Newmont Mining Corp. Announces Second Quarter Operating and Financial Results

Newmont Mining Corp. (NYSE: NEM) (Newmont or the Company) announced second quarter results, including $441 million in operating cash flow, and $692 million in adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA).¹

• Net income: Achieved adjusted net income² of $131 million, or $0.26 per basic share, compared to $101 million or $0.20 per share in the prior year quarter; GAAP net income attributable to shareholders from continuing operations was $63 million, or $0.13 per share, compared to $182 million or $0.37 per share in the prior year quarter

• Consolidated Adjusted EBITDA: Delivered Adjusted EBITDA of $692 million in the second quarter, compared to $525 million in the prior year quarter
• Consolidated cash flow: Generated cash from continuing operations of $441 million and free cash flow³ from continuing operations of $119 million, compared to $378 million and $124 million in the prior year quarter
• All-in sustaining costs (AISC)⁴: Improved gold AISC to $909 per ounce compared with $1,063 per ounce in the prior year quarter, and copper AISC to $1.61 per pound compared to $3.69 per pound in the prior year quarter
• Costs applicable to sales (CAS): Improved gold CAS to $638 per ounce compared with $744 per ounce in the prior year quarter, and copper CAS to $1.20 per pound compared to $2.53 per pound in the prior year quarter
• Attributable production: Delivered 1.24 million ounces and 41,000 tonnes of attributable gold and copper production, respectively, compared to 1.22 million ounces and 20,000 tonnes, respectively, in the prior year quarter
• Outlook: Improved 2015 outlook⁵ through strong operating performance and the addition of Cripple Creek & Victor (CC&V) gold mine; new guidance forecasts attributable gold production of between 4.7 and 5.1 million ounces, AISC of between $920 and $980 per ounce, and CAS of between $630 and $680 per ounce
• Portfolio: Acquisition of CC&V is expected to close early August; adding profitable production and cash flow to Newmont’s portfolio, with potential upside from cost and efficiency improvements and mine expansions
• Shareholder returns: Declared a second quarter dividend of $0.025 per share

"We continued to improve the underlying business in the second quarter, delivering $119 million in free cash flow and nearly $700 million in adjusted EBITDA while lowering all-in sustaining costs per ounce by 14 percent compared to the prior year. Favorable oil prices and exchange rates largely offset the impacts of lower metal prices. Based on this performance, we are improving our full-year outlook for both production and costs. We also strengthened our portfolio with the accretive acquisition of the Cripple Creek & Victor mine, while also continuing to divest certain non-core assets. Further, our strong operating performance allowed us to pay down an additional $75 million in debt and return cash to shareholders,” said Gary Goldberg, President and Chief Executive Officer.

Second Quarter Summary Results

Adjusted net income of $131 million, or $0.26 per basic share, was up 30% from the prior year quarter primarily due to higher copper production and better cost performance. GAAP net income attributable to shareholders from continuing operations was $63 million, or $0.13 per basic share, down from $182 million or $0.37 per share a year ago.

Consolidated cash flow from continuing operations was $441 million in the second quarter, compared to $378 million in the prior year quarter, more than offsetting the impact of lower metal prices and asset sales. Free cash flow was $119 million in the second quarter, slightly below the prior year quarter. During the quarter the Company paid $75 million towards its project debt facilities.

Revenue totaled $1.9 billion compared to $1.8 billion in the second quarter of 2014 primarily due to higher copper production and sales at Batu Hijau that helped offset lower metal prices and asset sales. During the second quarter of 2015, Batu Hijau mined higher grade ore and operated and shipped at full capacity. The prior year quarter was impacted by a temporary export ban.

Average net realized gold and copper price was $1,179 per ounce and $2.41 per pound, respectively, compared with $1,283 per ounce and $3.01 per pound, respectively, in the prior year quarter.

Attributable gold production totaled 1.24 million ounces, compared to 1.22 million ounces in the second quarter of 2014. Higher production at Batu Hijau and Tanami more than offset the impact of divesting Jundee and La Herradura. Including the pending sale of Waihi, Newmont will have generated approximately $1.6 billion in fair value asset sales since 2013 while maintaining attributable gold production. Attributable copper production totaled 41,000 tonnes compared to 20,000 tonnes in the year ago period due to higher grade ore at Batu Hijau.

Gold and copper AISC was $909 per ounce and $1.61 per pound, respectively, compared with $1,063 per ounce and $3.69 per pound, respectively, in the prior year quarter. Gold and copper CAS were $638 per ounce and $1.20 per pound, respectively, compared with $744 per ounce and $2.53 per pound, respectively, in the second quarter of 2014. Unit costs benefitted from ongoing cost and efficiency improvements, lower fuel prices and favorable Australian dollar exchange rates, and improved production volumes, particularly at Batu Hijau and Yanacocha.

Capital expenditures for the second quarter were $322 million, including $170 million of sustaining capital. Development capital was higher than the prior year primarily due to the construction of Merian in Suriname and Long Canyon Phase 1 in Nevada. Sustaining capital was lower mostly due to timing and a reduction of the full year forecast spend of about 5%.

2015 – 2017 OUTLOOK

Newmont has updated its gold production and cost outlook to include the impact of Long Canyon Phase 1, the pending acquisition of CC&V, and pending sale of Waihi. Attributable gold production is expected to increase from between 4.7 and 5.1 million ounces in 2015 to between 5.2 and 5.5 million ounces by 2017. In 2015, expected attributable gold production is up 3% from prior guidance primarily due to the inclusion of CC&V as well as improved productivity and mill utilization at Tanami and higher production at Batu Hijau. Attributable copper production outlook for 2015 is also up roughly 10% from prior guidance due to improved grade and face position at Batu Hijau.

The revised 2015 outlook includes a reduction in Asia Pacific and Africa region costs of approximately 6% each compared to previous guidance. Boddington and Tanami CAS and AISC outlook for 2015 are lower than previous estimates primarily due to lower oil prices and Australian dollar exchange rates, as well as efficiency improvements. Africa cost outlook for 2015 is improved due to lower direct spend related to power load shedding and processing of higher grade stockpiles. Consolidated AISC per ounce is expected to be between $920 and $980 in 2015, holding relatively steady at between $900 and $1,000 in 2017. Copper all-in sustaining costs per pound at Boddington are reduced in 2015 due to lower oil prices and Australian dollar exchange rates, as well as efficiency improvements. The long term outlook for copper production and costs remain unchanged for 2017.

The updated 2015 outlook includes reduced capital spending at Carlin and Twin Creeks in Nevada, as well as Boddington and Batu Hijau in Asia Pacific mostly due to optimized mine plans, cost savings and some delayed spend, offset by additional capital spend at the newly acquired CC&V gold mine in Colorado.

Debt – Year-to-date, Newmont has paid $200 million toward its existing term loan and $80 million toward project debt in Ghana and Indonesia. Newmont remains on track to pay down further debt in 2015.

Projects Update

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 Carlin’s Leeville underground mine. The shaft provides ventilation required to increase production and decrease mine costs over the 11 year mine life at Leeville. Capital costs for the project are estimated at between $300 and $350 million, a reduction of $50 million from prior guidance. Approximately $60 to $70 million will be spent in 2015.

The Cripple Creek & Victor acquisition is expected to close in early August. CC&V lowers Newmont’s cost profile with expected CAS of between $725 and $775 per ounce and AISC of between $825 and $875 per ounce in 2016 and 2017. Gold production is expected to average between 350,000 and 400,000 ounces in 2016 and 2017. Total capital costs for Newmont are approximately $200 million, with between $50 and $60 million to be spent in 2015.

Merian is progressing on schedule and on budget. Merian 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. 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 scheduled for start-up in late 2016.

Long Canyon Phase 1 is expected to achieve commercial production in the first half of 2017. This first phase of development consists of an open pit mine and heap leach operation with production of between 100,000 and 150,000 ounces per year over an eight year mine life. Estimated average costs applicable to sales are expected to be between $400 and $500 per ounce and all-in sustaining costs of between $500 and $600 per ounce over the life of the mine, in the first quartile for gold production. Total capital costs for the project are estimated at between $250 and $300 million allocated roughly evenly in 2015 and 2016 with minimal spending in 2017.

The Tanami Expansion and Ahafo Mill Expansion represent additional upside not currently included in the 2015 – 2017 outlook.

Tanami Expansion includes constructing a second decline in the mine and building incremental capacity in the plant to increase profitable production and serve as a platform for exploration drilling to support future expansion. For a capital cost of between $100 and $120 million, the project would add incremental gold production of 100,000 to 125,000 ounces (first five year average) at lower costs and increase mine life by three years. If approved later this year, additional production would come on line 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 late 2017.

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. The net income (loss) adjustments are presented net of tax generally at Company’s statutory effective tax rate of 35% and net of our partners’ noncontrolling interests when applicable. The corollary impact of the adjustments through the Company’s Valuation allowance is shown separately. 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 (Adjusted 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.

Management of the Company uses EBITDA and EBITDA adjusted for non-core or unusual items (Adjusted EBITDA) as non-GAAP measures to evaluate the Company’s operating performance. EBITDA and Adjusted EBITDA are non-U.S. GAAP measures. EBITDA and Adjusted EBITDA do not represent, and should not be considered an alternative to, net earnings (loss), operating earnings (loss), or cash flow from operations as those terms are defined by GAAP, and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Although Adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements by other companies, our calculation of Adjusted EBITDA is not necessarily comparable to such other similarly titled captions of other companies. The Company believes that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. Management’s determination of the components of Adjusted EBITDA 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 Earnings before interest, taxes and depreciation and amortization and Adjusted earnings before interest, taxes and depreciation and amortization as follows:

Free Cash Flow

Free cash flow is cash generated from Net cash provided from continuing operations less Additions to property, plant and mine development as presented on the Statement of Cash Flows. To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows to analyze cash flows generated from our operations. We believe Free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity. Net cash provided from continuing operations is reconciled to Free cash flow as follows:

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, such as costs applicable to sales per ounce, to provide visibility into the economics of our mining operations related to expenditures, operating performance and the ability to generate cash flow from operations.

Current GAAP-measures used in the mining 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 is a non-GAAP measure that provides additional information to management, investors, and analysts that aid in the understanding of the economics of our operations and performance compared to other producers and in the investor’s visibility by better defining the total costs associated with production.

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 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.