Newmont Announces First Quarter Operating and Financial Results

Newmont Mining Corporation (NYSE: NEM) (“Newmont” or the “Company”) today reported first quarter 2014 financial and operating results.

“We are building on the momentum we established in 2013 with strong cost and production performance in the first quarter of 2014,” said Gary Goldberg, President and Chief Executive Officer. “Our team drove down all-in sustaining costs by $82 million compared to the prior year quarter through sustainable cost and efficiency improvements. We are also delivering on our commitment to improve mining fundamentals, which led to a 40 percent increase in gold production at Tanami compared to the prior year quarter. We are confident we can maintain this trajectory as the year progresses, as evidenced by our updated outlook for lower costs and higher production for Africa.”

Highlights for the first quarter

• Achieved reported net income attributable to shareholders from continuing operations of $117 million, or $0.23 per basic share, and adjusted net income1 of $108 million, or $0.22 per basic share;
• Generated cash from continuing operations of $183 million;
• Generated cost savings of $82 million in gold all-in sustaining costs2 (“AISC”), which equates to $1,034 per ounce, down 8 percent from the prior year quarter;
• Realized costs applicable to sales (“CAS”) of $751 per ounce of gold and $2.71 per pound of copper, a decrease of 1 percent and an increase of 19 percent, respectively, over first quarter last year;
• Delivered 1.2 million ounces and 24 thousand tonnes of attributable gold and copper production, with higher gold production coming from our Australia/New Zealand and Africa operations;
• Improved AISC outlook3 by 13 percent, and production outlook by 2 percent in Africa; and
• Declared a second quarter dividend of $0.025 per share in accordance with the Company’s gold price-linked dividend policy4.

First Quarter Financial Results

The Company reported attributable net income from continuing operations of $117 million, or $0.23 per basic share, compared with $314 million, or $0.63 per share in 2013. The Company reported adjusted net income of $108 million, or $0.22 per basic share, compared with $353 million, or $0.70 per basic share a year earlier. Improved production and stable operating costs relative to the prior year quarter were offset by declines in average realized gold and copper prices of approximately 21 percent and 20 percent, respectively. Reduced spending on exploration, advanced projects, and sustaining capital also led to $82 million in lower gold AISC this quarter.

Summary of first quarter 2014 financial results compared with 2013:

• Generated revenue of $1.8 billion compared with $2.2 billion in 2013;
• Gold and copper AISC of $1,034 per ounce and $3.67 per pound, respectively, compared with $1,121 per ounce and $3.38 per pound, respectively;
• Average realized gold and copper price of $1,293 per ounce and $2.50 per pound, respectively, compared with $1,631 per ounce and $3.12 per pound, respectively;
• Gold and copper CAS of $751 per ounce and $2.71 per pound, respectively, compared with $760 per ounce and $2.27 per pound, respectively; and
• Cash flow from continuing operations of $183 million compared with $439 million.

Attributable gold production increased approximately 4 percent from 2013 levels due to production from the new Akyem operation, as well as higher production from Australian operations, partially offset by lower production from Peru as a result of the planned stripping campaign at Yanacocha. Attributable copper tonnes produced were 20 percent higher with the contribution from the Phoenix Copper Leach operation in Nevada. Gold CAS remained stable over last year. Gold AISC was reduced by 8 percent, primarily due to cost and efficiency improvements.

First Quarter Operating Results by Region

North America

Attributable gold production at Carlin decreased 1 percent from the prior year quarter, primarily due to planned lower grades at Mill 6. CAS per ounce increased 4 percent due to planned stockpile and leach pad inventory adjustments, partially offset by lower operating costs.

Attributable gold production at Phoenix increased 4 percent from the prior year quarter due to slightly higher grade at the Phoenix mill. Copper pounds produced increased 71 percent due to production from the Phoenix Copper Leach operation, which entered commercial production in the fourth quarter of 2013. Gold CAS per ounce decreased 48 percent due to higher ounces sold and a higher allocation of costs to copper with the copper leach facility in production. Copper CAS per pound decreased 25 percent due to higher copper pounds sold as a result of the new copper leach facility.

Attributable gold production at Twin Creeks decreased 3 percent from the prior year quarter due to lower production following the sale of Midas, partially offset by higher mill throughput at the Autoclave. CAS per ounce decreased 1 percent due to more ounces sold.

Attributable gold production at La Herradura decreased 49 percent from the prior year quarter due to the suspension of their explosives permit. CAS per ounce decreased 6 percent due to a decrease in stripping with the ramp up of production after receiving the explosives permit at the end of February partially offset by lower ounces sold.

Gold AISC in North America was $958 per ounce, a decrease of 7 percent over the prior year quarter due to realization of operating efficiencies, reduced exploration and advanced project spend and reduced royalties. Copper AISC was $2.55 per pound, a decrease of 32 percent over prior year quarter due to increased copper production from Phoenix Copper Leach.

South America

Attributable gold production at Yanacocha decreased 25 percent from the prior year quarter mainly due to the planned stripping phase at the Tapado Oeste pit. Production is expected to increase in the second half of 2014 as mining returns to higher grade ore at Tapado Oeste. CAS per ounce increased 87 percent from the prior year quarter primarily due to higher direct mining costs associated with the current stripping campaign.

Gold AISC in South America was $1,403 per ounce, an increase of 59 percent over the prior year quarter due to higher production costs and lower volume resulting from the stripping campaign.

Australia/New Zealand

Attributable gold production at Boddington decreased 2 percent from the prior year quarter, primarily due to lower grades. Copper production was in line with the prior year quarter. Boddington realized record-setting throughput levels this quarter due to sustainable process improvements implemented through the Full Potential program. These benefits were offset by the lower grades. Gold CAS decreased 3 percent per ounce due to a combination of lower mill maintenance costs and favorable foreign exchange rates. Copper CAS increased 12 percent per pound, primarily due to planned stockpile inventory adjustments.

Attributable gold production at Tanami increased 40 percent from the prior year quarter, primarily as a result of higher grades from the Auron ore body and lower mining dilution from improved mining practices. CAS per ounce decreased by 45 percent due to higher production coupled with lower operating costs and favorable foreign exchange rates.

Attributable gold production at Jundee decreased 17 percent from the prior year quarter primarily as a result of lower ore grade milled. CAS per ounce decreased by 6 percent as a result of lower underground mining costs and favorable foreign exchange rates, partially offset by lower production.

Attributable gold production at Waihi decreased 10 percent from the prior year quarter primarily as a result of lower ore grade milled and a build-up of gold in circuit inventory, partially offset by higher throughput. CAS per ounce decreased by 18 percent as a result of lower underground mining costs.

Attributable gold production at KCGM increased 15 percent from the prior year quarter primarily as a result of higher grades and tons milled. CAS per ounce decreased by 17 percent as a result of the higher production.

Gold AISC in Australia/New Zealand was $942 per ounce, a decrease of 17 percent over the prior year quarter due to lower production costs, exploration costs, and sustaining capital spend. Copper AISC was $3.27 per pound, an increase of 11 percent over the prior year due to higher CAS per pound.

Indonesia

Attributable gold and copper production at Batu Hijau increased 14 percent and 11 percent, respectively, from the prior year quarter due to higher ore grade and recovery for both gold and copper. However, the Company was unable to export approximately 2 thousand attributable ounces of gold and 2.5 thousand attributable tonnes of copper as a result of new export regulations imposed in January 2014 by the Indonesian government.

CAS increased 29 percent per ounce of gold and 46 percent per pound of copper, due to the planned stockpile inventory adjustments and lower ounces and pounds sold.

Gold AISC in Indonesia was $2,167 per ounce, an increase of 8 percent over the prior year quarter and copper AISC was $4.63 per pound, an increase of 25 percent over the prior year quarter, due to lower ounces and pounds sold.

Africa

Attributable gold production at Ahafo decreased 16 percent from the prior year quarter due to lower processed ore grade. CAS per ounce was in line with the prior year. The new Akyem operation is performing well, providing 120,000 ounces of production at CAS of $311 per ounce.

Gold AISC in Africa was $616 per ounce this quarter, a decrease of 45 percent over the prior year quarter due to new production at Akyem and lower exploration and advanced project expense and sustaining capital.

Outlook Update

The Company continues to expect total attributable gold production of between 4.6 to 4.9 million ounces at CAS of $740 to $790 per ounce and AISC of $1,075 to $1,175 per ounce. The Company also continues to expect total copper production of between 95 to 110 thousand tonnes at CAS of $2.00 to $2.25 per pound and AISC of $2.75 to $2.95 per pound. As a result of mine plan optimization at the Ahafo operation in Africa, the Company is increasing production outlook from between 785,000 to 850,000 ounces to between 790,000 to 870,000 ounces for the region. Both Ahafo and Akyem are realizing lower costs and the Company is reducing its Africa regional CAS from $575 to $625 per ounce to $510 to $555 per ounce, and AISC from $795 to $865 per ounce to $690 to $755 per ounce for 2014. The Company also announced a decrease in expected interest expense of $25 million. Offsetting that, the 2014 tax rate is now expected to be between 37 and 40 percent, primarily due to the tax treatment of the sale of Midas and higher taxes in Peru.

Balance Sheet and Financial Flexibility

Cash from continuing operations was $183 million. The Company also received cash of $57 million from the sale of its Midas operation and $25 million from the sale of its investment in Paladin Energy. At quarter end, the Company held $1.5 billion of consolidated cash on its balance sheet.

The Company also recently closed on a term loan of $575 million. The term loan provides for a single, delayed drawdown through July 15, 2014, with a maturity date five years from drawdown. The loan is intended to retire the $575 million of convertible debt maturing July 2014. The Company now expects a lower 2014 interest expense of between $325 to $350 million. Concurrent with closing the term loan, the Company also renewed its $3.0 billion corporate revolving credit facility, extending the maturity date two years to March 31, 2019. At March 31, there were no outstanding borrowings under the facility.

Capital Update

Total capital spent in the first quarter was $235 million. Capital expenditures in North America during the first quarter of 2014 were primarily related to the development of the Turf Leeville vent shaft in Nevada. Capital expenditures in South America, Australia and New Zealand, Indonesia, and Africa were primarily for sustaining capital.

The Company continues to manage its wider project portfolio to maintain flexibility to address the development risks associated with its projects including permitting, local community and government support, engineering and procurement availability, technical issues, escalating costs and other associated risks that could adversely impact the timing and costs of certain opportunities.

Indonesia Update

In January 2014, the Indonesian government issued new regulations for the export of copper concentrate that contain potentially restrictive conditions for obtaining an export permit, as well as a significant, progressive export duty. While the 2009 mining law preserves the validity of PT Newmont Nusa Tenggara’s (“PTNNT”, the entity operating the Batu Hijau mine) Contract of Work (the investment agreement entered into by PTNNT and the Indonesian government in 1986, which includes the right to export copper concentrates and a prohibition against new taxes, duties, and levies), the Indonesian government has stated its intention to enforce the new regulations on PTNNT’s operations and has not yet recognized PTNNT’s rights to export copper concentrate and only pay the taxes, duties, and levies specified in the Contract of Work. The Company believes that these new 2014 regulations conflict with the Contract of Work. Although PTNNT is continuing to engage with government officials in Indonesia in an effort to resolve this issue and gain clarity on implementation of the new regulations, while also considering other remedies, including possible legal action, the Company can make no assurances that the new regulations will not impact operations and/or outlook. In April 2014, PTNNT received the required approval as a registered exporter from the Ministry of Trade and continues working through the process and engaging with the government to secure the newly required export permit. At this time, operations continue at Batu Hijau. However, to the extent there are continued delays in obtaining approvals for 2014 exports, PTNNT will implement contingency plans to scale back production taking into consideration copper concentrate storage capacity and in-country smelter availability, which would impact the Company's ability to achieve its outlook. For a discussion of this and other factors which could impact future financial performance and operating results in Indonesia, see Item 1A, under the heading “Risk Factors,” of the Company’s Form 10-K, filed on February 21, 2014.

Operating Results Table

Outlook Tables

Supplemental Information

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.

Reconciliation of Adjusted Net Income (loss) to GAAP Net Income (loss)

Management of the Company uses Adjusted net income to evaluate the Company’s operating performance, and for planning and forecasting future business operations. The Company believes the use of Adjusted net income 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 are evaluated periodically and based, in part, on a review of non-GAAP financial measures used by mining industry analysts. Net income attributable to Newmont stockholders is reconciled to Adjusted net income as follows:

CAS 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 both a consolidated and attributable to Newmont basis. Attributable costs applicable to sales are based on our economic interest in production from our mines. For operations where we hold less than a 100 percent economic share in the production, we exclude the share of gold or copper production attributable to the non-controlling interest. We include attributable costs applicable to sales per ounce/pound to provide management, investors and analysts with information with which to compare our performance to other gold producers. 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.

Net attributable costs applicable to sales per ounce measures the benefit of copper produced in conjunction with gold, as a credit against the cost of producing gold. A number of other gold producers present their costs net of the contribution from copper and other non-gold sales. We believe that including a measure on this basis provides management, investors and analysts with information with which to compare our performance to other gold producers, and to better assess the overall performance of our business. In addition, this measure provides information to enable investors and analysts to understand the importance of associated non-gold revenues to our cost structure.

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

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 and attributable 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 All-in sustaining costs, 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 Phoenix, Boddington, and Batu Hijau 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 Phoenix, Boddington, and Batu Hijau mines.