Filed by Newmont Mining Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Normandy Mining Limited
Commission File No. 132-00965
IMPORTANT NOTICE
Although the Normandy Board, subject to its fiduciary duties, has recommended
Newmont's offer to Normandy shareholders, Normandy has not provided unqualified
assistance to Newmont in making its offer. Among other things, Normandy has
refused to provide Newmont with certain financial information, and it has not
permitted its auditors to issue a consent in respect of financial information
relating to Normandy.
CAUTIONARY STATEMENT
The following contains forward-looking information and statements about Newmont
Mining Corporation, Franco-Nevada Mining Corporation Limited, Normandy Mining
Limited and the combined company after completion of the transactions.
Forward-looking statements are statements that are not historical facts. These
statements include financial projections and estimates and their underlying
assumptions; statements regarding plans, objectives and expectations with
respect to future operations, products and services; and statements regarding
future performance. Forward-looking statements are generally identified by the
words "expects," "anticipates," "believes," "intends," "estimates" and similar
expressions. The forward-looking information and statements in the following are
subject to various risks and uncertainties, many of which are difficult to
predict and generally beyond the control of Newmont, Franco-Nevada and Normandy
Mining, that could cause actual results to differ materially from those
expressed in, or implied or projected by, the forward-looking information and
statements. These risks and uncertainties include those discussed or identified
in the public filings with the U.S. Securities and Exchange Commission made by
Newmont and Normandy, and Franco-Nevada's filings with the Ontario Securities
Commission; risks and uncertainties with respect to the parties' expectations
regarding the timing, completion and accounting and tax treatment of the
transactions, the value of the transaction consideration, production and
development opportunities, conducting worldwide operations, earnings accretion,
cost savings, revenue enhancements, synergies and other benefits anticipated
from the transactions; and the effect of gold price and foreign exchange rate
fluctuations, and general economic conditions such as changes in interest rates
and the performance of the financial markets, changes in domestic and foreign
laws, regulations and taxes, changes in competition and pricing environments,
the occurrence of significant natural disasters, civil unrest and general market
and industry conditions.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed transactions, Newmont Mining Corporation has
filed with the U.S. Securities and Exchange Commission a Registration Statement
on Form S-4 (which includes an Offer Document) and a Proxy Statement/Prospectus
on Schedule 14A. Investors and security holders are advised to read the Offer
Document and the Proxy Statement/Prospectus, which were mailed beginning on
January 11, 2002, because they contain important information. Investors and
security holders may obtain free copies of the Offer Document and the Proxy
Statement/Prospectus and other documents filed by Newmont with the Commission at
the Commission's web site at http://www.sec.gov. Free copies of the Offer
Document and the Proxy Statement/Prospectus and other filings made by Newmont or
Normandy with the Commission, may also be obtained from Newmont. Free copies of
Newmont's and Normandy's filings may be obtained by directing a request to
Newmont Mining Corporation, Attn: Investor Relations, 1700 Lincoln Street,
Denver, Colorado 80203, Telephone: (303) 863-7414. Copies of Franco-Nevada's
filings may be obtained at http://www.sedar.com.
NEWMONT MINING CORPORATION
MODERATOR: WENDY YANG
FEBRUARY 6, 2002/12:00 P.M.
PAGE 1
NEWMONT MINING CORPORATION
FEBRUARY 6, 2002
12:00 P.M. CST
Coordinator Good afternoon and thank you all for holding. I would like to
remind parties your lines have been placed on a listen only
mode until the question and answer session of today's
conference, and also that today's call is being recorded at
the request of Newmont Mining Corporation. If you have any
objections you may disconnect at this time.
I would now like to turn the call over to Ms. Wendy Yang,
Director of Investor Relations. Thank you ma'am you may
begin.
W. Yang Thank you. Thanks for joining us today for our conference
call to review Newmont's fourth quarter and year-end
financial and operating performance. This call is being
simulcast on our Web site and will be available for
playback for a limited time.
NEWMONT MINING CORPORATION
MODERATOR: WENDY YANG
FEBRUARY 6, 2002/12:00 P.M.
PAGE 2
As we shall be discussing some forward-looking information,
you should be aware that there are risks unique to our
industry and these risk factors are described in detail in our
filings with the SEC. The information we are discussing today,
February 6, 2002, is relevant for the current period. For the
most up to date material disclosure please refer to our latest
SEC filing and news releases.
Giving remarks today are Wayne Murdy, Chairman, President and
CEO and Bruce Hansen, Senior Vice President and CFO. We also
have with us Jeff Huspeni, Vice President of Exploration and
John Dow, Executive Vice president and Group Executive for
Latin America. Wayne, please go ahead.
W. Murdy Thank you, Wendy, and good day everybody. I'm trying to
work on my Australian accent, but I've got to get some help
from some of my friends. Obviously, we've seen a great
short period of spot gold price movement with the spot
price yesterday closing at just over $297 an ounce, so a
lot of volatility today. I'm sure we'll continue to see
this volatility in the gold price, but it's good to see the
price range moving upward over the past year. As I've said
we're optimistic of an improved gold price going forward,
based on improved economic fundamentals. Primarily we'll
look
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PAGE 3
at the supply/demand picture and we think that is very
optimistic for gold price as production is falling off
worldwide.
Today I am pleased to announce the results of our best
financial quarter of the year. I'm proud of our employees for
remaining focused on our 2001 goals through the fourth
quarter, while as the same time we initiated the exciting but
intense acquisition efforts of Normandy Mining and
Franco-Nevada. Newmont for the quarter earned $20.2 million or
$0.10 per share. Excluding merger and certain non-cash items,
we earned $31.7 million or $0.16 per share.
It was a good year overall in 2001. We produced 5.4 million
ounces at a cash cost of $184 per ounce in line with our
targets. We reported $13.7 million or $0.07 per share for the
full year, excluding merger costs and non-cash items; a 73%
improvement from the year 2000 despite a $10 per ounce lower
realized goal price at $271, generated cash flow from
operations of $381 million or $1.95 per share.
We accomplished some important refinancing goals that we had
established going into the year, which Bruce will talk about
later. Clearly though at these gold prices, we're not
achieving the kind of rate of return
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PAGE 4
that we feel our shareholders deserve over the long run. With
an improving gold price and with the new Newmont and the
quality assets that are being put together in this
combination, we think those kinds of returns are clearly on
the horizon.
This was a terrific year also for our copper-gold project at
Batu Hijau Mine in Indonesia, which continued to exceed our
operating targets. For the year, Batu Hijau sold 640 million
pounds of copper, 22% more than the year 2000. Gold sales for
the year were 525,000 ounces, 65% improvement over the prior
year; total cash costs of $0.36 per pound, net of the gold
credit, was a 37% improvement.
The operating results were due to higher-grade reconciliation
in the mine plant, a 17% increase in tons mined and a 15%
higher mill throughput. In fact, in the fourth quarter, the
enhanced mill throughput rate of 129,000 metric tons per day
is 8% above the design rate of 120,000 metric tons per day.
Batu Hijau's overall operating efficiency offset a weak
average realized copper price of $0.70 per pound, $0.12 less
than in 2000. With this performance Batu Hijau was able to
contribute $33 million to our equity
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PAGE 5
income for 2001. This compared with a loss of $10 million in
2000 as the project was starting up.
We have also reported our equity proven and probable reserves
for year-end 2001 of approximately 60 million ounces of gold
after production depletion. North American reserves accounted
for slightly more than half. Total company wide copper
reserves were six billion equity pounds with Batu Hijau
accounting for 5.5 billion equity pounds.
Our exploration and research expenses were cut by 28% to $55
million in 2001 as a result of the depressed gold market.
Yanacocha, where reserved total 34 million ounces, the
two-pronged exploration program concentrated on the complex
and deep sulfide zones containing copper-gold mineralization
and near surface oxide zones for gold. These efforts will
continue in 2002 with a focus to locate higher-grade
copper-gold targets and new covered oxide targets. As I've
said before, this is a world-class district and we'll be
mining here for years to come. In Nevada our 2002 exploration
efforts will focus on new underground mining opportunities
near Deep Post, Deep Star, Carlin, Gold Quarry and Twin
Creeks.
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PAGE 6
Finally, over the past three months I've spoken many times
about our pending acquisition of Normandy and Franco-Nevada.
In the strengthening of shareholder value, in the new Newmont,
is the premier gold investment vehicle. There's a lot of
positive support and interest in Newmont and as we travel to
over 25 cities in a three week period, let me give you a two
minute version. As we traveled over that period we saw a lot
of support from our shareholders.
Let me give you a little short version of where we are and
where we're going. We expect to close both transactions this
month. We're hopeful of surpassing the 50.1% mark for our open
bid for Normandy's shares by the end of next week. In any
case, we announced in another press release today that we're
extending the Normandy period of acceptance to 7:00 p.m.
Sydney time on February 26th. This is to enable people
adequate time after our shareholder vote on the 13th of
February. Bruce will speak a little bit more to the timing in
his remarks.
Franco-Nevada shareholders overwhelmingly approved Newmont's
acquisition at a special meeting in Toronto on January 30th.
The meeting was well attended and it was an historic event
that marked the closing of a phenomenal 18-year record and the
opening of a new chapter for these
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FEBRUARY 6, 2002/12:00 P.M.
PAGE 7
new shareholders of Newmont. As I said, the Newmont special
meeting will be in Denver on February 13th. At the current
point, votes are running in favor in the high 90% level.
The new Newmont will be the gold standard for investors
seeking portfolio diversification and making a gold play. As
we have seen in recent days the gold price rally, Newmont
continues to offer the most leverage to a rising gold price.
We're working intently on integration to begin immediately
capturing synergies of $70 to $80 million in the first full
year. We have also indicated that we have raised between $250
and $300 million in cash in 2002 due to the sale of non-core
assets of the compliant portfolio. This effort was kicked off
well with just over $100 million raised by Franco-Nevada sale
of its Aber Diamond equity stake. In addition the recent sale
of Franco-Nevada's ... warrants raised another $11 million.
As we go forward, we will maintain our no hedging philosophy,
and as stated that we intend to opportunistically deliver into
or unwind Normandy's hedge book. Some of this program has
already been started and been announce by Normandy's
management. An important financial goal of the new company
will be to continue to lower total debt. We
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FEBRUARY 6, 2002/12:00 P.M.
PAGE 8
intend to improve our net debt to total capitalization of 24%
and less than 20% in the first year. On a long-term basis we
want to run net debt at under 10% of total capitalization.
Another fiscal goal is to increase the royalty business of
Franco-Nevada to generate further stable cash flows to protect
against logo prices. We have a joint task force that's in
place running the transformation with representatives from
Normandy, Franco-Nevada and Newmont. All three organizations
will contribute to this effort and we intend to draw on the
strengths of each one of these organizations as we put
together the new Newmont.
Let me now turn this over to Bruce Hansen for some additional
remarks on the financial and operating report performance for
the quarter.
B. Hansen Thank you, Wayne. As Wayne mentioned, we also announced
today the extension of our Normandy bid to February 26th
from February 15th in order to give Normandy shareholders
the opportunity to tender into our bid following our
shareholder meeting, which will be held on February 13th.
We intend to declare our bid unconditional on February 15th
if we
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FEBRUARY 6, 2002/12:00 P.M.
PAGE 9
obtain a relevant interest in 50.1% of Normandy shares on a
fully diluted bases taking into account the approximately
19.8% of Normandy shares currently owned by Franco-Nevada.
This also assumes that we receive final clearance from the ASX
on our Australian listing and Newmont stockholder approval
transactions. We intend to complete the Franco-Nevada
acquisition as soon as the relevant interest in the 50.1% of
Normandy shares is obtained. We are very excited about the
prospect of completing both the Franco-Nevada and Normandy
Mining transactions this month, which will obviously lead to
the creation of the new Newmont.
As Wayne also indicated, it was a very good quarter for
Newmont and a very good year. In the fourth quarter of 2001,
Newmont reported net income of $20.2 million or $0.10 per
share. Excluding merger and restructuring costs associated
with the Battle Mountain acquisition and non-cash items,
Newmont earned $31.7 million or $0.16 per share. Contributing
to this performance were, of course, on target production, as
well as cash costs and a $5 an ounce higher realized gold
price over the fourth quarter of 2000 as compared to fourth
quarter of 2001.
After accounting for pre-tax charges of $60.5 million for
corporate restructuring and Battle Mountain merger costs and
$41 million for
NEWMONT MINING CORPORATION
MODERATOR: WENDY YANG
FEBRUARY 6, 2002/12:00 P.M.
PAGE 10
miscellaneous write downs, Newmont had a net loss of $30.8
million or $0.16 per share for the full year 2001.
Cash flow from operations in the fourth quarter was $147
million and $381 million or $1.95 per share for the full year.
Asset write-downs in 2001 included an $18 million write down
at Minahasa due to a shorter mine life and various inventory
and valuation adjustments. Full year results also reflected a
4% lower expense rate for G&A totaling $61 million as a result
of combining with Battle Mountain, and a 17% lower
depreciation and inflation charge of $300 million
corresponding with lower production.
I would also like to point out that during the fourth quarter
there was also an income tax benefit of $16.6 billion,
excluding the impact of merger and non-cash items. As a result
of favorable tax return reconciliation, as compared to our
book provision, and from reduced income tax provision at
Minera Yanacocha benefiting from the Peruvian reinvestment
program.
In regard to our continuing current merger transformation
efforts, I would like to take the opportunity here to point
out that we did in 2001
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FEBRUARY 6, 2002/12:00 P.M.
PAGE 11
successfully integrate Battle Mountain and achieve more than
$25 million in synergies for the full year. These savings were
derived mainly from Exploration, G&A, and operations.
Integration, we believe, is the core competency of Newmont,
and also is a skill set that Normandy Mining brings to the
table as well. I think this will be key to extracting the full
value of synergies and capturing the complimentary strengths
of all three companies. In our past experiences with Santa Fe
Gold and with Battle Mountain, we have done better than our
projected savings. With our Normandy and Franco acquisition we
remain on target and continue to forecast synergies of $70 to
$80 million in the first full year rising to $80 to $90
million beyond that.
During 2001 we completed three important financial goals. We
raised $275 million in May of 2001 from the issuance of eight
and five-eighth percent notes maturing in 2011 enabling the
company to repay its outstanding balance on its bank facility.
We also completed a new $600 million revolving credit facility
with $400 million maturing in 2006 and the balance renewable
annually. We also restructured our small book of coal options
for 2.35 million ounces into sales contracts requiring
physical
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FEBRUARY 6, 2002/12:00 P.M.
PAGE 12
delivery at future dates, thus removing any further mark to
market volatility to net income.
Most recently, and further into our no hedging policy, in
December of 2001 Newmont effectively closed out Battle
Mountain's small hedge book covering approximately 275,000
ounces, which provided Newmont with a cash gain of
approximately $5 million.
Entering 2002 Newmont is in very good financial shape. We have
total debt of $1.3 billion offset by cash balances of nearly
$150 million, and a net debt to total cap ratio of 40%. We
will use our un-drawn $600 million revolving credit facility
for the payment of cash consideration for Normandy
shareholders. We'll then look to the cash balance of the
combined company to subsequently repay that debt and look
selectively to reduce debt across the board from excess cash
balances and free cash flow.
As a standalone ... Newmont, we remain focused on continuallY
increasing our financial flexibility and delivering our
balance sheet over time. As Wayne mentioned, in regard to the
combined new company, with Normandy Mining and Franco-Nevada,
we'll continue to drive our
NEWMONT MINING CORPORATION
MODERATOR: WENDY YANG
FEBRUARY 6, 2002/12:00 P.M.
PAGE 13
net debt to total capitalization down over time starting at
24%, looking out a year to below 20%, and then focusing on a
target of 10% over the long term.
Obviously, this is an exciting time for Newmont employees and
shareholders as we're well positioned to become the new gold
standard within the industry. We're expected to generate very
strong cash flow and free cash flow derived from the world's
largest production base. We will offer the size and liquidity
needed by our large generalist investors for portfolio
diversification.
Most importantly with the rising gold market, as we've
currently seen, we have the largest degree of upside
participation in the industry. Finally, we have the balance
sheet strength, the pipeline of development projects, and a
strong management team to accomplish all of this. Now we're
happy to take your questions. Thank you.
Coordinator Michael Dudas, you may ask your question and please state your
company name.
NEWMONT MINING CORPORATION
MODERATOR: WENDY YANG
FEBRUARY 6, 2002/12:00 P.M.
PAGE 14
M. Dudas Good morning or good evening, wherever you guys are. Bear
Stearns. I have two questions. Wayne, could you share
with us, you mentioned your mentioned your 23 city tour,
could you share with us two to three major concerns or
focus points that investors have portrayed to you? I'll
follow up with Bruce in a second.
W. Murdy Thank you, Michael. We are spread out a little bit,
Michael. We are in a few different cities because the
effort is just clearly underway. As I said, we got really
tremendous support from the institutional investors we met
with throughout the period. I would say that initially
there was some sense of concern with respect from some of
our real die-hard bulls that we were giving up some of the
upside in this transaction. Newmont has always been very
leveraged to the gold price, and in putting together this
combination, it's like any combination there's pluses and
minuses for each one of the investor groups. There was
some dilution to our upside but the ability to add the
balance sheet strength, the pipeline of projects, I think
as people looked at this in its entirety that that issue
dissipated pretty quickly.
The other issue that has come up is something that the three
companies all recognize, and will have to work on very hard is
the different cultures. We are three very different cultures.
I personally think that that's a
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FEBRUARY 6, 2002/12:00 P.M.
PAGE 15
strength of the new company. Each one of the companies has
grown in a different way, but we are in a world that changes
rapidly, and so having very good people in all three
organizations and being able to put together the best of the
best I think serves us very well. I think as we have gone
through this process and been able to work together, in what
is clearly a very unique transaction, where you have three
different companies, three different jurisdictions involved,
where one is actually a contested situation with the fourth
jurisdiction, I think the ability to work smoothly through
that process and meet all our time deadlines that we have set
forth going forward shows the ability of this group to work
together very well.
M. Dudas Thank you, Wayne. Bruce, just to follow up with you. Do
you think that the reduced liquidity in the gold markets,
some bullion banks have pulled out of the business, would
it have made it more difficult for Newmont to affect some
of its hedger off balance sheet transactions and do you
think that will have an impact on some of the volatility in
the marketplace?
B. Hansen I think there is somewhat of reduced liquidity in the
market. I think there is sufficient liquidity available for us
as we look at opportunities to unwind the Normandy hedge book.
That being said, at current prices,
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PAGE 16
we'll be focused on essentially delivering into that hedge
book and that is easily absorbed.
M. Dudas Terrific. Thank you, gentlemen.
Coordinator Thank you. Brian Christie, you may ask your question and
please state your company name.
B. Christie It's Brian Christie with Canaccord Capital. Good
afternoon, gentlemen. Just one question on the sale of the
assets, Wayne, I think you gave a value there. Could you
just repeat that for me? Then, have you come up with a
ballpark on the cost of the merger transactions here?
W. Murdy What we've disclosed is that we intend to raise between
$250 and $300 million in the first year. We're, as we said,
about $111 million into that already, really, to individual
transactions.
B. Christie What about the cost of the mergers?
W. Murdy Bruce, what are we using in the pro formas?
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B. Hansen It's roughly $90 million.
B. Christie Okay thanks, gentlemen.
Coordinator Thank you. Adrian Day, you may ask your question and
please state your company name.
A. Day Adrian Day, Global Strategic. First of all I really
appreciate, Wayne, the fact that you lead off with a
discussion of gold unlike many gold companies that seem
embarrassed of their product. Two questions if I may.
First of all, do you have an expiration budget for the year
ahead? Secondly, in terms of personnel from both Normandy
and Franco, I don't know if you've had time to sort of
think about how many people you're going to have to let go,
and then are the people you really want are they
enthusiastic about coming over and those sorts of issues?
Thanks.
W. Murdy First of all, with respect to Exploration, what we have
laid out in our pro forma, which were put together on a
basis of $275 gold, was about an $80 million combined
budget. We're really going through a two-phased program,
if you will, this year for all of us. Normandy is on a
different fiscal year-end, so they're well into their year
in conducting their program.
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PAGE 18
We have just initiated our program for 2002. All of this is
getting relooked at in the March time frame, and we would
expect by April/May to lay out the new program. The focus
clearly is on near project or projects that are close to
current infrastructure or current discoveries.
With respect to people, we don't have big numbers involved in
this. This is not an acquisition that's driven by huge people
reductions as some have been in the past and that's because
primarily we're adding a new fourth very important leg to the
operation with respect to the Normandy operations in
Australia. We'll develop those as we go through, but that's
not a significant driver of synergies in this particular
transaction. We're very excited about the...
A. Day I'm sorry. The people you want to come over are they all
coming?
B. Murdy ... through the due diligence process, and I think what
you'll see coming out of this transaction is really a mix
of individuals in key positions from all three companies.
A. Day Okay, thank you.
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Coordinator Thank you. John Tumazos you may ask your question and
please state your company name.
J. Tumazos John Tumazos Prudential Securities. Congratulations on all
of the progress. With regard to the hedging question asked
earlier, I would appreciate if you could explain the
response and perhaps elaborate to my follow up question?
You said you were going to deliver into the hedge book of
Normandy. Should we interpret that to mean that two
million plus Normandy and five million plus Newmont ounces
could get delivered 600,000 ounces a month until it's all
closed out quickly?
B. Hansen No, John, I think our view is to predominately deliver it
into the existing schedule of maturities that Normandy
has. As you're aware, as you move maturities around in
terms of gold hedge books, you change the valuation or
strike price for amateurs of those instruments, so we'd
have to look carefully in terms of actually moving
maturities. I think we've been very consistent in saying
that, "Look, if components of the hedge book are in the
money we'll accelerate the closure of those components,"
but if they're out of the money, as they are now with the
rise in the gold price and the Australian dollar weakness
we've seen over the last couple of years, we'll tend to
deliver into that book pretty much in accordance with
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PAGE 20
its maturity. We'll, on an ongoing basis, evaluate exactly how
we do that and we may accelerate a little bit more or just
deliver as I indicated.
J. Tumazos Could you refresh us as to how many Australian dollars are
hedged?
B. Hansen Well, Normandy's got their gold hedge book essentially
denominated in Australian dollars. They're hedging ounces in
an Australian gold price. They do a small amount of Australian
currency hedging related to the revenue protection associated
with the golden growth in copper operations as well.
J. Tumazos So it might be a 110% of their bullion hedging dollar
magnitude?
B. Hansen I guess I don't understand.
J. Tumazos It's more than the bullion by how many dollars, $50
million, $100 million, something like that?
B. Hansen We'll have to get back to you on that.
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J. Tumazos If I could ask a conceptual question. In the last several
weeks, the A dollar has moved against the hedge book about
2%, about $0.01 per dollar, and the gold price, of course,
has risen more than 5% so as to create a disconnect where
it's been adverse on both sides. As the gold market has
done better than other resources in the Australian economic
outlook, it would seem difficult to predict that
interaction. Are you simply going to sit with that and
deliver against the A dollar as the gold comes through or
cover the currency?
B. Hansen John, we're going to deliver ounces, and that will satisfy
the obligation related to the bullion hedges. Depending
upon where the Australian dollar is at that point in time,
and where the US dollar gold price is at that point in
time, as we deliver we'll either have an opportunity gain
or an opportunity loss. I will point out that as you look
at this book on a combined basis it's clearly something on
the order of 7% or 8% of the combined company's reserves,
and if we have a higher US dollar gold price that
translates to the kind of leverage and upside that we're
giving to investors beyond any opportunity gains and losses
associated with the delivering into the hedge book.
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J. Tumazos As of the present, are you prepared to tell us what the
mark to market of the Normandy or the total Newmont
enterprise, anyway you want, currency and bullion hedges?
B. Hansen Normandy has released a number, as of their last release, on
financial and production statistics. That's the most up to
date information that we currently have in regards to the mark
to market of that hedge book. On an ongoing basis, as we have
consistently with regards to our small amount of hedges, we've
provided that information to market and we'll do so in the
future.
J. Tumazos Thank you.
Coordinator Thank you. Jeff Stanley, you may ask you ask your question
and please state your company name.
J. Stanley Thank you. I'm with BMO Nesbitt Burns. Perhaps a couple
of questions on an operating nature. John, Yanacocha, the
ramp up of La Quinua going a little slower than
anticipated. Can you elaborate on perhaps why and how that
looks like it's going to pan out over the next little
while, and just how far down the track you are with respect
to looking at the sulfide and
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MODERATOR: WENDY YANG
FEBRUARY 6, 2002/12:00 P.M.
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the copper-gold mineralization; you know likely recoveries,
the nature of the mineralization and give some thoughts on
perhaps the initial scoping studies? What do you think might
be potential there in terms of development in the timetable?
J. Dow La Quinua has a slower than expected start in the fourth
quarter last year, but we've really got our act together in
the last month and rapidly approaching design capacity. We
did 3.7 million tons in the quarter, which was a bit less
than we though during the early stages of commissioning,
but through January of this year, we've averaged over
100,000 tons a day. We've had several days over design
capacity and a record day during January of 138,000 tons.
The La Quinua conglomerate is going just great, and we're
looking to have it running at design capacity by the middle
of the year. Obviously, we are going to try to do that a
little bit quicker. After a slow start, and it was mostly
because we had a few commissioning problems with the
conglomerate itself, that we didn't shift as much dirt
while we waited for the conglomerate to be ready, but we
overcame most of those things and it's going fine now.
With regard to the sulfide program, there's a steady progress
being made on understanding the particular challenges of the
sulfides. I think it's
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probably premature, Jeff, to give you a time frame for that.
Obviously the sooner we understand it the better. There are
some of these ore types that are easier than others; the
Carachugo's Cerro mineralization is a little bit less
complicated. It looks like a considerable amount of the gold
there will actually be recoverable by gravity because it's
physical metal and visible. I wouldn't like to speculate at
this stage in the year just exactly what our time frame to be
more specific about development would be. We are working hard
on it obviously. The sulfides represent the long-term future
at Yanacocha. We continue to be encouraged by the drilling
that's being done there, but it's a bit early to say anything
too specific in answer to your question.
W. Murdy If I just might add to that. We said a year ago we had
more than 20 years of oxide material proven and probable
and from an MPV standpoint it just didn't make sense to
continue to drill out some of the other oxides just for the
sake of adding to a reserve that was 20 years out. Our
production profile is such that we continue to clearly
expect that by 2004 we'll be producing about 2.5 million
ounces. The nice thing at Yanacocha now is we've started
to level out. We've got our fleet size and our mining
rates set, and the increase in production over the next
several years will come from, first of all, having a full
year in 2002 at these higher mining rates,
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and then some better grade and better strip ratios for the
next couple of years after that.
The sulfide program is a great long-term asset, but it's five
to seven years away from becoming a significant income
producer for us. You need to put that in context when you talk
about it.
J. Stanley Perhaps one additional question on Nevada. I'd like to
gain some sort of understanding of the flexibility.
Obviously, you've got an enormous number of processing
facilities and reserves and resources of all sorts of
different natures throughout Nevada. I'm just wondering if
you can give us some sort of idea of the flexibility from
an operating perspective to adjust your programs under
different gold price environments? Just how efficient is
the optimizer program in terms of rescheduling, the
movement of ore and waste into the various facilities? Do
you have Midas programmed into the optimizer yet?
W. Murdy No, we haven't closed yet so we weren't able to do that.
That will come very quickly. Dave, did you want to talk a
little bit about Nevada?
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Dave Jeff, to answer your question, Wayne is right, Midas is not
in the optimizer yet, but we do have a significant amount
of material in Nevada, both on the underground side and in
the pit areas and stock piles that are sensitive to the
gold price. If the gold price should continue to rise,
we'll take another good look at this. Nevada has always
supported us in the past, it has not disappointed us. If
you look at Nevada in light of rising gold prices, there's
good news there.
J. Stanley Okay, good. Thanks very much. Thank you, gentlemen.
Coordinator Thank you. Our next question comes from Michael Fowler.
Sir you may ask your question and please state your company
name.
M. Fowler Harris Partners Limited. Tumazos asked the question about
hedging, but I have a question about in terms of, as I
understand from your document, that you weren't allowed or
weren't given the financial statements or lease in order to
divert the financials from Normandy, and Normandy is an
Australian GAAP and also it formed as a whole series of
acquisitions and so forth. Is there anything there on an
off-balance sheet theme that you would expect?
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W. Murdy No. Let me just put that in context. Obviously, we are
involved in a very competitive situation and Normandy's
statements we had full access to their financial
information and their audited statements. The issue was
really one of converting from Australian GAAP to US. We
understand the differences on a macro-basis and as we were
going through the books and records and doing our due
diligence, that was not a big issue. In fact, to go back
and convert that and make the historical conversions takes
a significant effort, and that's why we were able to get
the exemption from the SEC in that regard.
Going forward, we will have to put, this will be purchase
accounting, we will have to put our own valuations based on
the current market on all of those assets and that will take
some time also. That's the effort that will be underway. We're
not concerned about any off-balance sheet financing
arrangements there.
M. Fowler Wayne, perhaps you could just remind us what kind of
off-balance sheet guarantees or items that you have in
Newmont?
B. Hansen The only significant off-balance sheet item that we have
relates to our interest in Batu Hijau where it's a
non-recourse one billion dollar facility.
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The sponsors have a $125 million support facility associated
with that project. In regard to cash shortfalls, the sponsors
will support it up to $125 million and we own 56.25% of it.
M. Fowler Thank you very much, Bruce.
Coordinator Thank you. Danielle McConvey, you may ask your question
and please state your company name.
D. McConvey Goldman Sachs. Good day everyone. A few questions.
First, John, on Yanacocha, can you give a little color?
This past year you indicated very early that it would not
be a year that you would be increasing reserves based on
your concentration of deep sulfide. Looking forward
throughout 2002, is it going to be the same case? Is the
concentration going to be in deep sulfide or will we expect
a net depletion of reserves there this year?
J. Dow Dan, the focus on reserves replacement at Yanacocha this
year is going to be on Kori Minera. You will have seen in
the reserve statement we put out that Kori Minera has been
added to the NRN category and we'll be working to convert
Kori Minera to reserves through this year. The story for
2002 will be similar to 2001. The effort at Yanacocha is
longer term.
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Its aim is to find out the economic value of the sulfides and
that's a longer-term exercise because of their metallurgy than
it is with the simple oxide ores.
D. McConvey Second question with respect to the sensitivity of reserves, I
guess in your annual report you will disclose the
sensitivities for a $25 per ounce move in the gold price. You
can't by chance give those out now can you?
B. Hansen Actually Dan, it's in the full press release on the last
page.
D. McConvey Okay, sorry.
B. Hansen It's in terms of a $25 reduction in price of about 6.9% and
a $25 increase above the 3.5 as opposed to the 5%. I would
point out that as we look at higher prices we don't take
into ... a lot of rigor there and simply adjust the kind of
mining columns and the pit parameters associated with
that. We don't look at other projects or look at it in a
very extensive manner. I would think as we see our prices,
you would see better sensitivity as prices increase.
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D. McConvey Thank you. Last question, Batu Hijau is going very well.
Wayne, in the past you've told us about how you're going
through a high-grade portion of the pit and that was going
to change. You're moving more tons than you had planned as
well. Looking forward into 2002, would you expect some
positive reconciliation's to continue just in terms of
tonnage and is the actual grade still fairly close to plan
or is it becoming better than expected?
W. Murdy Well, we continue to come in better than expected this last
year. We've been conservative in trying to project that out in
the future because we are still in the very early life. I
guess I would say that we're very encouraged by what we see.
Dave, do you want to comment further on that?
Dave The pattern of the past continues. We always seem to find
a little bit better grades than we had anticipated. The
positive reconciliation had held up as we actually get
deeper in the ore body. The affect of this reconciliation
is slightly more favorable to us, but certainly no
surprises there. The plant continues to do well. Our
progress board increasing production is very pleasing to
us.
D. McConvey Thank you.
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Coordinator Thank you. Marc Cohen, you may ask your question and
please state your company name.
M. Cohen Marc Cohen, Inc. It's nice to have your own company. A
couple of questions, Wayne. First of all, a very fine
quarter, ... for an excellent merger. If you look at where
we were in terms of production in the year 2000 then you
came down some more in 2001, you're telling us in your
outlook for 2002 that you're going to go down another
couple of 100,000 ounces to 5.2 million ounces. Are you
trying to tell us that if there were no merger, that one
could anticipate that it, say $300 an ounce, which is what
you're using for your calculations I believe, that 2003
might even be lesser production than 2002?
W. Murdy Basically, Marc, we've been saying for some time that we
expect it to be on a standalone basis about a five million
ounce producer. I think our original year 2000 the production
on a pooling basis with that amount would have been 5.7 and we
produced about 4.9, so we produced 5.4 this year, which we
hit. We are in an industry where production is starting to
fall off. That's part of the story. I think it's true of all
of the major producers, absent acquisitions or reinstating
dispositions. I know it's true
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of the five largest producers in this industry and as you look
at the studies it's true the industry as a whole. If we had
not done this transaction, next year we would still be above
five million ounces, but basically a pretty flat period. I
should say that all of that planning was done at a $275 flat
price. So at $300 we can do better, but it's not going to be
markedly different.
M. Cohen The usage of $300 in your reserve calculation, that is, a
couple of years ago, if I remember correctly, that may have
been as high as $350?
B. Hansen It was as high as $400 back in 1996, Marc.
M. Cohen But, during that same period many of your competitors have
also reduced that number, so you all are acknowledging that
the numbers the industry is capable of really getting has come
down.
W. Murdy We're just acknowledging what the market was showing over a
period of time. Again, it's very difficult in mining to
start whipping around those numbers. In 1996 we were at
$400. The industry basically came down to $350 in 1997,
1998 then down to $325 and then down to $300. As the
market improves I think you'll see some of those numbers
begin to move up. The good thing that the industry has
started to do through this period
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is at least within some band show some sensitivity. Again,
that is limited because it takes so much work to put together
a mine plan for a number of bits at different prices, but we
try to give a realistic sensitivity within about a $50 band.
M. Cohen Now the number, which you give for your proven and probable
reserves is always in a contained basis. Is there anyway you
feasibly could give a recover number? I realize you have a
multitude of different mines. Is there a number you feel
comfortable with?
W. Murdy What we disclose is, in the supplementary information, we
always disclose what our current recoveries are for each
one of the operations. I will tell you that I think this
is a weakness of this industry because it discloses gross
as opposed to recovered, but it's a very difficult thing to
come up with over a full line way.
M. Cohen Again, congratulations on what looks like a super merger
and acquisition.
W. Murdy Thank you very much Marc. Good to hear your voice.
M. Cohen Thank you very much.
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Coordinator Thank you. Paul Rankine you may ask your question and
please state your company name.
P. Rankine Paul Rankine from Citigroup Asset Management. Two
questions, first on the fixed rate debt, are you keeping
all of that in fixed rate at the 8.5%? Secondly, on
looking at Batu Hijau, your costs have come down quite
dramatically last year. What are you looking at for cost
wise in 2002?
B. Hansen Let me address at least the first part of the question.
The vast majority of our consolidated debt is fixed rate
debt. We swapped $200 million into floating rate debt;
$100 million associated with the 2005 maturity bonds and
$100 million associated with the recent eight and
five-eighths bonds that mature in 2011. We recognize, from
just a risk management perspective, that we were a bit
overloaded on fixed rate debt and have managed what I think
is to a more appropriate blend.
In regard to your second question, could you repeat that?
P. Rankine Yes. With Batu Hijau you've managed to go and pull down
your cash operating costs quite considerably in 2001. What
are the prospects for
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maintaining at that sort of level in 2002 given that you had
given guidance previously at sort of long term of around about
$0.55 for that operation?
B. Hansen I think that's a high number now. You have to take into
consideration that 2002 we are going through a new stripping
phase and with that we'll have slightly lower grades in the
first half of the year. We're projecting a number that's
pretty much in alignment with what we saw in 2001, maybe
slightly higher.
P. Rankine Thank you.
Coordinator Thank you. Our last question comes from Mark Smith. Sir,
you may ask your question and please state your company
name.
M. Smith First Associates. Just a very quick question. With a net
debt to total capitalization in 40%, could you just give us
some feeling of where you feel that debt should come down
to and what your target is in the new merged entity?
W. Murdy ... of a box, we expect to be at 24%. We have said that we
would intend by the end of the year to be under 20% with an
intermediate goal of
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ultimately being about 10% net debt to book cap. We'll
continue to use project financing in some of the overseas
operations, but on a net debt basis that's the goal.
M. Smith Okay, thank you very much.
Coordinator Thank you. I would now like to turn the call back over to
Ms. Wendy Yang.
W. Yang Thank you very much. That concludes our call today. Thank
you.