Newmont Announces Fourth Quarter and Full Year 2014 Operating and Financial Results and 2015 Outlook

Newmont Mining Corp. (NYSE: NEM) (“Newmont” or “the Company”) announced fourth quarter and full year 2014 results, including $1.5 billion in operating cash flow, $524 million of cost savings¹ and production in line with guidance for the year.

• Net income: Reported quarterly and full year net income attributable to shareholders from continuing operations of $39 million or $0.08 per share for the fourth quarter and $548 million or $1.10 per share for the full year; adjusted net income² was $86 million or $0.17 per share for the quarter and $545 million or $1.09 per share for the year
• Consolidated cash flow: Generated cash flow from continuing operations of $562 million in the fourth quarter and $1.5 billion for 2014; free cash flow was $218 million in the fourth quarter and $341 million for the year, a $680 million improvement over 2013
• Consolidated adjusted EBITDA³: Delivered earnings before interest, taxes, depreciation and amortization (EBITDA) of $652 million in the fourth quarter and $2.1 billion for the full year
• Gold all-in sustaining costs (AISC)⁴: Lowered gold AISC to $927 per ounce in the fourth quarter, representing a second consecutive quarter of maintaining AISC below $1,000 per ounce; and $1,002 for the full year, a 10% improvement over 2013
• Gold costs applicable to sales (CAS): Reduced gold CAS to $631 per ounce in the fourth quarter, and $706 per ounce for the full year, representing a 9% improvement over 2013
• Attributable production: Produced 1.26 million ounces of gold in the fourth quarter and remained in line with guidance at 4.85 million ounces of gold for the year
• Shareholder returns: Declared a fourth quarter dividend of $0.025 per share in accordance with the Company’s gold price-linked dividend policy⁵
• Outlook⁶: Improved 2015 outlook through strong operating performance and expect attributable gold production of between 4.6 to 4.9 million ounces in 2015, at CAS of between $660 and $710 per ounce and AISC of between $960 and $1,020 per ounce in 2015

“We delivered on our commitment to improve operating costs and efficiencies, strengthen our balance sheet and progress our most promising projects in 2014. Highlights included generating $1.5 billion in cash from continuing operations and lowering our adjusted consolidated all-in sustaining costs by more than $500 million. We also generated almost $800 million in cash from asset sales while maintaining attributable gold production well within our original guidance range. Strong results allowed us to move forward with the development of Merian in Suriname, advance our Turf Vent Shaft project in Nevada, and improve our outlook. In 2015, we will continue to deliver improved costs and efficiency, fund our most promising projects and strengthen our balance sheet,” said Gary J. Goldberg, President and Chief Executive Officer.

Fourth Quarter and Full Year 2014 Results

Net income attributable to shareholders from continuing operations was $39 million or $0.08 per share for the fourth quarter and $548 million or $1.10 per share for the full year, which compares favorably to $(1.2) billion or $(2.39) per share for the prior year quarter and $(2.6) billion and $(5.21) per share for 2013. Adjusted net income was $86 million or $0.17 per share in the fourth quarter and $545 million, or $1.09 per basic share for the full year, compared with $143 million or $0.28 per share for the prior year quarter, and $623 million, or $1.25 per basic share in 2013. The largest adjustments to net income in the fourth quarter include a loss from discontinued operations, as well as asset sales and tax valuation allowances primarily related to the sale of Newmont’s stake in the Penmont joint venture completed October 7, 2014.

Consolidated cash flow from continuing operations was $562 million in the fourth quarter and $1.5 billion for the full year. Free cash flow was $218 million in the fourth quarter and $341 million for the full year, a $680 million improvement over 2013. The Company held $2.4 billion of consolidated cash on its balance sheet at year-end 2014, up 50% from the prior year. Newmont strives to maintain a healthy balance between investing in profitable growth, reducing debt and returning cash to shareholders. Nearly 50% of the Company’s cash is held domestically with the remainder held by offshore subsidiaries to fund local growth, repay regional debt and for potential repatriation.

Revenue totaled $2.0 billion in the fourth quarter compared to $2.2 billion in the prior year quarter, and $7.3 billion in 2014 compared to $8.4 billion in 2013, due primarily to lower gold and copper prices and divestments.

Average realized price was $1,194 per ounce for gold for the fourth quarter, down from $1,267 in the prior year quarter; and $1,258 for the year, down from $1,393 in 2013. Average realized copper price per pound was $2.55 for the fourth quarter, down from $2.96 in the prior year quarter; and $2.65 for the year, down from $2.98 in 2013.

Attributable production was 1.26 million ounces of gold in the fourth quarter, compared to 1.45 million ounces in the prior year quarter, due mainly to the impact of divestments; and 4.85 million ounces for the year, compared to 5.07 million ounces in 2013. Absent the impact of divestments, gold production was in line with 2013 levels. Increases were driven by a full year of production at Akyem and higher grades and ore recoveries at Batu Hijau. These helped offset decreases in North America due to planned stripping at Carlin and Twin Creeks and divestment of Midas and La Herradura; lower Australia production associated with the sale of Jundee; and declines in South America due to lower ore on leach pads and resulting decreases in leach recoveries.

Attributable copper production was 28,700 tonnes in the fourth quarter, compared to 21,600 tonnes in the prior year quarter, and 86,500 tonnes for the full year, up from 81,400 tonnes in 2013. Copper production increased 6% year on year due to a full year of production from Phoenix Copper Leach and slightly higher copper production at Boddington, offsetting lower than planned production at Batu Hijau resulting from a four month shut-down due to export permit issues.

AISC was $927 per gold ounce in the fourth quarter, down from $1,043 in the prior year quarter; and $1,002 per ounce in 2014, down from $1,113 in 2013. Total gold AISC came in below 2014 guidance due to strong operational performance and lower sustaining capital expenditures. Copper AISC was $2.39 per pound in the fourth quarter, down from $4.74 in the prior year quarter, and $3.65 for the full year, down from $5.07 in 2013.

CAS was $631 per gold ounce in the fourth quarter, down from $766 per ounce in the prior year quarter; and $706 per ounce for the year, down from $772 per ounce in 2013. These improvements were driven by ongoing cost and efficiency gains across the portfolio, a full year of lower cost production at Akyem, lower production costs and lower inventory adjustments at Batu Hijau. Gold CAS in the Americas was slightly higher due mainly to planned stripping campaigns at Carlin and Yanacocha. Copper CAS was $1.86 per pound in the fourth quarter, down from $3.82 in the prior year quarter; and $2.88 per pound for the year, down from $4.12 in 2013.

Capital expenditures for the fourth quarter were $344 million, of which $233 million was sustaining capital. Full year capital spend was about 6% below guidance at $1.1 billion, of which $810 million was sustaining capital. Development capital primarily went to build the Turf Vent Shaft in Nevada and Merian in Suriname. Exploration and advanced projects of $325 million also came in lower than full year guidance. Total general and administrative and depreciation and amortization expenses met guidance, at $186 million and $1.2 billion, respectively.

2015 – 2017 OUTLOOK

Attributable gold production is expected to increase steadily from between 4.6 and 4.9 million ounces in 2015 to between 4.7 and 5.1 million ounces by 2017. New production at Merian and higher grades in Nevada and Indonesia are expected to offset lower grades at Yanacocha and Ahafo. The remainder of the portfolio is expected to deliver steady and profitable production.

• North America production is expected to increase from between 1.5 and 1.6 million ounces in 2015 to between 1.6 and 1.7 million ounces in 2016 and 2017, benefitting from Turf Vent Shaft completion, and lower stripping at Carlin. Potential development of Long Canyon Phase 1 represents additional upside.
• South America production is expected to decline from between 510,000 and 560,000 ounces in 2015 to between 450,000 and 550,000 ounces in 2016, before rising to between 650,000 and 750,000 ounces in 2017 as the first full year of production at Merian offsets the impact of maturing operations at Yanacocha.
• Asia Pacific production is expected to remain stable at between 1.8 and 2.0 million ounces from 2015 through 2017. Productivity improvements at Tanami and higher grades at Batu Hijau offset production declines at Waihi as the mine nears the end of its current reserve life. Potential development of the Tanami Expansion project represents additional upside.
• Africa production, excluding the impact of potential development of the Ahafo Mill Expansion, is expected to decline from between 740,000 and 800,000 ounces in 2015 and 2016 to between 625,000 and 675,000 ounces in 2017, due primarily to lower grades at Ahafo.

Attributable copper production is expected to be between 130,000 and 160,000 tonnes in 2015 and level out to between 115,000 and 135,000 tonnes in 2016 and 2017. The Company expects to mine higher grade Phase 6 ore at Batu Hijau throughout the period; however, in late 2016, lower grade stockpiled ore is expected to be processed for several months during a pit dewatering sequence at Batu Hijau. Production at Phoenix Copper Leach and Boddington is expected to remain stable for the period.

Gold cost outlook – AISC is expected to improve from between $960 and $1,020 per ounce in 2015 to between $925 and $1,025 per ounce by 2017. CAS is expected to remain stable at between $660 and $710 per ounce in 2015 and between $650 and $750 per ounce in 2016 and 2017.⁷ Costs will benefit from higher grades at Batu Hijau, the Carlin underground mines, Tanami and KCGM; and lower cost production from Merian. Ongoing cost and efficiency improvements are expected to offset lower grade and throughput at Ahafo and maturing operations at Yanacocha.

• North American AISC is expected to improve from between $990 and $1,060 per ounce in 2015 to between $850 and $950 per ounce by 2017. CAS is expected to improve from between $750 and $800 per ounce in 2015 to between $600 and $700 per ounce by 2017. Nevada operating costs are expected to benefit from lower stripping at Carlin, completion of the Turf Vent Shaft, and lower marginal production at Twin Creeks.
• South America AISC is expected to increase from between $950 and $1,020 per ounce in 2015, to between $1,050 and $1,150 per ounce in 2016, before decreasing to between $950 and $1,050 per ounce in 2017. Similarly, CAS is expected to increase from between $550 and $590 per ounce in 2015 to between $700 and $800 per ounce in 2016, before decreasing to between $650 and $750 per ounce in 2017. The primary driver is the addition of lower cost production from Merian.
• Asia Pacific AISC is expected to be between $840 and $900 per ounce in 2015 and between $800 and $900 per ounce for 2016 and 2017. CAS is also expected to remain stable at between $670 and $720 per ounce in 2015 and between $650 and $750 per ounce in 2016 and 2017. Primary drivers include higher grades at Batu Hijau and higher grades and production at Tanami and KCGM.
• Africa AISC is expected to rise from between $820 and $880 per ounce in 2015, to between $1,175 and $1,275 per ounce by 2017. Gold CAS is expected to increase more slowly than previously indicated – from between $620 and $670 per ounce in 2015 to between $950 and $1,050 per ounce in 2017 – as planned cost and efficiency improvements partially offset increased stripping and lower grades and Ahafo and lower grades at Akyem in 2017.

Copper cost outlook – Copper AISC is expected to average between $1.70 and $1.90 per pound in 2015 with higher grade ore at Batu Hijau, and increase slightly to between $1.80 and $2.00 per pound by 2017. CAS is expected to be between $1.20 and $1.40 per pound in 2015, and increase to between $1.30 and $1.50 per pound in 2016 and 2017.

Sensitivities – AISC and CAS could further benefit from lower energy prices and an improving Australian dollar exchange ratio. Every $10 reduction in the price of oil implies an expected $30 million improvement in attributable free cash flow. Similarly, every $0.05 favorable change in the Australian dollar results in a $60 million improvement in attributable free cash flow. These estimates exclude current hedge programs. Please refer to the 10K for further information on hedging positions.

Capital – Sustaining capital is expected to remain stable between $850 and $950 million from 2015 through 2017 as a result of ongoing efforts to improve technical and operational efficiencies.

Debt – At $1,200 per ounce gold, Newmont could fund its most promising growth projects and potentially repay $750 million in 2015 from cash flow and existing cash balances. This would include the scheduled repayment of the PTNNT project debt facility, other regional and corporate debt and between $300 million to $400 million of potential term loan prepayments.

Projects – Turf Vent Shaft in Nevada and Merian in Suriname are included in the company’s outlook for 2015 through 2017:

The Turf Vent Shaft is expected to achieve commercial production in late 2015, adding approximately 100,000 to 150,000 ounces of annual production to Leeville. The shaft provides ventilation required to increase production and decrease mine costs over the 11 year mine life at greater Leeville. Capital costs for the project are estimated at between $350 and $400 million, of which approximately $70 to $80 million will be spent in 2015.

Merian is under construction, and will give Newmont a foothold in a prospective new district with significant upside potential. Gold production is expected to average between 400,000 and 500,000 ounces on a 100 percent basis during the first five years at a cost applicable to sales of $575 to $675 per ounce, and all-in sustaining cost of between $650 and $750 per ounce (unescalated). Capital costs for the project are estimated at between $600 and $700 million for Newmont’s 75 percent share. Newmont’s capital expenditure is expected to be between $330 million and $360 million in 2015 and between $150 million and $190 million in 2016. The project is on time and budget for start-up in late 2016.

The following projects are not currently included in the 2015 – 2017 outlook and hold the potential to add between 250,000 and 350,000 ounces of gold production at competitive costs:

Long Canyon Phase 1 is an oxide deposit with significant upside potential in an emerging district located 80 miles east of Elko, Nevada. The project has been optimized to lower capital, generate stronger returns and reduce the payback period. This first phase of development consists of an open pit mine and heap leach operation with low cost production of between 100,000 and 150,000 ounces per year over an eight year mine life for capital costs of between $250 and $300 million. If approved in Q1 2015, production would begin in Q1 2017.

Tanami Expansion Project includes constructing a second decline in the mine and building incremental capacity in the plant. For a capital cost of between $100 and $120 million, the project would add incremental gold production of 50,000 to 60,000 ounces (first five year average) at lower costs and increase mine life by four years. If approved in the first half of 2015, the additional production would begin in 2017.

Ahafo Mill Expansion would increase profitable production by 100,000 to 125,000 ounces (first five year average) while lowering costs and off-setting the impacts of lower grades and harder ore. Capital costs are expected to be between $140 and $160 million. If approved in the second half of 2015, the additional production would be expected in 2017.

(1) Excludes Depreciation and amortization and Reclamation and remediation.

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles (“GAAP”). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Adjusted net income (loss)

Management of the Company uses Adjusted net income (loss) to evaluate the Company’s operating performance, and for planning and forecasting future business operations. The Company believes the use of Adjusted net income (loss) allows investors and analysts to compare results of the continuing operations of the Company and its direct and indirect subsidiaries relating to the production and sale of minerals to similar operating results of other mining companies, by excluding exceptional or unusual items. Management’s determination of the components of Adjusted net income (loss) are evaluated periodically and based, in part, on a review of non-GAAP financial measures used by mining industry analysts. Net income (loss) attributable to Newmont stockholders is reconciled to Adjusted net income (loss) as follows:

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”)

We also present adjusted earnings before interest, taxes, depreciation, and amortization ("adjusted EBITDA") as a non-GAAP measure. Our management uses adjusted net income, adjusted net income per diluted share and adjusted EBITDA as measures of operating performance to assist in comparing performance from period to period on a consistent basis; as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; in communications with the board of directors, stockholders, analysts and investors concerning our financial performance; as useful comparisons to the performance of our competitors; and as metrics of certain management incentive compensation calculations. We believe that adjusted net income, adjusted net income per diluted share and adjusted EBITDA are used by and are useful to investors and other users of our financial statements in evaluating our operating performance because they provide an additional tool to evaluate our performance without regard to special and non-core items, which can vary substantially from company to company depending upon accounting methods and book value of assets and capital structure. We have provided reconciliations of all non-GAAP measures to their nearest U.S. GAAP measures and have consistently applied the adjustments within our reconciliations in arriving at each non-GAAP measure. These adjustments consist of special items from our U.S. GAAP financial statements as well as other non-core items, such as property, plant and mine development impairments, restructuring costs, gains and losses on sales of asset sales, abnormal production costs and transaction/acquisition costs included in our U.S. GAAP results that warrant adjustment to arrive at non-GAAP results. We consider these items to be necessary adjustments for purposes of evaluating our ongoing business performance and are often considered non-recurring. Such adjustments are subjective and involve significant management judgment.

Costs applicable to sales per ounce/pound

Costs applicable to sales per ounce/pound are non-GAAP financial measures. These measures are calculated by dividing the costs applicable to sales of gold and copper by gold ounces or copper pounds sold, respectively. These measures are calculated on a consistent basis for the periods presented on a consolidated basis. Costs applicable to sales per ounce/pound statistics are intended to provide additional information only and do not have any standardized meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Other companies may calculate these measures differently.

The following tables reconcile these non-GAAP measures to the most directly comparable GAAP measures.

Costs applicable to sales per ounce

Costs applicable to sales per pound

All-In Sustaining Costs

Newmont has worked to develop a metric that expands on GAAP measures such as cost of goods sold and non-GAAP measures to provide visibility into the economics of our gold mining operations related to expenditures, operating performance and the ability to generate cash flow from operations.

Current GAAP-measures used in the gold industry, such as cost of goods sold, do not capture all of the expenditures incurred to discover, develop, and sustain gold production. Therefore, we believe that All-in sustaining costs are non-GAAP measures that provide additional information to management, investors, and analysts that aid in the understanding of the economics of our operations and performance compared to other gold producers and in the investor’s visibility by better defining the total costs associated with producing gold.

All-in sustaining cost (“AISC”) amounts are intended to provide additional information only and do not have any standardized meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Other companies may calculate these measures differently as a result of differences in the underlying accounting principles, policies applied and in accounting frameworks such as in International Financial Reporting Standards (“IFRS”), or by reflecting the benefit from selling non-gold metals as a reduction to AISC. Differences may also arise related to definitional differences of sustaining versus development capital activities based upon each company’s internal policies.

The following disclosure provides information regarding the adjustments made in determining the All-in sustaining costs measure:

Cost Applicable to Sales—Includes all direct and indirect costs related to current gold production incurred to execute the current mine plan. Costs Applicable to Sales (“CAS”) includes by-product credits from certain metals obtained during the process of extracting and processing the primary ore-body. CAS is accounted for on an accrual basis and excludes Amortization and Reclamation and remediation, which is consistent with our presentation of CAS on the Statement of Consolidated Income. In determining AISC, only the CAS associated with producing and selling an ounce of gold is included in the measure. Therefore, the amount of gold CAS included in AISC is derived from the CAS presented in the Company’s Statement of Consolidated Income less the amount of CAS attributable to the production of copper at our Phoenix, Boddington and Batu Hijau mines. The copper CAS at those mine sites is disclosed in Note 3 – Segments that accompanies the Consolidated Financial Statements. The allocation of CAS between gold and copper at the Phoenix, Boddington and Batu Hijau mines is based upon the relative sales percentage of copper and gold sold during the period.

Remediation Costs—Includes accretion expense related to asset retirement obligations (“ARO”) and the amortization of the related Asset Retirement Cost (“ARC”) for the Company’s operating properties recorded as an ARC asset. Accretion related to ARO and the amortization of the ARC assets for reclamation and remediation do not reflect annual cash outflows but are calculated in accordance with GAAP. The accretion and amortization reflect the periodic costs of reclamation and remediation associated with current gold production and are therefore included in the measure. The allocation of these costs to gold and copper is determined using the same allocation used in the allocation of CAS between gold and copper at the Phoenix, Boddington and Batu Hijau mines.

Advanced Projects and Exploration—Includes incurred expenses related to projects that are designed to increase or enhance current gold production and gold exploration. We note that as current resources are depleted, exploration and advance projects are necessary for us to replace the depleting reserves or enhance the recovery and processing of the current reserves. As this relates to sustaining our gold production, and is considered a continuing cost of a mining company, these costs are included in the AISC measure. These costs are derived from the Advanced projects, research and development and Exploration amounts presented in the Company’s Statement of Consolidated Income less the amount attributable to the production of copper at our Phoenix, Boddington and Batu Hijau mines. The allocation of these costs to gold and copper is determined using the same allocation used in the allocation of CAS between gold and copper at the Batu Hijau, Boddington and Phoenix mines.

General and Administrative—Includes cost related to administrative tasks not directly related to current gold production, but rather related to support our corporate structure and fulfilling our obligations to operate as a public company. Including these expenses in the AISC metric provides visibility of the impact that general and administrative activities have on current operations and profitability on a per ounce basis.

Other Expense, net—Includes costs related to regional administration and community development to support current gold production. We exclude certain exceptional or unusual expenses from Other expense, net, such as restructuring, as these are not indicative to sustaining our current gold operations. Furthermore, this adjustment to Other expense, net is also consistent with the nature of the adjustments made to Net income (loss) as disclosed in the Company’s non-GAAP financial measure Adjusted net income (loss). The allocation of these costs to gold and copper is determined using the same allocation used in the allocation of CAS between gold and copper at the Phoenix, Boddington and Batu Hijau mines.

Treatment and Refining Costs—Includes costs paid to smelters for treatment and refining of our concentrates to produce the salable precious metal. These costs are presented net as a reduction of Sales.

Sustaining Capital—We determined sustaining capital as those capital expenditures that are necessary to maintain current gold production and execute the current mine plan. Capital expenditures to develop new operations, or related to projects at existing operations where these projects will enhance gold production or reserves, are considered development. We determined the breakout of sustaining and development capital costs based on a systematic review of our project portfolio in light of the nature of each project. Sustaining capital costs are relevant to the AISC metric as these are needed to maintain the Company’s current gold operations and provide improved transparency related to our ability to finance these expenditures from current operations. The allocation of these costs to gold and copper is determined using the same allocation used in the allocation of CAS between gold and copper at the Batu Hijau, Boddington and Phoenix mines.