Newmont Announces Full Year and Fourth Quarter 2015 Results

Newmont Mining Corp. (NYSE: NEM) (Newmont or the Company) announced full-year 2015 operating and financial results, including:

• Net income: Delivered adjusted net income¹ of $507 million or $0.98 per share; GAAP net income attributable to shareholders from continuing operations was $193 million or $0.38 per share
• EBITDA: Increased consolidated adjusted EBITDA² by 29% over 2014 to $2.7 billion
• Consolidated cash flow: More than doubled free cash flow³ to $756 million and generated cash from continuing operations of $2.2 billion
• Gold all-in sustaining costs (AISC)⁴: Lowered gold AISC 10% to $898 per ounce, ending the year within guidance

• Gold costs applicable to sales (CAS): Lowered gold CAS 10% to $633 per ounce, ending the year within guidance
• Attributable production: Delivered 5.04 million ounces of attributable gold production, ending the year within guidance
• Portfolio Optimization: Completed the Turf Vent Shaft, progressed Merian, Long Canyon and the Tanami Expansion Project on time and on budget, and acquired Cripple Creek & Victor

• Outlook: Provided long-term production and cost outlook, including profitable gold production of between 4.5 and 5.0 million ounces at AISC below $1,000 per ounce

“Newmont completed the year with safer and more efficient operations, a stronger balance sheet and an improved portfolio,” said Gary Goldberg, President and Chief Executive Officer. “We increased EBITDA by almost one-third to $2.7 billion, more than doubled free cash flow to $756 million, and lowered net debt by 19%, despite a 9% drop in realized gold price. Our performance improved as a result of our disciplined and systematic focus on cost and efficiency. This delivered a 10% reduction in AISC and supported our ability to fund five profitable development projects and acquire Cripple Creek & Victor. Our plans for 2016 and beyond remain focused on improving our underlying business, strengthening our portfolio and creating value for shareholders.”

Fourth quarter 2015 highlights include gold AISC below $1,000 per ounce for the sixth consecutive quarter, adjusted EBITDA of nearly $500 million and gold production in line with the prior year quarter. Fourth quarter results were impacted by lower metal prices, delayed export shipments from Indonesia due to late receipt of an export permit, and other non-recurring costs.

• Net income: Delivered adjusted net income of $20 million or $0.04 per share; GAAP net income attributable to shareholders from continuing operations of $(247) million or $(0.48) per share was impacted by lower metal prices and non-recurring reclamation charges and adjustments
• EBITDA: Generated consolidated adjusted EBITDA of $466 million down from the prior year quarter due to lower metal prices
• Consolidated cash flow: Generated cash from continuing operations of $275 million; free cash flow was $(185) million due to lower metals pricing and timing of project spend
• Gold AISC: Maintained gold AISC at $999 per ounce, the sixth consecutive quarter below $1,000
• Gold CAS: Reported gold CAS at $680 per ounce in the fourth quarter, an 8% increase from the prior year quarter mostly due to lower mill grades at Yanacocha and Ahafo
• Attributable production: Produced 1.3 million ounces of gold in line with prior year quarter
• Shareholder returns: Maintained fourth quarter dividend of $0.025 per share⁵ in line with Newmont’s revised gold price-linked dividend policy

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¹ Non-GAAP measure. Based on fully diluted shares outstanding. See the end of the release for reconciliation to net income.
² Non-GAAP measure. See the end of the release for reconciliation.
³ Non-GAAP measure. See the end of the release for reconciliation.
⁴ Non-GAAP measure. See the end of the release for reconciliation.
⁵ Such policy is non-binding. Declaration of future dividends remains subject to approval and discretion of the Board of Directors.

Fourth Quarter and Full Year 2015 Results

Adjusted net income was $20 million, or $0.04 per share in the fourth quarter and $507 million or $0.98 per share for the year; compared to $86 million, or $0.17 per share in the prior year quarter and $545 million or $1.09 per share for 2014. Primary adjustments to net income in the fourth quarter included a non-cash reclamation charge, tax valuation allowance adjustments and a one-time payment related to prior period royalties and taxes from the revised Ghana Investment Agreement. GAAP net income (loss) attributable to shareholders from continuing operations was $(247) million or $(0.48) per share in the fourth quarter and $193 million or $0.38 per share for the full year, compared to $39 million or $0.08 per share for the prior year quarter and $548 million or $1.10 per share in 2014.

Revenue totaled $1,816 million in the fourth quarter and $7,729 million for the year, compared to $2,017 million in the prior year quarter and $7,292 million for 2014. During the quarter, higher production at Batu Hijau and the addition of Cripple Creek & Victor help offset lower metal prices and the impact of divestitures. Batu Hijau continued to mine higher grade Phase 6 ore but fourth quarter copper sales volumes were impacted by the export permit delay, and 18 percent lower than the third quarter. Newmont received a six month export permit on November 20, 2015, and revenue from approximately 27 million pounds of copper and 39,000 ounces of gold shipped in December is expected to be recognized in the first quarter 2016.

Average realized price was $1,084 per ounce for gold for the fourth quarter, down from $1,194 in the prior year quarter; and $1,141 for the year, down from $1,258 in 2014. Average realized copper price per pound was $1.86 for the fourth quarter, down from $2.55 in the prior year quarter; and $2.13 for the year, down from $2.65 in 2014.

Attributable gold production was 1.25 million ounces in the fourth quarter, compared to 1.26 million ounces in the prior year quarter; and 5.04 million ounces for the year, compared to 4.85 million ounces in 2014. During the quarter, higher production at Batu Hijau and the addition of Cripple Creek & Victor offset production declines at Yanacocha and Ahafo. Newmont has generated approximately $1.7 billion in fair value asset sales since 2013 while maintaining steady attributable gold production.

Attributable copper production was 39,000 tonnes in the fourth quarter, up from 29,000 tonnes in the prior year quarter, and 166,000 tonnes for the full year, up from 86,000 tonnes in 2014. Copper production increased 34% over the prior year quarter due to higher grade ore at Batu Hijau.

CAS was $680 per gold ounce in the fourth quarter, compared to $631 per ounce in the prior year quarter; and $633 per ounce for the year, down from $706 per ounce in 2014. Full year CAS improvements were driven by ongoing cost and efficiency gains realized through the Full Potential program, as well as favorable exchange rates and oil prices. Fourth quarter CAS was impacted by lower production at Yanacocha and Ahafo, and delayed sales from Batu Hijau. Copper CAS was $1.18 per pound in the fourth quarter, down from $1.86 in the prior year quarter; and $1.21 per pound for the year, down from $2.88 in 2014.

AISC was $999 per gold ounce in the fourth quarter, compared to $927 in the prior year quarter; and $898 per ounce for the full year, compared to $1,002 in 2014. AISC reductions for the year were driven by ongoing cost and efficiency improvements as well as favorable exchange rates and oil pricing. Fourth quarter AISC increased versus the prior year quarter due to lower volumes at Yanacocha and timing of sustaining capital spend. Copper AISC was $1.51 per pound in the fourth quarter, down from $2.39 in the prior year quarter, and $1.59 for the full year, down from $3.65 in 2014.

Capital expenditures for the fourth quarter were $460 million of which $248 million was sustaining capital. Full year capital spend was at the low end of guidance at $1.4 billion, of which $746 million was sustaining capital. Sustaining capital was lower for the year due to continued cost and efficiency improvements as well as some timing impacts. Development capital was used to construct the Turf Vent Shaft, Merian and Long Canyon. Fourth quarter sustaining capital increased to build water treatment facilities at Yanacocha and a paste fill plant at Carlin.

Consolidated cash flow from continuing operations was $275 million in the fourth quarter and $2,157 million for the full year, compared to $562 million in the prior year quarter and $1,451 million for 2014, as higher volumes, cost and efficiency improvements and favorable oil prices and Australian dollar exchange rates more than offset the impact of lower metal prices. Free cash flow was $(185) million in the fourth quarter compared to $218 million in the prior year quarter and $756 million for the full year, a $415 million improvement from 2014. The Company held $2,782 million of consolidated cash on its balance sheet at year-end 2015, up 16% from the prior year.

Projects Update

• Cripple Creek & Victor (CC&V) expansion includes a new leach pad, recovery plant and mill. Leach pad construction is slightly ahead of schedule with first production expected in Q2 2016. The recovery plant remains on schedule to be completed later this year. Finally, mill availability has improved following a scheduled shut down in December, and Newmont expects to deliver further improvements in the first half of 2016. Gold production for 2016 is expected to be between 350,000 and 400,000 ounces at AISC of between $650 and $700, with production weighted toward the latter part of the year. The expansion remains on budget with development costs of approximately $200 million, of which 50% remain to be spent in 2016.
• Merian is 66% complete. The project remains below budget and on track to reach commercial production in the second half of 2016. Merian will produce between 400,000 and 500,000 ounces of gold annually during its first five years at AISC of between $650 and $750 per ounce. Newmont’s 75% share of development capital is estimated at between $575 and $625 million, after a further $50 million reduction in consolidated capital. An expenditure of between $170 million and $210 million remains in 2016.
• Long Canyon Phase 1 is just over 45% complete and remains on budget and schedule to reach commercial production in the first half of 2017. This first phase of development includes an open pit mine and heap leach operation with production of between 100,000 and 150,000 ounces per year at AISC of between $500 and $600 per ounce over an eight year mine life. About half of the total capital costs of between $250 and $300 million will be spent in 2016 with minimal spending in 2017.
• Tanami Expansion Project 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 future expansion. The project is on budget and on schedule to deliver additional production beginning in 2017. The expansion will improve annual gold production to between 425,000 and 475,000 ounces per year at AISC of between $700 and $750 per ounce for the first five years, and will increase mine life by three years. Capital costs for the project are estimated at between $100 and $120 million with about half of that amount spent in 2016.
• Ahafo Mill Expansion and Subika Underground represent opportunities not currently included in Newmont’s outlook. The two projects would increase profitable production at Ahafo while lowering costs and offsetting the impacts of lower grades and harder ore. Both projects will be reviewed in the second half of 2016.

Outlook

Newmont updated its long-term outlook in December 2015. Guidance calls for AISC below $1,000 per ounce and profitable production of at least 4.5 to 5.0 million ounces per year through 2020.

Attributable gold production is expected to increase from between 4.8 and 5.3 million ounces in 2016 to between 5.2 and 5.7 million ounces in 2017, and remain stable at between 4.5 and 5.0 million ounces through 2020. New production at CC&V, Long Canyon Phase 1, Merian and the Tanami expansion are expected to offset the impacts of maturing operations at Yanacocha and mine sequencing at Batu Hijau. Projects that are not yet approved including Ahafo Mill Expansion, Subika Underground and Northwest Exodus represent upside of between 250,000 and 400,000 ounces of gold production beginning in 2018.

Attributable copper production is expected to be between 120,000 and 160,000 tonnes in 2016 and 2017 before decreasing to between 70,000 and 110,000 tonnes by 2018. The decline is due to the depletion of higher grade Phase 6 ore at Batu Hijau in 2018. 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 $900 and $960 per ounce in 2016 to between $850 and $950 per ounce in 2017. 2018 costs are expected to remain below $1,000 per ounce despite higher stripping at Boddington and in Nevada and lower production at Batu Hijau. CAS is expected to be between $650 and $700 per ounce in 2016, and remain stable at between $650 and $750 per ounce in 2017 and 2018. Costs benefit from higher grades at Batu Hijau and Carlin underground mines through 2017, and from lower cost production at Tanami and Merian through 2018. Ongoing cost and efficiency improvements are expected to offset lower grades and throughput at Ahafo and maturing operations at Yanacocha. Full Potential savings and lower cost ounces from projects that have yet to be approved could further improve costs in the longer term.

Copper cost outlook – Copper AISC is expected to average between $1.50 and $1.70 per pound in 2016 with higher grade ore at Batu Hijau, and increase slightly to between $1.60 and $1.80 per pound in 2017, and to between $2.40 and $2.60 per pound in 2018. CAS is expected to be between $1.20 and $1.40 per pound in 2016 and 2017, and increase to between $1.80 and $2.00 per pound by 2018. The increase in costs over the period is mostly due to lower production volumes at Batu Hijau as Phase 6 ore is depleted as well as higher stripping at Boddington though 2018.

Capital – 2016 sustaining capital is expected to be between $700 and $750 million increasing to between $800 and $900 million in 2017 to cover equipment rebuilds, water treatment and tailings storage facilities. Technical and operational cost and efficiency improvements represent further upside. Sustaining capital is expected to remain stable at between $700 and $800 million to cover infrastructure, equipment and ongoing mine development in the longer term.

Debt – Newmont paid $200 million toward its existing term loan and $250 million toward project debt in Ghana and Indonesia in 2015. The Company expects to continue to repay project debt and will analyze opportunities to pay down other Corporate debt in 2016, targeting the highest rates and nearest-term maturities first.

2016 Outlook^a

(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:

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Note: Quarterly amounts may not calculate to annual amounts due to rounding.

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: