Newmont Announces Third Quarter Operating and Financial Results

Newmont Mining Corp. (NYSE: NEM) (Newmont or the Company) announced third quarter results, including $813 million in operating cash flow, and $758 million in adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA)¹.

• Net income: Achieved GAAP net income attributable to shareholders from continuing operations of $202 million, or $0.38 per share, compared to $210 million or $0.42 per share in the prior year quarter; adjusted net income² was $126 million, or $0.23 per share, compared to $249 million or $0.50 per share in the prior year quarter
• Consolidated Adjusted EBITDA: Delivered Adjusted EBITDA of $758 million in the third quarter, compared to $455 million in the prior year quarter
• Consolidated cash flow: Generated cash from continuing operations of $813 million compared to $328 million in the prior year quarter and free cash flow³ from continuing operations of $478 million, compared to $51 million in the prior year quarter
• All-in sustaining costs (AISC)⁴: Improved gold AISC to $835 per ounce compared with $995 per ounce in the prior year quarter, and copper AISC to $1.54 per pound compared to $6.61 per pound in the prior year quarter
• Costs applicable to sales (CAS): Improved gold CAS to $608 per ounce compared with $705 per ounce in the prior year quarter, and copper CAS to $1.15 per pound compared to $5.73 per pound in the prior year quarter
• Attributable production: Delivered 1.34 million ounces and 48,000 tonnes of attributable gold and copper production, respectively, compared to 1.15 million ounces and 13,000 tonnes, respectively, in the prior year quarter
• Outlook: Improved 2015 cost outlook⁵ as a result of cost and efficiency improvements, favorable oil prices and Australian dollar exchange rates, and some delayed spend; expect AISC of between $880 and $940 per ounce, and CAS of between $620 and $660 per ounce; attributable gold production maintained at between 4.7 and 5.1 million ounces
• Portfolio: Recently approved Tanami Expansion project reduces Tanami overall costs and improves Tanami production to between 425,000 and 475,000 ounces per year (first five years of expansion)
• Shareholder returns: Maintained third quarter dividend of $0.025 per share⁶

“We delivered a 16 percent reduction in all-in sustaining costs and generated $758 million in adjusted EBITDA and $478 million in free cash flow – despite lower metal prices – through a sustained focus on improving costs and efficiency. The Cripple Creek & Victor integration process is underway and we are moving forward with our Tanami Expansion project in Australia, which is expected to generate an IRR of more than 35% in the current metal price environment. The project involves building a second decline in the underground mine and incremental capacity in the plant to increase profitable production and extend mine life,” said Gary Goldberg, President and Chief Executive Officer.

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¹ Non-GAAP measure. See end of release for reconciliation.
² Non-GAAP measure. Based on fully diluted shares outstanding. See end of release for reconciliation to net income.
³ Non-GAAP measure. See end of release for reconciliation.
⁴ Non-GAAP measure. See end of release for reconciliation.
⁵ Outlook constitutes forward-looking statements, which are subject to risk and uncertainties. See Cautionary Note.
⁶ Such policy is non-binding. Declaration of future dividends remains subject to approval and discretion of the Board of Directors.

Third Quarter Summary Results

GAAP net income attributable to shareholders from continuing operations was $202 million, or $0.38 per share, compared to $210 million or $0.42 per share a year ago. Adjusted net income was $126 million, or $0.23 per share, down from $249 million or $0.50 per share in the prior year quarter.

Consolidated cash flow from continuing operations was $813 million in the third quarter, compared to $328 million in the prior year quarter, as higher production, sales volumes and cost improvements more than offset the impact of lower metal prices. Free cash flow was $478 million in the third quarter, more than nine times the free cash flow of the prior year quarter.

Gold and copper AISC was $835 per ounce and $1.54 per pound, respectively, compared with $995 per ounce and $6.61 per pound, respectively, in the prior year quarter. Gold and copper CAS were $608 per ounce and $1.15 per pound, respectively, compared with $705 per ounce and $5.73 per pound, respectively, in the third quarter of 2014. Unit costs benefitted from ongoing cost and efficiency improvements, lower fuel prices and favorable Australian dollar exchange rates, and improved sales volumes, particularly at Batu Hijau, Boddington and Tanami.

Revenue totaled $2.0 billion compared to $1.7 billion in the third quarter of 2014 as higher production and sales volumes at Batu Hijau, Boddington and Tanami more than offset lower metal prices. During the third 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 $1,104 per ounce and $1.95 per pound, respectively, compared with $1,270 per ounce and $2.71 per pound, respectively, in the prior year quarter.

Attributable gold production totaled 1.34 million ounces, up 16% from the prior year quarter due to higher production at Batu Hijau, Tanami and Boddington, and the addition of Cripple Creek & Victor. Boddington production benefited from improved mill utilization as a result of Full Potential and higher grades. Tanami production was up from the prior year quarter due to higher grade ore and improved throughput. Including the pending sale of Waihi, Newmont has generated approximately $1.7 billion in fair value asset sales since 2013 while maintaining attributable gold production.

Attributable copper production totaled 48,000 tonnes compared to 13,000 tonnes in the year ago period due to higher grade ore at Batu Hijau.

Capital expenditures for the third quarter were $335 million, including $172 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 year to date due to timing and continued cost improvements, resulting in a reduction of the full year forecast spend of about 13%. Long-term sustaining capital guidance remains at between $850 and $950 million.

2015 OUTLOOK

Newmont’s revised 2015 CAS and AISC outlook are down 2% and 4%, respectively, driven by a reduction in Asia Pacific and Africa region costs compared to previous guidance as well as lower than expected inventory costs at CC&V. Asia Pacific costs are lower than previous estimates primarily due to cost and efficiency improvements and some delayed spend, as well as lower oil prices and Australian dollar exchange rates. Africa cost outlook for 2015 is improved mostly due to better than expected power and diesel prices and Full Potential savings.

2015 gold production guidance is unchanged as better than expected production at Boddington and Akyem offset lower production at CC&V due to a slower mill ramp-up. This is not expected to impact long-term production. 2015 outlook for copper production remains unchanged.

The updated 2015 outlook includes reduced capital spending at all regions primarily due to cost savings and some delayed spend, partially offset by additional capital spend for the recently approved Tanami Expansion project.

Newmont will update long-term guidance in conjunction with the investor day to be held December 3, 2015.

Debt – Year-to-date, Newmont has paid $200 million toward its existing term loan and $130 million toward project debt in Ghana and Indonesia. Newmont will continue to analyze opportunities to pay our liabilities in advance, and could potentially repay up to a total of $750 million dollars by year end from cash flow and existing cash balances.

Projects Update

The Turf Vent Shaft is expected to achieve commercial production in the fourth quarter of 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. Total development costs for the project are estimated at between $300 and $350 million with approximately $60 to $70 million spent in 2015.

The Cripple Creek & Victor (CC&V) acquisition closed on August 3, 2015 and successful integration is underway. CC&V is expected to lower Newmont’s overall cost profile with expected cost applicable to sales and all-in sustaining cost to be updated for purchase price allocation later this year. Gold production is expected to average between 350,000 and 400,000 ounces in 2016 and 2017. Total development capital costs to complete the expansion are approximately $200 million, with between $50 and $60 million to be spent in 2015.

Merian is progressing on schedule and below 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 $650 million for Newmont’s 75 percent share. Newmont’s capital expenditure is expected to be between $290 million and $330 million in 2015 and between $170 million and $210 million in 2016. The project is scheduled for start-up in the second half of 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.

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. The expansion improves Tanami gold production to between 425,000 and 475,000 ounces per year at all-in sustaining costs of between $700 and $750 per ounce (for the first five years of the expansion) and increases mine life by three years. Capital costs for the project are estimated at between $100 and $120 million with about half of the capital spent in 2016 with the remaining allocated between 2015 and 2017. Additional production is expected to come on line in 2017.

The Ahafo Mill Expansion represents additional upside not currently included in 2015 outlook.

The 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. The Ahafo Mill Expansion is expected to be reviewed with Subika Underground in mid to late 2016. If approved in 2016, additional production would be expected in 2018.

^a2015 Outlook projections used in this release (“Outlook”) are considered “forward-looking statements” and represent management’s good faith estimates or expectations of future production results as of the date hereof. Outlook is based upon certain assumptions, including, but not limited to, metal prices, oil prices, certain exchange rates and other assumptions. For example, 2015 Outlook assumes $1,100/oz Au, $2.50/lb Cu, $0.75 USD/AUD exchange rate and $65/barrel WTI for the remaining period. AISC and CAS cost estimates do not include inflation. Such assumptions may prove to be incorrect and actual results may differ materially from those anticipated. Consequently, Outlook cannot be guaranteed. As such, investors are cautioned not to place undue reliance upon Outlook and forward-looking statements as there can be no assurance that the plans, assumptions or expectations upon which they are placed will occur.
^bNon-GAAP measure. All-in sustaining costs as used in the Company’s Outlook is a non-GAAP metric defined as the sum of cost applicable to sales (including all direct and indirect costs related to current gold production incurred to execute on the current mine plan), remediation costs (including operating accretion and amortization of asset retirement costs), G&A, exploration expense, advanced projects and R&D, treatment and refining costs, other expense, net of one-time adjustments and sustaining capital.
^cIncludes Lone Tree operations.
^dIncludes TRJV operations.
^eCC&V 2015 outlook includes 5 months of operations; acquisition closed early August 2015. Investors are cautioned that CC&V outlook remains subject to further review by management as integration continues, and CC&V 2015 CAS and AISC estimates remain subject to various factors, including potential adjustment in connection with purchase price allocation.
^fConsolidated production for Yanacocha is presented on a total production basis for the mine site; attributable production represents a 51.35% interest.
^gWaihi 2015 outlook assumes divestiture closes on October 30, 2015.
^hBoth consolidated and attributable production are shown on a pro-rata basis with a 50% ownership for Kalgoorlie.
ⁱLa Zanja and Duketon are not included in the consolidated figures above; attributable production figures are presented based upon a 46.94% ownership interest at La Zanja and a 19.45% ownership interest in Duketon.
^jConsolidated production for Batu Hijau is presented on a total production basis for the mine site; whereas attributable production represents a 48.5% ownership interest in 2015 outlook. Outlook for Batu Hijau remains subject to various factors, including, without limitation, renegotiation of the CoW, issuance of future export approvals, negotiations with the labor union, future in-country smelting availability and regulations relating to export quotas, and certain other factors.
^kConsolidated expense outlook is adjusted to exclude extraordinary items. For example, the tax rate outlook above is a consolidated adjusted rate, which assumes the exclusion of certain tax valuation allowance adjustments.

(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.

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.

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 understand the results of the continuing operations of the Company and its direct and indirect subsidiaries relating to the production and sale of minerals, by excluding certain items that have a disproportionate impact on our results for a particular period. 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. The tax valuation allowance adjustment includes items such as foreign tax credits, alternative minimum tax credits, capital losses and disallowed foreign losses. 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. Management of the Company uses EBITDA and EBITDA adjusted for non-core or certain items that have a disproportionate impact on our results for a particular period (Adjusted EBITDA) as non-GAAP measures to evaluate the Company’s operating performance. 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 EBITDA and Adjusted EBITDA 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.