscribe for one ordinary share in the Company in certain periods. The
exercise price of the option is the weighted average market price per share
during the 60 trading days prior to the date of acceptance of the rights to
options, less the total amount of dividend per share. The dividend per share is
calculated as the higher of the actual dividend per share for the period from
the date of acceptance of the rights to options and the exercise date, and the
average dividend per share paid by the Company for the 3 years preceding. The
minimum exercise price is A$1.00. An application is made for official quotation
of the shares at the time of issue.
At 30 June 2000 no options had been granted under this plan.
THE EMPLOYEE SHARE BONUS PLAN
The Company's Employee Share Bonus Plan was established on 26 November 1991.
Each year the Board determines whether eligible persons will receive a bonus.
The bonus is calculated as a percentage of salary package and is apportioned
into two tranches; 50 percent as an allocation of rights to options and 50
percent as cash or as additional allocation of rights to options. Rights to
options allocated in lieu of cash vest upon the eligible person's acceptance of
the Company's offer. Rights to the balance of the options allocated each year
vest over the following three years.
Options are granted for nil consideration. Each option carries a right to
subscribe for fully paid ordinary shares on any business day up until its
expiry date, being five years from the date of issue. For all options which
were vested before 1 May 1996, the employee is entitled to receive 1.101
Normandy shares for each option exercised. For all options which were vested
after 1 May 1996, the employee is entitled to receive one Normandy share for
each option exercised. The exercise price of the option is at 5 percent
discount to the market price ruling when the allocations are made.
It is management's intention that no further allocation of rights to options
will be made under the plan.
DETAILS OF OPTIONS VESTED AND OUTSTANDING UNDER THE PLAN ARE AS FOLLOWS:
2000 1999
----------------- -----------------
NUMBER AVERAGE NUMBER AVERAGE
ISSUED PRICE ISSUED PRICE
--------- ------- --------- -------
Opening balance.................. 7,042,765 1.69 6,177,066 1.68
Options issued during the period. 1,572,291 1.67 2,005,613 1.64
Options exercised during the year -- -- 233,805 1.08
Options cancelled during the year 485,141 1.61 906,109 1.64
--------- ---- --------- ----
Closing balance(i)............... 8,129,915 1.69 7,042,765 1.69
========= ==== ========= ====
--------
(i) 1,954,478 (1999: 2,206,324) of these options are convertible to 1.101
shares per option held.
B-123
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
The issue price of shares issued under the plan is recognised as issued
capital at the date of issue. Amounts recognised in relation to the year ended
30 June were as follows:
2000 1999
------ ------
A$'000 A$'000
Issued capital -- 252
34 REMUNERATION OF DIRECTORS AND EXECUTIVES
CONSOLIDATED
-------------
2000 1999
------ ------
A$'000 A$'000
(A) NON-EXECUTIVE DIRECTORS
Amounts paid or payable, or otherwise made available to Directors of entities in the
Normandy Mining Limited consolidated entity from entities in the consolidated entity 789 869
The following income bands apply in respect of non-executive Directors of
Normandy Mining Limited:
NUMBER
---------
2000 1999
---- ----
A$10,000 -- A$19,999... -- 1
A$40,000 -- A$49,999... -- 1
A$70,000 -- A$79,999... -- 1
A$80,000 -- A$89,999... 1 --
A$90,000 -- A$99,999... 1 --
A$100,000 -- A$109,999. -- 1
A$110,000 -- A$119,999. 1 1
A$130,000 -- A$139,999. 1 1
A$210,000 -- A$219,999* 1 --
A$230,000 -- A$239,999. -- 1
--------
* A$180,000 (1999: A$282,500) was paid on retirement of non-executive
Directors during the year.
B-124
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
These bands include the remuneration received by non-executive Directors of
Normandy Mining Limited from other companies in the Normandy Mining Limited
consolidated entity as a result of their directorships and/or membership of
communities of Directors.
CONSOLIDATED
-------------
2000 1999
------ ------
A$'000 A$'000
(B) EXECUTIVE DIRECTORS
Amounts paid or payable, or otherwise made available to executive officers who are or were
Directors of entities in the Normandy Mining Limited consolidated entity from entities in
the consolidated entity.................................................................. 6,504 4,003
The following income bands apply in respect of Executive Directors of
Normandy Mining Limited:
NUMBER
---------
2000 1999
---- ----
A$800,000--A$809,999...... -- 1
A$1,060,000--A$1,069,999.. -- 1
A$2,290,000--A$2,299,999*. 1 --
A$2,660,000--A$2,669,999** 1 --
--------
* A$1,664,000 (1999: Nil) was paid to executive Directors on resignation
during the year.
** Includes A$1,500,000 accrued but not yet paid.
B-125
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
CONSOLIDATED
-------------
2000 1999
------ ------
A$'000 A$'000
(C) EXECUTIVE OFFICERS
Amounts received or due and receivable by executive officers who are not Directors of
Normandy Mining Limited. Executive Officers are those persons within the consolidated
entity who have responsibility for the management of affairs of the consolidated entity and
the Company and its strategic direction.................................................... 4,337 3,327
The following income bands apply in respect of executive officers:
NUMBER
---------
2000 1999
---- ----
A$240,000--A$249,999*........................................................................... 1 --
A$250,000--A$259,999............................................................................ 1 1
A$260,000--A$269,999............................................................................ -- 1
A$280,000--A$289,999............................................................................ 2 --
A$290,000--A$299,999............................................................................ -- 1
A$310,000--A$319,999*........................................................................... 1 --
A$340,000--A$349,999............................................................................ 1 --
A$350,000--A$359,999............................................................................ -- 2
A$360,000--A$369,999............................................................................ 2 --
A$380,000--A$389.999............................................................................ -- 1
A$390,000--A$399,999............................................................................ -- 1
A$400,000--A$409,999............................................................................ -- 1
A$450,000--A$459,999............................................................................ 1 --
A$620,000--A$629,999............................................................................ -- 1
A$660,000--A$669,999............................................................................ 1 --
A$760,000--A$769,999*........................................................................... 1 --
--------
* A$726,000 (1999: Nil) was paid to executive officers on resignation during
the year.
35 OTHER RELATED PARTY INFORMATION
Information in respect of related entities of the consolidated entity not
disclosed elsewhere in this financial report is as follows:
DIRECTORS
The directors of Normandy Mining Limited during the year were:
Mr R J Champion de Crespigny
Rt Hon J D Anthony (retired 31 December 1999)
Dr I G Gould (resigned 14 April 2000)
Mr M S Hamson
Mr B G McKay
Mr J B Prescott
Mr B Wheelahan
B-126
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Remuneration paid or payable or otherwise made available to the Directors of
Normandy Mining Limited and its controlled entities is disclosed in Note 34.
TRANSACTIONS WITH RELATED ENTITIES
All transactions with related entities are made on normal commercial terms
and conditions.
TRANSACTIONS WITH DIRECTOR-RELATED ENTITIES
(a) Transactions have been made by the consolidated entity with related
entities of Mr J Gutnick, a former director of an associated entity, as follows:
. Interest accrued on a loan of A$106,090,000 (1999: A$103,000,000) at the
rate of 3% per annum capitalised annually for the period of 5 April 2000,
when Mr Gutnick ceased to be a related party.
. Interest accrued on a loan of A$60,000,000 (1999: A$60,000,000) at a rate
equivalent to the dividend rate received on Great Central Mines Limited
("GCM") shares. The loan was repaid in April 2000 by the issue of GCM
shares to the value of A$40,920,000.
. During the year ended 30 June 2000, loans of A$6,650,000 were made by the
consolidated entity. Interest accrued on the loans at a rate of 7.5% per
annum payable on maturity. The loans were repaid in March 2000.
. During the year ended 30 June 2000, the consolidated entity paid a total
of A$28,775,000 to a related entity of Mr J Gutnick in respect of the
acquisition of GCM and Yandal Gold Holdings Pty Ltd, formerly associated
entities. In the year ended 30 June 1999 the consolidated entity purchased
7,014,596 shares in GCM from a related entity of Mr J Gutnick. The sale
was made under normal commercial terms and conditions.
. During the year ended 30 June 1999, a loan of A$20,000,000 was made by the
consolidated entity of Johnson's Well Mining NL ("JWM"), a
director-related entity, in connection with an agreement whereby the
consolidated entity may earn an interest in exploration tenements owned by
JWM. The loan was made under normal commercial terms and conditions and is
secured over the exploration tenements. Interest is capitalised quarterly
at a commercial rate. Repayment with interest is due on 14 December 2001.
. During the year ended 30 June 1999 the assets of Normandy Bow River
Diamond Mine Limited were sold to a related entity. The sale was on normal
commercial terms and conditions. Proceeds were received in the form of a
deferred cash settlement to be fully paid by October 2001 and convertible
notes issued by the related entity.
(b) During the year ended 30 June 1999 a loan of A$12,932,000 was made to a
related entity of the following Directors of Normandy Mining Limited: Mr R J
Champion de Crespigny, Rt Hon J D Anthony, Dr I G Gould, Mr M S Hamson, Mr B G
McKay, Mr B Wheelahan, and the following Directors of controlled entities: L
Baertl, M Cutifani, D Hillier, B D Kay, J Reynolds, J Richards, R Robinson and
D J Smith. In the year ended 30 June 2000, repayments of A$3,037,000 were
received and advances of A$4,583,000 were made. Rt Hon J D Anthony, Dr I G
Gould, Mr L Baertl, M Cutifani, Dr D Smith and Mr J Richards are no longer
Directors of entities in the consolidated entity. In the current year the
entity became a related entity of Mr P Dowd. Interest accrues on the loan at 5%
per annum and is payable monthly. The principal amount is repayable on 8
December 2008. The loan is secured over the assets of the related entity.
B-127
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Amounts recorded in the profit and loss statement and balance sheet in
respect of the above transactions are set out below.
2000 1999
------ -------
A$'000 A$'000
Current loans receivable................. -- 30,000
Provision for doubtful debts............. -- (8,500)
------ -------
-- 21,500
Non-current loans receivable............. 14,477 171,527
Provision for doubtful debts............. (5,000) (12,500)
------ -------
9,477 159,027
Convertible notes receivable............. 2,457 2,457
Accrued interest......................... 686 2,773
Interest revenue......................... 6,878 5,654
Additions to provision for doubtful debts 1,000 21,000
Repayments made.......................... 51,157 5,000
Sales proceeds........................... -- 9,258
Less: net book value..................... -- (3,282)
------ -------
Profit on sales of assets................ -- 5,976
Investments in associates................ -- 10,522
====== =======
(c) The consolidated entity sold an equity interest in AMX Acqua Management
Corp, a related entity of a Director of an associated entity, to a related
entity of the Director, for a profit on sale of A$158,000.
B-128
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
Transactions with other related parties
2000 1999
------ ------
A$'000 A$'000
(a) During the year loans of A$33.5 million were made to Yandal Gold Holdings Pty Ltd
("YGH"), a former associated entity. YGH subsequently became a controlled entity.
Interest recorded in respect of the period for which YGH was an associated entity is set
out below.
Interest revenue............................................................................... 1,997 --
(b) During the year a loan of A$12 million was made to Australian Magnesium Investments
Pty Ltd. a former associated entity. Interest accrued on the loan at the 3 month bank bill
swap rate plus a margin of 3%. The loan was repaid in May 2000. Interest revenue.
Interest revenue............................................................................... 420 --
(c) During the year guarantee fees were received by Normandy Mining Limited from
Queensland Metals Corporation, an associated entity.
Interest revenue............................................................................... 865 825
(d) During the year loans were made to Normandy Anglo Asian group companies for
mineral exploration.
Loans receivable - associates.................................................................. 2,196 1,985
Additions to provision for doubtful debts...................................................... 699 2,663
(e) During the year interest was charged to BRGM Perou, an associated entity, in respect of
loans made.
Interest revenue............................................................................... 1,035 1,018
(f) During the year fees were paid for a range of legal services to a firm of which Mr R A
Fisher (a Director of controlled entities) is one of a number of partners.
Fees paid...................................................................................... 175 399
Trade creditors................................................................................ 19 23
OWNERSHIP INTEREST IN RELATED ENTITIES
Interests held in joint venture operations, joint venture entities,
controlled entities and associated entities are set out in Notes 25, 26, 27 and
28 to the financial statements.
AMOUNTS RECEIVABLE FROM RELATED ENTITIES
Details of amounts receivable from related entities are set out in Note 8 to
the financial statements.
INTEREST REVENUE AND EXPENSE AND DIVIDEND REVENUE
Interest revenue, interest expense and dividend revenue are set out in Notes
2 and 3 to the financial statements.
B-129
NORMANDY MINING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2000
SHARE AND SHARE OPTIONS
Details of all share and share option transactions between Directors of
Normandy Mining Limited and any entity in the consolidated entity are as
follows:
NUMBER
---------------------
2000 1999
---------- ----------
AGGREGATE NUMBER ISSUED DURING THE YEAR:
Ordinary shares
--Normandy Mining Limited(i)............ 2,795,142 2,487,613
AGGREGATE NUMBER HELD AT 30 JUNE:
Ordinary shares
--Normandy Mining Limited............... 69,429,743 68,239,712
--Normandy Mt Leyshon Limited........... -- 10,121
Ordinary share options
--Normandy Mining Limited............... 28,858,264 29,565,600
--------
(i) Includes Share Investment Plan issues and Dividend Reinvestment Plan issues.
Other movements in aggregate balances arise through normal on market
transactions.
There were no buy-backs of shares or share options during the financial year.
B-130
ANNEX C--FRANCO-NEVADA FINANCIAL INFORMATION
THE CONTENT IN THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION IS INTENDED TO COMPLY WITH CANADIAN
REGULATIONS.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (CANADIAN DOLLARS)
FOR THE SIX-MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000
FINANCIAL SUMMARY
For the six months ending September 30, 2001, earnings from continuing
operations increased to $55.1 million or $0.35 per share from $44.2 million or
$0.28 per share in the prior year. Earnings from discontinued operations were
$21.9 million or $0.14 per share for the six months, comprising the after-tax
gain on the Normandy Transaction (see "Normandy Transaction" below) and a
provision for the diminution in other non-core assets. The earnings from
discontinued operations last year consists of the Ken Snyder Mine and
Australian Division operations and total $16.9 million or $0.11 per share for
the six months. Total revenue was up 7% to $85.4 million.
NORMANDY TRANSACTION
Normandy Mining Limited ("Normandy") is Australia's largest gold producer
with annual gold production of 2.3 million ounces and reserves of 26.4 million
ounces. On May 30, 2001, Franco-Nevada completed the exchange of its Midas
operation, US $48 million and Franco-Nevada's Australian assets for a 19.99%
equity interest in Normandy.
OPERATIONS
REVENUES
Resource revenues increased 25% to $51.3 million for the six months ended
September 30, 2001 from $41.1 million in the prior year. The increase is net of
discontinued operations and is due to the addition of the new royalty on the
Ken Snyder Mine and continued growth in the Stillwater platinum/palladium and
Oil and Gas royalties. Franco-Nevada received over 2,000 gold equivalent ounces
during the second quarter from the Ken Snyder Mine royalty. Management expects
the amount of gold equivalent ounces to increase during the upcoming quarters
as Normandy continues to make improvements at the mine. The Company realized a
price of US$278 per ounce of gold during the first six months of the fiscal
year compared to an average spot price of US$271 per ounce. The Company sells
its gold at spot plus a modest premium. Revenue from the Stillwater royalty has
increased 13% year-over-year due to higher production. The royalties on the
Goldstrike property have increased 17% year-over-year due to higher production
at the Goldstrike property. These increases in revenue in Franco-Nevada's major
royalty interests have more than offset the loss of revenue from mine closures
at Dee and Rosebud.
Franco-Nevada's 19.99% equity interest in Normandy generated earnings of
$11.2 million year-to-date. As the interest in Normandy was acquired effective
April 1, 2001, there are no comparative amounts for the prior year.
Year-to-date investment income has decreased 41% to $22.9 million. The
decrease is due to a $15.1 million gain on the sale of marketable securities
recognized last year versus a year-to-date loss of $3.5 million. Interest
income has remained relatively stable year-over-year.
C-1
EXPENSES
Depletion and depreciation expense decreased 64% to $3.2 million in the six
months compared to $8.9 million in the prior year. In 2000, the Company wrote
off its net investment of $3 million in Canyon Resources Corporation's
MacDonald Gold Project and wrote down certain other properties. Management
expects depletion and depreciation expense to continue at approximately current
levels.
Operating costs have remained fairly stable year over year. General and
Administration expenses have decreased from $4.8 million to $3.2 million for
the six months ended September 30, 2001. During 2000 the Company expensed costs
associated with the proposed Gold Fields Ltd. merger. No such charges were
levied during the current year.
Franco-Nevada's largest expense is its tax. For the six months,
Franco-Nevada's tax rate decreased to 30% of pre-tax earnings compared to 33%
the previous year. The lower tax rate emanates from a 6% drop in the tax rate
on investment income.
ECHO BAY MINES LTD.
On September 5, 2001, Franco-Nevada entered into an agreement to convert
US$72.4 million principal amount (US$115.3 million with accrued interest as at
September 30, 2001) of the capital securities of Echo Bay Mines Ltd. ("Echo
Bay") into common shares of Echo Bay. Echo Bay is a substantial gold company
that last year produced 695,000 ounces from four mines in the United States and
Canada. Pending shareholder approval, Franco-Nevada expects to maintain a 49.5%
interest in Echo Bay following conversion.
BRIGGS MINE
During the quarter ended September 30, 2001, Franco-Nevada agreed to
exchange its 2% NSR royalty on the Briggs Mine in California for a 7.3% equity
position in Canyon Resources Corporation and a 3% NSR royalty on production in
excess of 175,000 ounces from April 1, 2001.
CORPORATE
Franco-Nevada has changed its financial year-end from March 31st to December
31st. This aligns the Company with other international gold companies and
reduces confusion over calendar versus fiscal years. Franco-Nevada's website
provides restated numbers on a calendar year basis for the past 10 years.
C-2
RISK FACTORS
NATURE OF MINERAL EXPLORATION AND MINING
The exploration and development of mineral deposits involves significant
financial risks over an extended period of time that even a combination of
careful evaluation, experience and knowledge, may not eliminate. While
discovery of a mineral-bearing structure may result in substantial rewards, few
properties that are explored are ultimately developed into producing mines.
Major expenses may be required to establish reserves by drilling and to
construct mining and processing facilities at a site. It is impossible to
ensure that the current or proposed exploration programs on properties in which
the Corporation has an interest will, result in a profitable commercial mining
operation. Although the Corporation does not operate any mines, it is, through
its participating interests in said mines, subject to the hazards and risks
normally incident to exploration, development and production. Industry
accidents could result in damage to life, property and, or, the environment. As
a non-operator, Franco-Nevada believes it is not legally liable for damages
incurred by operators of its properties. However, as an active exploration
company, Franco-Nevada is fully liable for any damages arising from its
exploration activities. The activities of the Corporation may be subject to
prolonged disruptions due to weather conditions. Hazards, such as unusual or
unexpected formations, rock bursts, pressures, cave-ins, flooding or other
conditions may be encountered in the drilling, mining, and removal of material.
Whether a mineral deposit will be commercially viable depends on a number of
factors, some of which are the particular attributes of the deposit, such as
its size and grade, proximity to infrastructure, financing costs and
governmental regulations, including regulations relating to prices, taxes,
royalties, infrastructure, land use, importing and exporting of minerals and
environmental protection. The effect of these factors cannot be accurately
predicted, but the combination of these factors may result in the Corporation
not receiving an adequate return on invested capital. The Corporation
continually reviews its activities and operations to identify significant risk
factors for the purpose of reducing both the likelihood of the occurrence of
risks and the potential impacts of risk occurrences.
RESERVES AND PRODUCTION
No assurance can be given that the intended production schedules at mines
where the Corporation holds an interest will be achieved. In addition, mines
must achieve long-term profitability to remain open. As Franco-Nevada does not
operate any mines, it cannot influence the production or profitability of the
mines in which it holds an interest.
The figures for ore reserves presented herein in respect of each mine are
estimates and no assurance can be given that the anticipated tonnage and grade
will be achieved or that the indicated level of recovery will be realized.
Market fluctuations in the price of gold may render ore reserves uneconomical.
Moreover, short-term operating factors relating to the ore reserves, such as
the need for orderly development of the ore body or the processing of new or
different ore grades, may cause a mining operation to be unprofitable in any
particular accounting period.
LICENSES AND PERMITS
The operations of the Corporation and those of the operators of the
properties or operations in which the Corporation holds an interest require
licenses and permits from various governmental authorities. The Corporation
believes that it holds all necessary licenses and permits under applicable laws
and regulations in respect of its properties and believes it is presently
complying in all material respects with the terms of such licenses and permits.
However, such licenses and permits are subject to change in various
circumstances. There is no guarantee that the Corporation or the operators of
those properties in which the Corporation holds an interest, will be able to
obtain or maintain all necessary licenses and permits that may be required to
explore and develop the properties, commence construction or operation of
mining facilities, or maintain operations that economically justify the cost.
C-3
GOLD AND OTHER METAL AND MINERAL PRICES
The profitability of any mining operation in which the Corporation has an
interest will be significantly affected by changes in the market price of the
produced mineral. Mineral prices, including gold prices, fluctuate on a daily
basis and are affected by numerous factors beyond the control of the
Corporation. The level of interest rates, the rate of inflation, world supply
of gold and stability of exchange rates can all cause significant fluctuations
in gold prices. Such external economic factors are in turn influenced by
changes in international investment patterns, monetary systems and political
developments.
The price of gold and other minerals have fluctuated widely and future
material price declines could cause continued commercial production to be
impractical. If, as a result of a decline in gold or other mineral prices,
revenues from metal sales were to fall below cash operating costs, production
might be discontinued.
COMPETITION
The mineral exploration and mining business is competitive in all of its
phases. The Corporation competes with numerous other companies and individuals,
including competitors with greater financial, technical and other resources, in
the search for and the acquisition of mineral interests. There is no assurance
that the Corporation will continue to be able to compete successfully with its
competitors in acquiring such properties or royalties.
LIQUIDITY
Franco-Nevada maintains a strong, debt-free, Balance Sheet with cash and
short-term investments of $864 million as at September 30, 2001. Management
believes a large cash reserve is vital to capitalizing quickly on opportunities
in the industry.
OUTLOOK
Franco-Nevada holds 19.99% of the common shares of Normandy Mining Limited
and equity accounts its share of Normandy's results. Franco-Nevada expects its
share of Normandy's earnings and the royalty on the Ken Snyder Mine will
largely replace the future earnings of the Ken Snyder Mine and the Australian
Royalty Division. However, Franco-Nevada does not control Normandy's operations
and, as a result, Franco-Nevada's share of Normandy's earnings may be
materially more or less than the earnings which would have been derived from
the Ken Snyder Mine and the Australian Royalty Division.
Franco is pursuing its stated intention (see Annual Report for March 31,
2001) of focusing on sizeable transactions that can add shareholder value.
C-4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CANADIAN DOLLARS)
FOR THE TWELVE-MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
SIGNIFICANT EVENT
On May 30, 2001 Franco-Nevada completed its transaction ("Normandy
Transaction") with Normandy Mining Limited (Normandy), Australia's largest gold
producer. Franco-Nevada transferred the Ken Snyder Mine, its Australian assets
and US $48 million in return for 446.1 million treasury shares of Normandy.
Franco-Nevada retained a minimum 5% net smelter return royalty on the Ken
Snyder Mine and Midas exploration properties, which escalates to 10% at gold
prices over US $400 per ounce.
The Normandy Transaction became effective April 1, 2001. The results of the
Ken Snyder Mine and the Australian Division are reported as discontinued
operations and prior financial statements have been restated. See "Discontinued
Operations".
SUMMARY
Earnings from continuing operations increased to $79.9 million in 2001
compared with $64.0 million and $63.5 million in 2000 and 1999, respectively.
Earnings per share from continuing operations are $0.51 per share in 2001
compared to $0.41 per share in 2000 and $0.42 per share in 1999. Earnings from
discontinued operations are $33.6 million ($0.21 per share) in 2001, $33.6
million ($0.21 per share) in 2000 and $5.1 million ($0.03 per share) in 1999.
Discontinued operations are comprised of the Ken Snyder Mine and Australian
Division that are subject to the Normandy Transaction as described above. Cash
flow from continuing operations increased to $92.0 million from $84.5 million
in 2000 and $82.9 million in 1999. Year-over-year earnings growth emanates from
the balanced portfolio of precious metals royalties, a strong performance from
the oil and gas division and the realization of certain investment gains. At
year-end 2001, the balance sheet remains strong, with no debt and $939.0
million of cash and short-term investments.
The royalty portfolio continues to perform well despite the poor gold price
environment with gold averaging only US $272 for the year compared with US $280
in 2000 and US $292 in 1999. Resource revenue increased modestly from $72.8
million in 1999 to $82.0 million in 2000 and up to $95.6 million in 2001, a 31%
increase over the period. Offsetting the weakness in gold were strong oil, gas,
platinum and palladium prices.
During 2001 Franco-Nevada became more focused on precious metals and, as a
result, the investments in San Juan Basin Royalty Trust (oil) and Inco Class
VBN (nickel) were sold at a profit.
In September 2000, the South African Government rejected Franco-Nevada's
proposed merger with Gold Fields Limited ("Gold Fields"). The Gold Fields
merger would have provided Franco-Nevada with additional leverage to gold while
Gold Fields garnered Franco-Nevada's financial strength, strong cash flows and
a more desirable geo-political operating environment.
DISCONTINUED OPERATIONS
After successfully discovering, developing and operating the Ken Snyder
Mine, Franco-Nevada decided to sell it, only two years after reaching
commercial production. Franco-Nevada realized that its expertise is not in
operating mines but in merchant banking within the mining industry. Thus, we
sought a world-class operating partner willing to exchange a significant equity
stake for the mine. The Normandy Transaction achieved our objective and our
19.99% interest in Normandy will be equity accounted from April 1, 2001 onward.
The Ken Snyder Mine began commercial production in January 1999 and for the
two and one-half months of commercial operation in 1999 it produced 33,000
ounces of gold equivalent. Gold equivalent, for the purposes
C-5
of this Management Discussion and Analysis, means converting, for comparative
purposes, ounces of silver produced into ounces of gold produced, with 50
ounces of silver equaling one ounce of gold. During 2000, production totaled
230,258 gold equivalent ounces with cash operating costs of US $98 per
equivalent ounce and total costs of US $142 per equivalent ounce. Total costs
include cash operating costs and depreciation, depletion, state tax and
reclamation. In 2001, 257,000 of gold equivalent ounces were produced at a cash
cost of US $114 and total costs of US $165 per equivalent ounce.
Prior to its inclusion in the Normandy Transaction, Franco-Nevada's
Australian division provided consistent returns with revenues of $6.2 million
in 2001, $6.7 million in 2000 and $5.3 million in 1999. The Australian division
was included in the Normandy Transaction to enhance the strategic alliance with
our new partner. Franco-Nevada believes that Normandy, Australia's industry
leader, can better maximize the value of these Australian assets.
REVENUES
Resource revenues totaled $95.6 million in 2001, $82.0 million in 2000 and
$72.8 million in 1999. The increase is attributable to rising oil and gas
prices and a growing contribution from the Stillwater royalty.
PRECIOUS METALS
Precious metal revenues have been relatively consistent over the past three
years, growing from $61.6 million in 1999 to $66.0 million in 2001. The fall in
the average price of gold was more than compensated by higher platinum and
palladium prices. The following three points summarize the major components of,
and shifts within, the mineral royalty revenue stream:
. The Goldstrike complex generates the Company's largest royalty stream,
totaling $44.6 million during 2001, $47.4 million in 2000 and $43.0
million in 1999. Net Profit Interest ("NPI") quarterly revenue continues
to be erratic, ranging from nil to $9.0 million per quarter over the past
three years. The quarterly NPI is influenced not only by the price of gold
and operating costs but also by mine sequencing and the extent and nature
of capital costs. During 1999 and 2000, Barrick's capital expenditures
totaled US $397 million and US $126 million, respectively, and it has
budgeted an additional US $96 million in calendar 2001. Franco-Nevada
expects that future NPI receipts will continue to be erratic in timing and
extent.
. As anticipated, the Stillwater platinum and palladium royalty is
augmenting the royalty revenue stream as the Goldstrike complex matures.
Stillwater generated revenue of $10.1 million in 2001, up 120% over the
$4.6 million earned in 2000, which in turn was up 18% over the $3.9
million earned in 1999. The increases are attributable to high platinum
and palladium prices and increased production at the Stillwater mine over
this time period. Franco-Nevada expects the Stillwater royalty stream to
increase over the years as production from our royalty ground continues to
grow.
. The Company's remaining mineral royalty portfolio generated $11.3 million
compared to $12.8 million in 2000 and $14.7 million in 1999.
OIL AND GAS
The Oil and Gas Division continues to provide solid returns with revenues
primarily from royalties up from $11.2 million in 1999 to $17.2 million in 2000
and $29.6 million in 2001. Realized prices during 2001 were $37.84 per barrel
of oil and $5.15 per thousand cubic feet ("mcf") of gas versus $27.26 and
$2.56, respectively, in 2000 and $17.08 and $1.98 in 1999.
INVESTMENT
Investment revenues total $82.0 million, $38.6 million and $43.3 million in
2001, 2000 and 1999 respectively. The large increase of $43.4 million in 2001
is attributable to investment gains on the disposition of
C-6
the San Juan Basin Royalty Trust Units ($15.2 million) and Inco Class VBN
shares ($8.3 million). In addition, higher interest was earned on higher
average cash balances. Investment revenue in 2000 fell to $38.6 million from
$43.3 million in 1999 as a result of lower cash balances. Strategic investments
were made in Aber Diamond Corp. and Inco Class VBN shares during 1999 and early
2000 totaling $150.2 million thus reducing average, interest earning, cash
balances during most of 2000. Franco-Nevada maintains a conservative strategy
with respect to its cash resources, investing primarily in investment-grade
interest-bearing instruments.
EXPENSES
Depletion and depreciation totaled $13.9 million in 2001, $15.1 million in
2000 and $14.3 million during 1999, fairly consistent year to year. The modest
drop in 2001 arose from an increase in the oil and gas reserve base that
reduced depletion commensurately. Depletion and depreciation on the mineral
royalty portfolio was consistent at $11.6 million compared to $11.3 million in
2000 and $11.1 million in 1999. The majority of gold companies operating our
royalty lands have, over the past few years, lowered the gold price upon which
they base their reserves. The downgrade in reserves and the potential closure
of certain properties led Franco-Nevada to book a provision of $28.2 million in
2001 to account for the diminution in value. The provision will reduce future
depletion costs as marginal properties have now been written down.
Operating expenses have remained relatively stable from fiscal 1999 through
to 2001. General and Administration expenses were $5.5 million in 1999, $7.6
million in 2000 and $10.7 million in 2001. The increase is comprised of costs
associated with the proposed Gold Fields merger, higher employee costs, and
business development activities.
Taxes, Franco-Nevada's largest expense at 35.4% of pre-tax earnings
increased slightly from 33.7% in 2000 and 33.0% in 1999. The oil and gas
division is heavily taxed and with its relatively strong contribution to
consolidated profits, it has skewed the overall tax rate higher.
INVESTMENTS IN RESOURCE PROPERTIES
Franco-Nevada invested $2.2 million in resource properties during 2001, down
from $9.2 million during 2000. In 1999, the company acquired its interest in
the Stillwater mine, accounting for $54.4 million of the $65.0 million invested
in resource properties. The timing of Franco-Nevada's next business opportunity
is impossible to judge and, as a result, it is impossible to forecast capital
expenditures. However, Franco-Nevada does maintain a small exploration budget
and funding is readily available for prospects yielding encouraging results.
C-7
AUDITORS' REPORT
TO THE DIRECTORS OF
FRANCO-NEVADA MINING CORPORATION LIMITED
We have audited the consolidated balance sheets of FRANCO-NEVADA MINING
CORPORATION LIMITED as at March 31, 2001 and 2000 and the consolidated
statements of earnings, retained earnings and cash flows for each of the years
in the three-year period ended March 31, 2001. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Canada and the United States. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at March 31,
2001 and 2000 and the results of its operations and cash flows for each of the
years in the three-year period ended March 31, 2001 in accordance with Canadian
generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Chartered Accountants
Toronto, Ontario
April 30, 2001
COMMENTS BY AUDITORS FOR UNITED STATES READERS ON CANADIAN - UNITED STATES
REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph, following the opinion paragraph, when there is a
change in accounting principles that has a material effect on the comparability
of the Company's consolidated financial statements, such as the change
described in Note 2 to the consolidated financial statements. Our report to the
Directors dated April 30, 2001 is expressed in accordance with Canadian
reporting standards which do not require a reference to such a change in
accounting principles in the Auditors' Report when the change is properly
accounted for and adequately disclosed in the consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Chartered Accountants
Toronto, Ontario
April 30, 2001
C-8
FRANCO-NEVADA MINING CORPORATION LIMITED
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, MARCH 31, MARCH 31,
2001 2001 2000
------------- ---------- ----------
(UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS) (NOTE 1)
ASSETS
Current assets
Cash and short-term investments..................... $ 864,053 $ 939,011 $ 705,714
Receivables......................................... 22,281 14,991 18,862
Precious metals..................................... 44,224 13,612 27,584
Taxes recoverable................................... 4,790 -- --
---------- ---------- ----------
935,348 967,614 752,160
Investments in marketable securities (note 4).......... 134,396 160,800 248,869
Resource properties (note 5)........................... 179,063 337,757 349,364
Capital assets (note 6)................................ 9,264 81,579 70,498
Investment in Normandy Mining Limited.................. 349,055 -- --
---------- ---------- ----------
1,607,126 1,547,750 1,420,891
========== ========== ==========
LIABILITIES
Current liabilities
Accounts payable.................................... 2,989 9,036 4,382
Taxes payable....................................... -- 17,385 8,289
---------- ---------- ----------
2,989 26,421 12,671
---------- ---------- ----------
Future income taxes (note 9)........................... 82,437 85,873 62,033
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Capital stock (note 7) (September 30, 2001--158,920,430
shares, March 31, 2001--158,630,670 shares, March 31,
2000--158,630,670 shares)............................ 1,026,139 1,021,321 1,021,321
Retained earnings...................................... 421,533 344,516 303,601
Deferred foreign exchange gain (note 8)................ 74,028 69,619 21,265
---------- ---------- ----------
1,521,700 1,435,456 1,346,187
---------- ---------- ----------
$1,607,126 $1,547,750 $1,420,891
========== ========== ==========
C-9
FRANCO-NEVADA MINING CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS
SIX MONTHS ENDED FOR THE YEARS ENDED
------------------------------ ---------------------------------
SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31,
2001 2000 2001 2000 1999
------------- ------------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS) (NOTE 1
REVENUES
Resource................................ $51,323 $41,142 $ 95,596 $ 81,970 $ 72,777
Equity earnings in Normandy............. 11,215 -- -- -- --
Investment.............................. 22,902 38,960 82,035 38,607 43,330
------- ------- -------- -------- --------
85,440 80,102 177,631 120,577 116,107
------- ------- -------- -------- --------
EXPENSES
General and administration.............. 3,164 4,848 10,688 7,554 5,508
Operating costs......................... 371 473 1,141 1,396 1,573
Depletion and depreciation.............. 3,192 8,866 13,856 15,069 14,280
Provision for mining assets............. -- -- 28,216 -- --
------- ------- -------- -------- --------
6,727 14,187 53,901 24,019 21,361
------- ------- -------- -------- --------
EARNINGS BEFORE TAXES...................... 78,713 65,915 123,730 96,558 94,746
------- ------- -------- -------- --------
Tax provision (note 9)
--current........................... 25,959 23,770 49,641 27,100 26,163
--future............................ (2,361) (2,041) (5,783) 5,463 5,129
------- ------- -------- -------- --------
23,598 21,729 43,858 32,563 31,292
------- ------- -------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS........ 55,115 44,186 79,872 63,995 63,454
Gain on sale of discontinued operations
(note 12)............................. 21,902 -- -- -- --
Income from discontinued operations..... -- 16,931 33,573 33,641 5,075
------- ------- -------- -------- --------
NET EARNINGS............................... $77,017 $61,117 $113,445 $ 97,636 $ 68,529
======= ======= ======== ======== ========
EARNINGS PER SHARE
Continuing operations................... 0.35 0.28 0.51 0.41 0.42
Discontinued operations................. 0.14 0.11 0.21 0.21 0.03
------- ------- -------- -------- --------
TOTAL EARNINGS PER SHARE................... $ 0.49 $ 0.39 $ 0.72 $ 0.62 $ 0.45
======= ======= ======== ======== ========
C-10
FRANCO-NEVADA MINING CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
SIX MONTHS ENDED FOR THE YEARS ENDED
-------------------------- ----------------------------
SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31,
2001 2000 2001 2000 1999
------------- ------------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS) (NOTE 1)
Beginning of period........................... $344,516 $303,601 $303,601 $253,554 $217,261
Change in accounting for income taxes (note 2) -- (17,009) (17,009) -- --
-------- -------- -------- -------- --------
344,516 286,592 286,592 253,554 217,261
Earnings...................................... 77,017 61,117 113,445 97,636 68,529
Dividends..................................... -- -- (55,521) (47,589) (32,236)
-------- -------- -------- -------- --------
End of period................................. $421,533 $347,709 $344,516 $303,601 $253,554
======== ======== ======== ======== ========
C-11
FRANCO-NEVADA MINING CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED FOR THE YEARS ENDED
-------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31,
2001 2000 2001 2000 1999
------------- ------------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS) (NOTE 1)
OPERATING ACTIVITIES
Earnings from continuing operations..... $ 55,115 $ 44,186 $ 79,872 $ 63,995 $ 63,454
--------- -------- -------- -------- ---------
Non-cash items
Depletion and depreciation........... 3,192 8,866 13,856 15,069 14,280
Future income taxes.................. (2,361) (2,041) (5,783) 5,463 5,129
Provision for mining assets.......... -- -- 28,216 -- --
Loss (gain) on sale of marketable
securities......................... 3,469 (15,097) (24,187) -- --
Equity earnings in Normandy.......... (11,215) -- -- -- --
--------- -------- -------- -------- ---------
Total non-cash items.................... (6,915) (8,272) 12,102 20,532 19,409
--------- -------- -------- -------- ---------
CASH FLOW FROM OPERATIONS............... 48,200 35,914 91,974 84,527 82,863
Change in non-cash working capital... (65,902) (12,559) 27,883 (24,093) 23,320
--------- -------- -------- -------- ---------
(17,702) 23,355 119,857 60,434 106,183
--------- -------- -------- -------- ---------
FINANCING ACTIVITIES
Shares issued for cash............... 4,818 -- -- 1,990 131,501
Dividends............................ -- -- (55,521) (47,589) (32,236)
--------- -------- -------- -------- ---------
4,818 -- (55,521) (45,599) 99,265
--------- -------- -------- -------- ---------
INVESTING ACTIVITIES
Marketable securities................ 22,298 37,984 118,107 (35,494) (144,809)
Resource properties.................. (3,114) (1,338) (2,195) (9,189) (65,019)
Capital assets....................... (1,102) (1,149) (1,900) (40) (782)
Investment in Normandy............... (82,584) -- -- -- --
Short-term investments............... (101,572) (32,703) (76,464) 28,891 (50,626)
--------- -------- -------- -------- ---------
(166,074) 2,794 37,548 (15,832) (261,236)
--------- -------- -------- -------- ---------
FOREIGN EXCHANGE GAIN (LOSS)............ 198 2,886 8,317 (2,531) 8,787
--------- -------- -------- -------- ---------
DISCONTINUED OPERATIONS................. -- (43,363) 33,034 36,182 (66,513)
--------- -------- -------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... (178,760) (14,328) 143,235 32,654 (113,514)
Cash and cash equivalents--beginning of
period................................ 318,653 175,418 175,418 142,764 256,278
--------- -------- -------- -------- ---------
Cash and cash equivalents--end of period $ 139,893 $161,090 $318,653 $175,418 $ 142,764
Short-term investments.................. 724,160 569,009 620,358 530,296 564,743
--------- -------- -------- -------- ---------
CASH AND SHORT-TERM INVESTMENTS--END OF
PERIOD................................ $ 864,053 $730,099 $939,011 $705,714 $ 707,507
========= ======== ======== ======== =========
C-12
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
1. ACCOUNTING POLICIES
The consolidated financial statements of Franco-Nevada Mining Corporation
Limited (the "Company") have been prepared in accordance with accounting
principles generally accepted in Canada. Summarized below are the significant
accounting policies used in these consolidated financial statements.
The accompanying unaudited interim financial statements are prepared in
accordance with generally accepted accounting principles ("GAAP") in Canada.
Certain information included in the Annual Financial Statements are not
included herein. In the opinion of management, all adjustments considered
necessary for fair presentation have been included in these financial
statements. Operating results for the period ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the full fiscal
period ended December 31, 2001 (see note 12).
(A) BASIS OF CONSOLIDATION
The consolidated financial statements include the statements of the Company
and its wholly owned subsidiaries.
(B) USE OF ESTIMATES
The preparation of the financial statements in conformity with Canadian
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and related notes. The most significant estimates and assumptions
are related to taxes and the recoverability of resource property costs through
future production. Actual results could be different from these estimates.
(C) CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents include highly-liquid instruments with an original
maturity of less than 90 days. The carrying amounts of cash and cash
equivalents are stated at cost which approximates their fair value. The
Company's short-term investments include highly-liquid instruments with an
original maturity of 90 days or more and are carried at cost, which
approximates their fair value.
(D) PRECIOUS METALS AND INVENTORIES
Precious metals inventory is valued at the period end spot price. Mine
operating supplies are valued at the lower of average cost and net realizable
value.
(E) INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities are valued at cost until it is
determined that a permanent impairment exists at which time a write-down is
taken.
(F) RESOURCE PROPERTIES
MINERAL PROPERTY AND DEVELOPMENT COSTS
The Company records its interest in mineral properties at cost. Producing
properties are amortized on the units-of-production basis. The ultimate
recovery of costs associated with non-producing properties is dependent
C-13
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
upon the discovery and development of economic reserves or the profitable sale
of the properties. If a property is abandoned or sold, the proceeds on the
sale, less the cost of the property and any related deferred expenditures, are
included in operations at that time. The Company periodically reviews its
mineral properties to ascertain whether an impairment in value has occurred.
Where a property is considered uneconomic it is written off.
OIL AND GAS PROPERTY
Producing oil and gas royalty properties are carried at the lower of the
cost and net recoverable amount. Depletion is provided on capitalized amounts
using the units-of-production method. Net recoverable amount is the aggregate
of estimated future net revenues from proven reserves less operating,
administration, financial and income tax expense. Estimated future net revenues
are determined using year-end prices.
(G) CAPITAL ASSETS
Assets expected to remain productive throughout the mine's life are
depreciated using the units-of-production method. Other assets are depreciated
on a straight-line basis over their estimated useful lives.
(H) TRANSLATION OF FOREIGN CURRENCY
Foreign operations are self-sustaining and are translated using the current
rate method. Assets and liabilities are translated at exchange rates prevailing
at the period-end and revenue and expense items at average exchange rates for
the period. Translation adjustments arising from changes in exchange rates are
accounted for as a separate component of shareholders' equity. These
adjustments will be included in operations upon realization.
(I) FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying value of Cash and Short Term Investments and Accounts Payable
in the consolidated balance sheets approximate fair values due to the
short-term duration of these instruments.
(J) REVENUE RECOGNITION
Gold and silver revenues from mining operations and royalty interests are
recognized at the time of production. Payment is received in cash or in-kind.
(K) COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the
current year's presentation.
2. CHANGE IN ACCOUNTING POLICY
On April 1, 2000 the Company adopted the new Canadian Institute of Chartered
Accountants recommendations for income taxes. Franco-Nevada provides for income
taxes using the asset and liability method. Under this method, future tax
assets and liabilities are determined based on differences between the
financial accounting and tax bases of assets and liabilities and are measured
using the substantively enacted tax rates and laws that will be in effect when
the differences are expected to reverse.
The Company has elected to adopt these standards retroactively without
restatement. The cumulative effect of adopting the standard is an increase in
future tax liabilities and a reduction in retained earnings of $17.0 million.
Prior to April 1, 2000, the Company followed the deferral method of tax
allocation in accounting for income taxes.
C-14
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
3. BUSINESS MERGER
On September 20, 1999, the Company announced completion of the merger that
resulted in Franco-Nevada Mining Corporation Limited ("Franco-Nevada") merging
with Euro-Nevada Mining Corporation Limited ("Euro-Nevada"). The merger of the
Company and Euro-Nevada is accounted for as a pooling of interests which
combines, at book value, the net assets and operations of the two companies.
Accordingly, these financial statements have been prepared, and are presented
as though the predecessor corporations had operated as a single entity since
inception. Euro-Nevada shareholders received 0.77 Franco-Nevada shares for each
Euro-Nevada share. Euro-Nevada had 101.2 million shares outstanding and, as a
result, the Company issued 77.9 million additional common shares to former
shareholders of Euro-Nevada.
The following tables set forth results of operations of the previously
separate companies for the periods before the combination.
FRANCO- EURO-
NEVADA NEVADA COMBINED
------- ------- --------
THREE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
Revenue-continuing operations............ $17,145 $11,576 $ 28,721
Net earnings............................. 14,892 10,611 25,503
YEAR ENDED MARCH 31, 1999
Revenue-continuing operations............ 70,777 45,330 116,107
Net earnings............................. $43,711 $24,818 $ 68,529
C-15
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
4. INVESTMENTS IN MARKETABLE SECURITIES
The Company holds the following investments:
MARCH 2001
------------------------
UNITS HELD
CARRYING ---------------
INVESTMENT VALUE NUMBER CLASS
---------- -------- ------ --------
Inco Limited (note a).................. $ 17,237 4,309 Warrants
Aber Diamond Corporation............... 69,507 7,717 Common
Duff & Phelps Utilities Income Inc..... 14,208 1,000 Common
First Australia Prime Income Fund, Inc. 56,155 5,000 Common
Other.................................. 3,693
--------
$160,800
========
MARCH 2000
---------------------------
UNITS HELD
CARRYING ------------------
INVESTMENT VALUE NUMBER CLASS
---------- -------- ------ -----------
Inco Limited........................... $ 80,705 9,576 VBN
Aber Diamond Corporation............... 69,507 7,717 Common
Duff & Phelps Utilities Income Inc..... 27,504 2,100 Common
First Australia Prime Income Fund, Inc. 51,767 5,000 Common
San Juan Basin Royalty Trust........... 14,503 2,000 Trust Units
Other.................................. 4,883
--------
$248,869
========
--------
(a) The Inco Limited ("Inco") Class VBN Shares ("VBN Shares") were tendered to
Inco in December 2000 in exchange for 4,309,277 warrants of Inco
("warrants") and cash proceeds of $7.50 per VBN Share. The Company
recognized a gain of $8.3 million on the transaction.
(b) The fair market value of investments at year-end is $179,153,753 (2000;
$221,577,536).
(c) On September 5, 2001, Franco-Nevada entered into an agreement to convert
US$72.4 million principal amount (US$115.3 million with accrued interest as
at September 30, 2001) of capital securities of Echo Bay Mines Ltd. ("Echo
Bay") into common shares of Echo Bay. Pending Echo Bay's shareholder
approval, Franco-Nevada expects to maintain a 49.5% interest in Echo Bay
following conversion. (unaudited)
5. RESOURCE PROPERTIES
MARCH 2001 MARCH 2000
----------------------------- -----------------------------
NET NET
ACCUMULATED BOOK ACCUMULATED BOOK
COST DEPLETION VALUE COST DEPLETION VALUE
-------- ----------- -------- -------- ----------- --------
Producing property.... $392,497 $(116,669) $275,828 $354,424 $(78,185) $276,239
Non-producing property 88,462 (26,533) 61,929 79,139 (6,014) 73,125
-------- --------- -------- -------- -------- --------
$480,959 $(143,202) $337,757 $433,563 $(84,199) $349,364
======== ========= ======== ======== ======== ========
C-16
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
6. CAPITAL ASSETS
MARCH 2001 MARCH 2000
---------------------------- ----------------------------
NET NET
ACCUMULATED BOOK ACCUMULATED BOOK
COST AMORTIZATION VALUE COST AMORTIZATION VALUE
------- ------------ ------- ------- ------------ -------
Plant & mining equipment $49,115 $ (5,905) $43,210 $36,569 $(2,278) $34,291
Well equipment.......... 9,121 (955) 8,166 7,267 (725) 6,542
Buildings............... 31,200 (4,461) 26,739 27,860 (2,069) 25,791
Other................... 5,998 (2,534) 3,464 5,965 (2,091) 3,874
------- -------- ------- ------- ------- -------
$95,434 $(13,855) $81,579 $77,661 $(7,163) $70,498
======= ======== ======= ======= ======= =======
7. CAPITAL STOCK
The Company has an unlimited number of authorized preferred and common
shares.
MARCH 2001 MARCH 2000 MARCH 1999
------------------ ------------------ -------------------
ISSUED AND OUTSTANDING: NUMBER $ NUMBER $ NUMBER $
----------------------- ------- ---------- ------- ---------- ------- ----------
COMMON SHARES
Beginning of year (note a).... 158,631 $1,014,348 158,357 $1,009,537 152,293 $ 861,653
Issued for cash............... -- -- -- -- 3,253 103,937
Issued for resource properties -- -- -- -- 957 25,693
Options exercised............. -- -- 274 4,811 185 3,472
Warrants exercised............ -- -- -- -- 1,669 17,603
------- ---------- ------- ---------- ------- ----------
End of year................... 158,631 $1,014,348 158,631 $1,014,348 158,357 $1,012,358
======= ========== ======= ========== ======= ==========
WARRANTS (NOTE B)
Beginning of year............. 4,380 $ 6,973 4,380 $ 6,973 4,830 $ 484
Exercised..................... -- -- -- -- (1,084) (271)
Issued........................ -- -- -- -- 634 6,760
------- ---------- ------- ---------- ------- ----------
End of year................... 4,380 $ 6,973 4,380 $ 6,973 4,380 $ 6,973
======= ========== ======= ========== ======= ==========
--------
(a) On September 20, 1999 Franco-Nevada Mining Corporation Limited merged with
Euro-Nevada Mining Corporation Limited. See note 3. The 1999 comparative
share capital amounts have been adjusted for the merger. The opening share
capital dollar amount for fiscal 2000 is net of $2,821,000 of share issue
costs incurred in the year.
(b) The Company has two classes of warrants issued and outstanding. There are
2,246,336 Class A warrants each of which entitles the holder thereof to
acquire four common shares of the Company at a price of $200 per warrant.
There are 2,133,751 Class B warrants outstanding each of which entitles the
holder thereof to acquire 3.08 common shares of the Company at a price of
$100 per warrant. The Class A and B warrants expire on September 15, 2003
and November 12, 2003, respectively.
(c) As at September 30, 2001, in addition to its 158,920,430 common shares, the
Company has two classes of warrants issued and outstanding. See note 7 (b).
(d) Franco-Nevada adopted a shareholders' rights plan (the "Rights Plan") on
February 24/th/, 2000. The Rights Plan was approved by the shareholders of
the Company on September 21, 2000. Under the Rights Plan, each
Franco-Nevada common share carries with it the right to purchase shares of
Franco-Nevada, at a discounted price, under certain circumstances and in
the event of particular hostile efforts to acquire control of the Company.
The rights are evidenced by and trade with the Franco-Nevada common shares.
C-17
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
(e) Share Option Plan
Common share options outstanding at March 31, 2001, 2000 and 1999 under the
share option plan are as follows:
MARCH 2001 MARCH 2000 MARCH 1999
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
--------- -------- --------- -------- --------- --------
Outstanding at beginning of year 5,873,716 $20.79 3,934,876 $18.29 4,084,316 $18.17
Changes during year
Granted....................... 50,000 18.30 2,500,000 24.50 35,400 31.09
Exercised..................... -- -- (273,359) 17.60 (184,840) 17.88
Expired....................... (593,600) 24.87 (287,801) 21.92 -- --
--------- ------ --------- ------ --------- ------
Outstanding at end of year...... 5,330,116 20.31 5,873,716 20.79 3,934,876 18.29
========= ====== ========= ====== ========= ======
Exercisable at end of year...... 1,656,068 $16.65 1,283,416 $16.16 1,103,914 $15.33
========= ====== ========= ====== ========= ======
The following table summarizes information about the share options
outstanding at March 31, 2001.
NUMBER WEIGHTED AVERAGE NUMBER
RANGE OF OUTSTANDING AT REMAINING WEIGHTED AVERAGE EXERCISABLE AT WEIGHTED AVERAGE
EXERCISE PRICE MAR. 31/01 CONTRACTUAL LIFE EXERCISE PRICE MAR. 31/01 EXERCISE PRICE
--------------- -------------- ---------------- ---------------- -------------- ----------------
$ 4.35 - $13.64 1,133,186 3.6 years $11.50 675,036 $10.05
$14.21 - $22.14 1,599,880 4.5 years $18.67 662,742 $18.37
$23.57 - $35.43 2,597,050 8.0 years $25.17 318,290 $27.09
--------
(i) Options granted under the Share Option Plan generally have a term of 10
years and vest evenly over their term. The exercise price of each option is
the closing price of the Company's common stock on the Toronto Stock
Exchange on the day on which the option is granted.
(ii) On September 20, 1999 the Company merged with Euro-Nevada Mining
Corporation Limited. At the time of the merger there were 2,102,332
options of Euro-Nevada outstanding. These options were converted to
1,618,796 options of Franco-Nevada at a ratio of 0.77. The 1999
comparatives for share options have been adjusted for this transaction.
8. DEFERRED FOREIGN EXCHANGE GAIN
Components of deferred foreign exchange include:
MARCH MARCH
2001 2000
------- -------
Cash............................................. $25,362 $15,170
Mineral properties............................... 31,939 2,748
Marketable securities............................ 10,538 2,650
Other............................................ 1,780 697
------- -------
$69,619 $21,265
======= =======
C-18
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
9. INCOME TAXES
(a) The Company's effective tax rate differs from the combined Canadian
federal and provincial statutory tax rate as follows:
MARCH MARCH MARCH
2001 2000 1999
----- ----- -----
Tax at Canadian statutory rate...... 43% 45% 45%
Lower U.S. tax rate on U.S. earnings (10) (12) (13)
Non-taxable earnings................ -- (2) (3)
Capital and mining taxes............ 2 3 4
--- --- ---
Effective tax rate.................. 35% 34% 33%
=== === ===
(b) The following table depicts the primary temporary differences included
in future income taxes as at March 31, 2001 and 2000. The 2000 comparative
amounts have been presented after reflecting the $17.0 million effect of the
implementation adjustment described in note 2.
MARCH MARCH
2001 2000
------ ------
Future income taxes:
Liabilities:
Mineral properties.. 65,169 64,395
Capital assets...... 16,445 10,734
Other............... 4,259 3,913
------ ------
Net future income taxes 85,873 79,042
====== ======
(c) Details of income tax (credit) expense by jurisdiction are:
MARCH MARCH MARCH
2001 2000 1999
------ ------ ------
Current
United States. 23,293 15,215 14,596
Canada........ 26,348 11,885 11,567
------ ------ ------
49,641 27,100 26,163
Future
United States. 866 2,319 621
Canada........ (6,649) 3,144 4,508
------ ------ ------
(5,783) 5,463 5,129
(d) Income taxes paid in 2001 were $45,249,276 (2000--$26,002,590,
1999--$19,357,381).
C-19
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
10. SEGMENT INFORMATION
The Company operates in the Mining and Oil and Gas industries. The
operations are evaluated and managed in two segments, namely, Mining royalties
and Oil and Gas. Mining royalties include precious metals and base metal
royalties and the Company's exploration interests that are aimed at generating
royalties. Oil and Gas operations are largely in Canada.
SIX MONTHS ENDED FOR THE YEARS ENDED
----------------------- -----------------------
SEPTEMBER SEPTEMBER MARCH MARCH MARCH
2001 2000 2001 2000 1999
----------- ----------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
REVENUES
Mining royalties....... $37,798 $27,800 $66,030 $64,771 $61,589
Oil & gas.............. 13,525 13,342 29,566 17,199 11,188
------- ------- ------- ------- -------
51,323 41,142 95,596 81,970 72,777
------- ------- ------- ------- -------
OPERATING COSTS
Mining royalties....... 43 136 341 196 155
Oil & gas.............. 328 337 800 1,200 1,418
------- ------- ------- ------- -------
371 473 1,141 1,396 1,573
======= ======= ======= ======= =======
DEPLETION AND DEPRECIATION
Mining royalties....... 2,312 7,237 11,555 11,269 11,089
Oil & gas.............. 880 1,629 2,301 3,800 3,191
------- ------- ------- ------- -------
$ 3,192 $ 8,866 $13,856 $15,069 $14,280
======= ======= ======= ======= =======
C-20
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
SIX MONTHS ENDED FOR THE YEARS ENDED
---------------------- ----------------------------------
SEPTEMBER SEPTEMBER MARCH MARCH MARCH
2001 2000 2001 2000 1999
----------- ----------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
SEGMENT INCOME BEFORE TAXES
Mining royalties..................... $ 35,443 $ 20,427 $ 54,134 $ 53,306 $ 50,345
Oil & Gas............................ 12,317 11,376 26,465 12,199 6,579
Provision for mining assets.......... -- -- (28,216) -- --
---------- ---------- ---------- ---------- ----------
47,760 31,803 52,383 65,505 56,924
Investment earnings.................. 22,902 38,960 82,035 38,607 43,330
Equity earnings in Normandy.......... 11,215 -- -- -- --
General and administration........... (3,164) (4,848) (10,688) (7,554) (5,508)
---------- ---------- ---------- ---------- ----------
EARNINGS BEFORE TAX..................... 78,713 65,915 123,730 96,558 94,746
Tax..................................... (23,598) (21,729) (43,858) (32,563) (31,292)
---------- ---------- ---------- ---------- ----------
EARNINGS FROM CONTINUING OPERATIONS..... 55,115 44,186 79,872 63,995 63,454
Discontinued operations................. 21,902 16,931 33,573 33,641 5,075
---------- ---------- ---------- ---------- ----------
NET EARNINGS............................ 77,017 61,117 113,445 97,636 68,529
========== ========== ========== ========== ==========
REVENUE BY GEOGRAPHIC AREA
USA.................................. 46,975 50,209 114,432 71,772 66,344
Canada............................... 26,054 28,499 60,120 45,228 46,232
Australia............................ 11,215 -- -- -- --
Other................................ 1,196 1,394 3,079 3,577 3,531
---------- ---------- ---------- ---------- ----------
85,440 80,102 177,631 120,577 116,107
========== ========== ========== ========== ==========
SEGMENT CAPITAL EXPENDITURES
Mining royalties..................... 2,602 1,271 2,265 8,924 61,446
Oil & gas............................ 1,614 1,216 1,830 305 4,355
---------- ---------- ---------- ---------- ----------
4,216 2,487 4,095 9,229 65,801
========== ========== ========== ========== ==========
IDENTIFIABLE ASSETS BY GEOGRAPHIC AREA
USA.................................. 1,191,180 593,671 1,386,228 521,363 515,581
Canada............................... 39,379 847,441 106,229 824,560 794,514
Australia............................ 349,055 30,628 23,779 31,208 29,943
Other................................ 27,512 42,776 31,514 43,760 49,487
---------- ---------- ---------- ---------- ----------
1,607,126 1,514,516 1,547,750 1,420,891 1,389,525
========== ========== ========== ========== ==========
IDENTIFIABLE ASSETS BY SEGMENT
Mining royalties..................... 215,263 317,899 172,225 236,483 227,424
Oil & gas............................ 43,997 43,912 44,037 57,149 59,911
Mining operations.................... -- 193,902 231,371 172,237 176,002
---------- ---------- ---------- ---------- ----------
Total assets for reportable segments. 259,260 555,713 447,633 465,869 463,337
Cash and investments at cost......... 1,347,504 958,506 1,099,811 954,583 925,826
Other................................ 362 297 306 439 362
---------- ---------- ---------- ---------- ----------
$1,607,126 $1,514,516 $1,547,750 $1,420,891 $1,389,525
========== ========== ========== ========== ==========
C-21
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
11. COMMITMENTS
(A) FOREIGN EXCHANGE CONTRACTS
Franco has entered into foreign exchange contracts whereunder Franco-Nevada
will receive Australian $4 million in June 2002 and 2003 at US$0.5873 and
US$0.5882 respectively for each Australian dollar. These contracts were closed
out subsequent to March 31, 2001.
(B) NET PROFITS INTEREST
Franco-Nevada pays the contract operator of the Ken Snyder Mine a 5% net
profit interest based upon the Company's reported pre-tax profit from the mine.
12. SUBSEQUENT EVENT
(a) On April 2, 2001, the Company entered into an agreement with Normandy
Mining Limited ("Normandy"), Australia's largest gold producer, to exchange its
Ken Snyder mine, US$48 million, and its Australian assets in return for a
19.99% interest in Normandy. On May 31, 2001 the transaction was consummated
and Normandy issued 446.1 million freely-trading ordinary shares to
Franco-Nevada. Franco-Nevada retained a minimum 5% NSR royalty over the Midas
property, which escalates at gold prices over US$300 per ounce to a maximum of
10% at gold prices over US$400 per ounce.
The exchange of assets resulted in a pre-tax gain of $38.6 million to
Franco-Nevada and has been classified as "Discontinued operations." Income
taxes of $16.7 million were recorded in connection with the exchange.
Amounts included in the consolidated balance sheets relating to discontinued
operations are as follows:
MARCH MARCH
2001 2000
-------- --------
Current assets....................... $ 31,509 $ 8,863
Non-current assets................... 223,525 195,237
Current liabilities.................. (8,880) (2,386)
Non-current liabilities.............. (51,071) (17,486)
-------- --------
Net assets of discontinued operations $195,083 $184,228
======== ========
The summarized statements of operations for the discontinued operations are
as follows:
MARCH MARCH MARCH
2001 2000 1999
-------- -------- --------
Revenue.................................. $106,641 $ 97,659 $ 19,489
Expenses................................. (65,738) (50,413) (12,048)
Taxes.................................... (7,330) (13,605) (2,366)
-------- -------- --------
Net earnings from discontinued operations $ 33,573 $ 33,641 $ 5,075
======== ======== ========
The summarized statements of cashflows for the discontinued operations are
as follows:
MARCH MARCH MARCH
2001 2000 1999
-------- -------- --------
Operating................................ $ 65,948 $ 56,016 $ 4,708
Investing................................ (33,309) (19,358) (71,339)
Foreign exchange......................... 395 (476) 118
-------- -------- --------
Net cashflow from discontinued operations $ 33,034 $ 36,182 $(66,513)
======== ======== ========
(b) The Company has announced a change of its year end to December 31
effective for the period ended December 31, 2001.
C-22
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
13. LEGAL MATTERS
(A) ENVIRONMENTAL
The Company's mining and exploration activities are subject to various laws
and regulations governing the protection of the environment. These laws and
regulations are continually changing and generally becoming more restrictive.
The Company conducts its operations so as to protect the public health and
environment and believes its operations are materially in compliance with all
applicable laws and regulations. The Company has made, and expects to make in
the future, expenditures to comply with such laws and regulations.
(B) CLAIMS
The Company is from time to time involved in various claims, legal
proceedings and complaints arising in the ordinary course of business. The
Company is also subject to reassessment for income and mining taxes for certain
years. It does not believe that adverse decisions in any pending or threatened
proceeding related to any potential tax assessments or other matters, or any
amount which it may be required to pay by reason thereof, will have material
adverse effect on the financial condition or future results of operations of
the Company.
14. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
For Canadian GAAP purposes Franco-Nevada has accounted for the investment in
Normandy Mining Limited on an equity basis using the best information available
from Normandy in the public domain. As Normandy has declined to provide a
reconciliation of its results of operations in US GAAP for the period ended
September 30, 2001 there is no basis for recording an adjustment to US GAAP.
Canadian GAAP varies in certain significant respects from the principles and
practices generally accepted in the United States ("US GAAP"). The effect of
these principal measurement differences on the Company's consolidated financial
statements are quantified below and described in the accompanying notes:
STATEMENTS OF EARNINGS
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE DATA)
SIX MONTHS ENDED FOR THE YEARS ENDED
---------------------- --------------------------
SEPTEMBER SEPTEMBER MARCH MARCH MARCH
2001 2000 2001 2000 1999
----------- ----------- -------- ------- -------
(UNAUDITED) (UNAUDITED)
Net earnings for the period reported under Canadian GAAP............... $ 77,017 $ 61,117 $113,445 $97,636 $68,529
Mineral properties expense(a).......................................... (1,938) (1,890) 8,576 (5,236) (7,637)
Business merger costs(b)............................................... -- -- -- (2,821) --
Fair market value adjustment of marketable securities(c)............... 12,228 (21,629) (21,971) -- --
Income taxes........................................................... (3,582) 8,239 4,370 2,911 3,101
-------- -------- -------- ------- -------
Net earnings for the period reported under US GAAP before US GAAP
difference on discontinued operations and changes in accounting policy 83,725 45,837 104,420 92,490 63,993
Discontinued operations(d)(e).......................................... 27,385 1,183 213 (1,307) (1,481)
-------- -------- -------- ------- -------
Net earnings for the period reported under US GAAP after discontinued
operations and before changes in accounting policy.................... 111,110 47,020 104,633 91,183 62,512
Cumulative effect of changes in accounting
policy(e)(f).......................................................... -- (2,467) (2,467) (4,943) --
-------- -------- -------- ------- -------
Net earnings for the period reported under US GAAP after discontinued
operations and changes in accounting policy........................... $111,110 $ 44,553 $102,166 $86,240 $62,512
======== ======== ======== ======= =======
C-23
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
--------
(a) In accordance with United States GAAP, the Company would be required to
charge all costs of mineral properties exploration to earnings as incurred
until proven economic reserves are established. In fiscal 2001, the Company
recorded a provision against mining assets which contains mineral property
assets already expensed under US GAAP. This has resulted in a reduction in
the provision under US GAAP of $8,576,000.
(b) Under US GAAP, merger costs are expensed as incurred. Under Canadian GAAP,
the costs are considered a capital transaction and netted against capital
stock.
(c) Under US GAAP, the Company was required to write-down a marketable security
investment in an earlier period. The provision and realized loss booked
under Canadian GAAP in the period ended September 30, 2001 has been
subsequently reversed as a result of the US GAAP adjustment.
(d) The Company disposed of its Ken Snyder Mine in Nevada and Australian
division to Normandy Mining Limited ("Normandy") of Australia in exchange
for an equity interest in Normandy. The gain recognized on the transaction
under Canadian GAAP has been adjusted for differences between carrying
costs of the Ken Snyder Mine and Australian division under US GAAP. The
above amounts are net of tax.
(e) Effective January 1, 2001 the Company implemented Staff Accounting Bulletin
("SAB") Note 101, Revenue Recognition for US GAAP purposes. According to
SAB 101, there are numerous conditions depicting when revenue can be
recognized. Under Canadian GAAP, the Company recognized revenue upon the
delivery of gold dore to the refiner. The above amounts are net of tax of
$1,328,000.
(f) Statement of Position 98-5 was adopted during fiscal 2000 which requires
start-up costs to be expensed as incurred. Under Canadian GAAP, start-up
costs are deferred and amortized over the mine life. The above adjustment
is net of tax of $2,362,000.
(g) The Company accounts for its share options under Canadian GAAP, which in
the Company's circumstances are not different from the amounts that would
be determined under the provisions of the Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related Interpretations. Accordingly, no compensation expense for its share
option plan has been recorded in the consolidated statements of operations
for the six months ended September 30, 2000 and 2001 and the fiscal years
ending March 31, 2001, 2000 and 1999.
SIX MONTHS ENDED FOR THE YEARS ENDED
---------------------- ----------------------------
SEPTEMBER SEPTEMBER MARCH MARCH MARCH
2001 2000 2001 2000 1999
----------- ----------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
BASIC EARNINGS PER SHARE
Net earnings per share for the period reported under US GAAP before
US GAAP difference on discontinued operations and changes in
accounting policy................................................. $ 0.53 $ 0.29 $ 0.66 $ 0.58 $ 0.41
Discontinued operations(d)(e)...................................... 0.17 0.01 0.00 (0.01) (0.01)
-------- -------- -------- -------- --------
Net earnings per share for the period reported under US GAAP after
discontinued operations and before changes in accounting policy... 0.70 0.30 0.66 0.57 0.40
Cumulative effect of changes in accounting policy(e)(f)............ -- (0.02) (0.02) (0.03) --
-------- -------- -------- -------- --------
Net earnings per share for the period reported under US GAAP after
discontinued operations and changes in accounting policy.......... $ 0.70 $ 0.28 $ 0.64 $ 0.54 $ 0.40
======== ======== ======== ======== ========
Weighted average number of common shares outstanding (thousands)... 158,662 158,631 158,631 158,521 154,898
======== ======== ======== ======== ========
C-24
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
SIX MONTHS ENDED FOR THE YEARS ENDED
----------------------- --------------------------
SEPTEMBER SEPTEMBER MARCH MARCH MARCH
2001 2000 2001 2000 1999
----------- ----------- -------- -------- -------
(UNAUDITED) (UNAUDITED)
STATEMENTS OF COMPREHENSIVE EARNINGS
Net earnings for the period reported under US GAAP. $111,110 $ 44,553 $102,166 $ 86,240 $62,512
Other comprehensive earnings (net of tax):
Foreign currency translation adjustment......... 4,749 21,043 46,074 (23,695) 27,161
Unrealized (loss)/gain on marketable securities. 374 49,514 51,776 (33,111) 9,427
-------- -------- -------- -------- -------
Comprehensive earnings............................. $116,233 $115,110 $200,016 $ 29,434 $99,100
======== ======== ======== ======== =======
The above amounts are net of taxes as follows: September 2001: $272,000,
September 2000: $20,867,000, March 2001: $16,913,000, March 2000: ($15,443,000)
and March 1999: $4,780,000.
The statements of comprehensive earnings provide a measure of all changes in
equity the company that results from transactions with other than shareholders
and other economic events that occur during the period.
SIX MONTHS ENDED FOR THE YEARS ENDED
---------------------- -----------------------------
SEPTEMBER SEPTEMBER MARCH MARCH MARCH
2001 2000 2001 2000 1999
----------- ----------- -------- -------- ---------
(UNAUDITED) (UNAUDITED)
STATEMENTS OF CASH FLOWS
The following summarizes the cash flow amounts in accordance with US GAAP.
Operating activities................... $ (19,640) $ 21,466 $116,257 $ 52,377 $ 98,546
Investing activities................... (164,136) 4,683 41,148 (10,596) (253,599)
Financing activities................... 4,818 -- (55,521) (42,778) 99,265
Foreign exchange....................... 198 2,886 8,317 (2,531) 8,787
Discontinued operations
Operating........................... -- (20,152) 65,781 54,709 3,062
Investing........................... -- (22,573) (33,142) (18,051) (69,693)
Foreign exchange.................... -- (638) 395 (476) 118
Opening cash and cash equivalents...... 318,653 175,418 175,418 142,764 256,278
Closing cash and cash equivalents...... 139,893 161,090 318,653 175,418 142,764
Closing cash and short-term investments 864,053 730,099 939,011 705,714 707,507
BALANCE SHEETS
The following summarizes the balance sheet amounts in accordance with US
GAAP where different from the amounts reported under Canadian GAAP.
(UNAUDITED)
SEPTEMBER 2001 MARCH 2001 MARCH 2000
--------------------- --------------------- ---------------------
CANADIAN US CANADIAN US CANADIAN US
GAAP GAAP GAAP GAAP GAAP GAAP
---------- ---------- ---------- ---------- ---------- ----------
Precious metals..................... $ 44,224 $ 44,224 $ 13,612 $ 10,155 $ 27,584 $ 27,584
Investments in marketable securities 134,396 165,881 160,800 179,154 248,869 221,578
Resource properties................. 179,063 173,263 337,757 286,421 349,364 291,844
Deferred taxes...................... 82,437 80,984 85,873 67,577 62,033 49,380
Capital stock....................... 1,026,139 1,028,960 1,021,321 1,024,142 1,021,321 1,024,142
Retained earnings................... 421,533 406,608 344,516 295,498 303,601 248,853
Deferred foreign exchange gain...... 74,028 70,972 69,619 66,223 21,265 20,149
C-25
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
NEW STANDARDS FOR CANADIAN GAAP
In late 2000, the Canadian Institute of Chartered Accountants ("CICA")
issued a revised standard, Section 3500, "Earnings Per Share". Public companies
with quarterly reporting requirements must calculate basic and fully diluted
earnings per share in accordance with the new standard. Diluted earnings per
share will now be calculated using the "Treasury Stock Method". The new section
will be implemented for the fiscal period ended December 31, 2001.
In August 2000, the CICA issued a new standard, Section 1751, "Interim
Financial Statements" effective for interim periods in fiscal years beginning
on or after January 1, 2001. This standard requires interim financial
statements, at a minimum, to include an income and cash flow statement for the
quarter and year to date periods, a balance sheet and a statement of retained
earnings along with detailed notes to the financial statements. Management does
not expect a significant impact on the financial statements of the Company upon
the adoption of the new standard.
The CICA recently issued new Handbook Sections 1581, "Business Combinations"
and 3062, "Goodwill and Other Intangible Assets". Effective July 1, 2001, the
standards require that all business combinations be accounted for using the
purchase method. Additionally, effective January 1, 2002, goodwill and
intangible assets with an indefinite life will no longer be amortized to
earnings and will be assessed for impairment on an annual basis in accordance
with the new standards, including a transitional impairment test whereby any
resulting impairment will be charged to opening retained earnings. Management
does not expect a significant impact on the financial statements of the Company
upon the adoption of the new standard.
In March 2000, the Accounting Standards Board of the CICA issued Accounting
Guideline No. 11, "Enterprises in the Development Stage". The guideline
addresses three specific issues: (a) capitalization of costs and expenditures,
(b) impairment and (c) disclosure. Prior to its issuance, development stage
entities were exempt from following certain aspects of Canadian GAAP. This
guideline will require that all companies account for transactions based on the
underlying characteristics of the transaction rather than the maturity of the
enterprise. The guideline is effective no later than fiscal periods beginning
on or after April 1, 2000. The Company is aware that there are two alternative
views of how this guideline affects mining companies with respect to the
capitalization of exploration costs. CICA Handbook Section 3061 "Property,
Plant and Equipment" states that "For a mining property, the cost of the asset
includes exploration costs if the enterprise considers that such costs have the
characteristics of property, plant and equipment." The Company considers that
exploration costs incurred meet the characteristics of property, plant and
equipment and accordingly defers such costs. Under the view adopted by the
Company, deferred exploration costs would not automatically be subject to
regular assessments of recoverability, unless conditions such as those in
Accounting Guideline No. 11 exist. Under the alternative view, there would be a
regular assessment of capitalized exploration costs. Assessment of the
probability of recoverability of deferred exploration costs from future
operations would require the preparation of a projection based on objective
evidence of economic reserves, such as a feasibility study. The Company's
interpretation of the guideline will not have a significant impact on the
financial statements. However, if the second view is accepted, all deferred
exploration costs would be written off as of the beginning of fiscal 2001. This
write-off would be treated as a change in accounting principle. The result
would be a reduction of resource properties of $49.0 million, a decrease to
retained earnings of $30.9 million and a reduction to future taxes of $18.1
million. The impact for the fiscal year ended March 31, 2001 would be a
reduction in resource properties of $3.5 million, net income of $2.3 million
and future taxes of $1.2 million. For the six-month periods ended September 30,
2000 and 2001 the reduction to resource properties, net income and future taxes
would be $1.9 million, $1.2 million and $0.7 million, respectively. The CICA is
currently evaluating this issue to determine the appropriate interpretation of
the guideline and CICA Handbook Section 3061.
C-26
FRANCO-NEVADA MINING CORPORATION LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE OTHERWISE
INDICATED)
NEW STANDARDS FOR US GAAP
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination and
SFAS No. 142 addresses the initial recognition and measurement of intangible
assets acquired outside of a business combination whether acquired individually
or with a group of other assets. These standards require all future business
combinations to be accounted for using the purchase method of accounting. The
Company is required to adopt SFAS No. 141 for business combinations after July
1, 2001 and 142 on a prospective basis as of January 1, 2002. Management does
not expect a significant impact on the financial statements of the Company upon
the adoption of the new standard.
The Financial Accounting Standards Board has recently issued FASB No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets". FAS 144
supersedes FAS 121 and the accounting and reporting provisions of APB 30 for
segments of a business to be disposed of. The pronouncement is effective
January 1, 2002, and will be adopted by the Company at that time. Management
does not expect a significant impact on the financial statements of the Company
upon the adoption of the new standard.
C-27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Tenth of Newmont's Restated Certificate of Incorporation provides
that the directors of the corporation shall be protected from personal
liability, through indemnification or otherwise, to the fullest extent
permitted under the General Corporation Law of the State of Delaware as from
time to time in effect.
The By-Laws of Newmont further provide that each person who at any time is
or shall have been a director or officer of Newmont, or is or shall have been
serving another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity at the request of Newmont, and
his or her heirs, executors and administrators, shall be indemnified by Newmont
in accordance with and to the full extent permitted by the General Corporation
Law of the State of Delaware. Article VI of the By-Laws of Newmont facilitates
enforcement of the right of directors and officers to be indemnified by
establishing such right as a contract right pursuant to which the person
entitled thereto may bring suit as if the indemnification provisions of the
By-Laws were set forth in a separate written contract between Newmont and the
director or officer.
Section 145 of the General Corporation Law of the State of Delaware, Newmont
Mining Corporation's jurisdiction of incorporation, provides as follows:
"(a) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had reasonable cause
to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
II-1
section, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct
set forth in subsections (a) and (b) of this section. Such determination
shall be made, with respect to a person who is a director or officer at the
time of such determination, (1) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated by majority vote
of such directors, even though less than a quorum, or (3) if there are no
such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or
other employees and agents may be so paid upon such terms and conditions, if
any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted under, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under
this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as such person would have respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "servicing at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expense proved by, or granted
pursuant to, this section shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a
II-2
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any by-law, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith unless otherwise indicated:
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1 Rights Agreement, dated as of August 31, 2000, between Newmont Mining Corporation and
ChaseMellon Shareholder Services LLC, as Rights Agent (incorporated herein by reference to
Exhibit 4.1 of Newmont's Form 8-A filed on September 6, 2000).
5.1 Form of opinion of Morris, Nichols, Arsht & Tunnell.*
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5.1).
24.1 Powers of Attorney.**
99.1 Form of Acceptance Form.*
99.2 Form of ADS Letter of Transmittal.*
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
99.4 Form of Letter to Clients.*
* To be filed by amendment.
**Previously filed.
(b) Financial Data Schedule.
Schedules are omitted because they either are not required or are not
applicable or because equivalent information has been included in the financial
statements, the notes thereto or elsewhere herein.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the U.S. Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the U.S.
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the U.S.
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect
II-3
to reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of this form; and
(2) the registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the U.S. Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to this registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the U.S. Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the U.S.
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the U.S. Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the U.S.
Securities Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED,
THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DENVER,
STATE OF COLORADO, ON JANUARY 7, 2002.
NEWMONT MINING CORPORATION**
/S/ WAYNE W. MURDY
By: _________________________________
Name: Wayne W. Murdy
Title: Chairman, President and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/S/ WAYNE W. MURDY Chairman, President, Chief January 7, 2002
----------------------- Executive Officer and Director
WAYNE W. MURDY (Principal Executive Officer)
/S/ BRUCE D. HANSEN* Senior Vice President and Chief January 7, 2002
----------------------- Financial Officer (Principal
BRUCE D. HANSEN Financial Officer)
/S/ LINDA K. WHEELER* Vice President and Controller January 7, 2002
----------------------- (Principal Accounting Officer)
LINDA K. WHEELER
/S/ GLEN A. BARTON* Director January 7, 2002
-----------------------
GLEN A. BARTON
/S/ VINCENT A. CALARCO* Director January 7, 2002
-----------------------
VINCENT A. CALARCO
/S/ RONALD C. CAMBRE* Director January 7, 2002
-----------------------
RONALD C. CAMBRE
--------
** If the securities issued under this registration statement are issued by
Delta Holdco Corp., the registrant shall be Delta Holdco Corp. (not Newmont
Mining Corporation) and the signatories hereto are signing in their
capacities noted below with respect to Delta Holdco Corp. (not Newmont
Mining Corporation).
II-5
SIGNATURE TITLE DATE
--------- ----- ----
/S/ JAMES T. CURRY, JR.* Director January 7, 2002
------------------------
JAMES T. CURRY, JR.
/S/ JOSEPH P. FLANNERY* Director January 7, 2002
------------------------
JOSEPH P. FLANNERY
/S/ LEO I. HIGDON, JR.* Director January 7, 2002
------------------------
LEO I. HIGDON, JR.
/S/ ROBERT J. MILLER* Director January 7, 2002
------------------------
ROBERT J. MILLER
/S/ ROBIN A. PLUMBRIDGE* Director January 7, 2002
------------------------
ROBIN A. PLUMBRIDGE
/S/ MOEEN A. QURESHI* Director January 7, 2002
------------------------
MOEEN A. QURESHI
/S/ MICHAEL K. REILLY* Director January 7, 2002
------------------------
MICHAEL K. REILLY
/S/ JAMES V. TARANIK* Director January 7, 2002
------------------------
JAMES V. TARANIK
*By Britt D. Banks, Vice President, General Counsel and Secretary, as
attorney-in-fact.
II-6
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
4.1 Rights Agreement, dated as of August 31, 2000, between Newmont Mining Corporation and
ChaseMellon Shareholder Services LLC, as Rights Agent (incorporated herein by reference to
Exhibit 4.1 of Newmont's Form 8-A filed on September 6, 2000).
5.1 Form of opinion of Morris, Nichols, Arsht & Tunnell.*
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Morris, Nichols, Arsht & Tunnell (included in Exhibit 5.1).
24.1 Powers of Attorney.**
99.1 Form of Acceptance Form.*
99.2 Form of ADS Letter of Transmittal.*
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
99.4 Form of Letter to Clients.*
* To be filed by amendment.
** Previously filed.