Newmont Announces Third Quarter Operating and Financial Results

Newmont Mining Corp. (NYSE: NEM) (“Newmont” or “the Company”) announced strong third quarter earnings, including $328 million in operating cash flow, savings of $58 million in adjusted gold all-in sustaining costs¹, stable production and reduced cost guidance for the year.

• Net Earnings: Achieved reported net income attributable to shareholders from continuing operations of $210 million, or $0.42 per basic share, and adjusted net income² of $249 million, or $0.50 per basic share;
• Cash Flow: Generated cash from continuing operations of $328 million and $51 million in free cash flow from continuing operations;
• All-in Sustaining Costs: Gold and copper all-in sustaining costs (“AISC”) were $995 per ounce and $6.61 per pound, respectively, compared with $1,018 per ounce and $3.24 per pound, respectively, in the prior year quarter;
• Costs Applicable to Sales: Reported gold and copper costs applicable to sales (“CAS”) of $705 per ounce and $5.73 per pound, respectively, compared with $668 per ounce and $2.41 per pound, respectively, in the prior year quarter;
• Outlook: On track to meet full year production outlook³ of 4.7 to 5.0 million attributable ounces of gold, even after accounting for asset divestitures, at a lower range of CAS ($710 to $750 per ounce) and gold AISC ($1,020 to $1,080 per ounce);
• Production: Delivered 1.15 million ounces and 13,700 tonnes of attributable gold and copper production, respectively;
• Optimized Portfolio: Announced the divestiture of its Penmont stake, for total proceeds of approximately $477 million, bringing the total value of divestments to nearly $1.3 billion since 2013; and,
• Shareholder Returns: Declared a fourth quarter dividend of $0.025 per share in accordance with the Company’s gold price-linked dividend policy⁴.

“We delivered another strong quarter, driving all-in sustaining costs below $1,000 per ounce, generating $210 million in net income and $51 million of free cash flow. For 2014, we expect costs at the low end of our cost guidance and we remain on track to meet our production outlook,” said Gary Goldberg, President and Chief Executive Officer. “I am pleased to report that construction is underway at our new Merian mine in Suriname. We have also achieved a safe and efficient start-up in Indonesia, where the mine and mill are operating at full capacity and exports have resumed. Finally, the sale of our stake in the Penmont joint venture in Mexico was completed on October 6, bringing our total proceeds from the divestment of non-core assets to nearly $1.3 billion.”

Third Quarter Summary Results

The Company reported attributable net income from continuing operations of $210 million, or $0.42 per basic share, compared with $419 million, or $0.84 per basic share in the third quarter of 2013. Adjusted net income was $249 million, or $0.50 per basic share, compared with $217 million, or $0.44 per basic share, in the prior year quarter.

Revenue totaled $1.7 billion compared to $2.0 billion in the third quarter of 2013. Average realized gold and copper price was $1,270 per ounce and $2.71 per pound, respectively, compared with $1,322 per ounce and $3.10 per pound, respectively, in the prior year quarter.

Attributable gold and copper production of 1.15 million ounces and 13,700 tonnes, respectively, compares to 1.28 million ounces and 19,200 tonnes, respectively, in the prior year quarter. For gold, higher production in Africa following the start-up of Akyem in the fourth quarter of 2013 partially offset lower production in North America and Australia. North American volumes were lower primarily due to planned stripping campaigns at Carlin and Twin Creeks which are expected to continue into 2015. Australian volumes were lower due to the sale of Jundee completed July 1, 2014 and planned lower grades mined at Tanami. Copper volumes were lower due to the shut-down at Batu Hijau effective June 5, 2014 through September 23, 2014.

Gold and copper AISC was $995 per ounce and $6.61 per pound, respectively, compared with $1,018 per ounce and $3.24 per pound, respectively, in the prior year quarter. Gold and copper CAS were $705 per ounce and $5.73 per pound, respectively, compared with $668 per ounce and $2.41 per pound, respectively, in the third quarter of 2013.

Third quarter CAS and AISC include the impacts of net realizable value (“NRV”) stockpile adjustments related to revised royalties and export duties agreed at Batu Hijau. The gold and copper CAS impact of these NRVs and abnormal production costs related to suspended operations at Batu Hijau were $2,236 per ounce and $7.63 per pound, respectively.

Outlook Update

For 2014, Newmont continues to expect total attributable gold production of 4.7 to 5.0 million ounces at a lower CAS of $710 to $750 per ounce and a lower AISC of $1,020 to $1,080 per ounce. The Company also continues to expect total attributable copper production of 80,000 to 90,000 tonnes at CAS of $2.80 to $3.10 per pound and AISC of $3.50 to $3.80 per pound.

2014 capital has been reduced to between $1,150 and $1,220 million based on spending year-to-date. Sustaining capital has been reduced across the portfolio through improved asset management.

Based on year-to-date GAAP profits, the full year tax rate is now expected to be in the 17% to 22% range. Newmont’s long-term tax rate outlook remains unchanged at 37% to 40%.

Guidance for 2014 through 2016 has been adjusted to exclude La Herradura. On October 6, the Company completed the sale of its 44 percent stake in the Penmont joint venture for total proceeds of $477 million, including cash proceeds of $450 million.

Balance Sheet and Financial Flexibility

In the third quarter, cash from continuing operations was $328 million and free cash flow was $51 million. At quarter end, the Company held $1.8 billion of consolidated cash on its balance sheet.

Capital Update

Total capital spent in the third quarter was $277 million, including $184 million of sustaining capital. The primary use of development capital in the quarter was to construct the Turf Vent Shaft project in Nevada and the Merian project in South America.

Project Update

Turf Vent Shaft, Nevada: The Turf Vent Shaft Project is on track to achieve commercial production in late 2015 and is expected to add between 100,000 and 150,000 ounces of production annually. Capital costs for the project are estimated at approximately $400 million, including $214 million spent to date. The Turf Vent Shaft project provides the ventilation required to increase production and decrease mine costs over the 11 year mine life.

Merian, Suriname: The Government of Suriname granted the Right of Exploitation on August 22, 2014 and construction mobilization is underway. The government has the option to purchase a 25 percent equity ownership in Merian, which, if exercised, will bring Newmont’s ownership to 75 percent and could lower the Company’s share of capital to as low as $650 million, compared to $900 to $1,000 million on a 100 percent basis. The project gives Newmont a foothold in a prospective new district with upside potential. Gold production is expected to average 400,000 to 500,000 ounces per year during the first five years at $750 to $850 per ounce AISC with first production expected in late 2016. Merian contains gold Reserves of 4.2 million ounces at a grade of 1.22 grams per tonne.⁵

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¹ Non-GAAP measure. See end of this release for reconciliation of AISC to CAS. Adjusted gold all-in sustaining cost savings are calculated excluding costs during Q3 2013 relating to Jundee and Midas (which were sold in 2014) of $61 and $10, respectively.

² Non-GAAP measure. See end of this release for reconciliation to net income attributable to shareholders.

³ Outlook constitutes forward-looking statements, which are subject to risks and uncertainties. See Cautionary Note at end of this release.

⁴ Such policy is non-binding; declaration of future dividends remains subject to approval and discretion of the Board of Directors.

⁵ Reserves are presented as of December 31, 2013 on a consolidated basis.

Please see below for footnotes to the above table.

2014-2016 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.

Adjusted net income (loss)

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

Costs applicable to sales per ounce/pound

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

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

Costs applicable to sales per ounce

Costs applicable to sales per pound

All-In Sustaining Costs

Newmont has worked to develop a metric that expands on GAAP measures such as cost of goods sold and non-GAAP measures to provide visibility into the economics of our 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 Newmont’s All-in sustaining costs measure:

Cost Applicable to Sales - Includes all direct and indirect costs related to current 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 Depreciation and Amortization and Reclamation and remediation, which is consistent with our presentation of CAS on the Condensed Consolidated Statements of Operations. In determining All-in sustaining costs, only the CAS associated with producing and selling an ounce of gold or a pound of copper is included in the measure. Therefore, the amount of CAS included in AISC is derived from the CAS presented in the Company’s Condensed Consolidated Statements of Operations. The allocation of CAS between gold and copper at the Phoenix, Boddington, and Batu Hijau mines is based upon the relative production 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 reserves are depleted, exploration and advanced 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 Condensed Consolidated Statements of 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.

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 production. We exclude certain exceptional or unusual expenses from Other expense, net, such as restructuring, as these are not indicative to sustaining our current 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.