UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Sections 13 and 15(d) of
the Securities Exchange Act of 1934
October 23, 2002
Date of Report (Date of earliest event reported)
NEWMONT MINING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
84-1611629
Delaware 001-31240 (IRS Employer
(State of Incorporation) (Commission File Number) Identification No.)
1700 Lincoln Street
Denver, Colorado 80203
(Address of Principal Executive Office)
(303) 863-7414
(Registrant's Telephone Number, Including Area Code)
(Not Applicable)
(Former Name or Former Address,
If Changed Since Last Report)
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Item 5. OTHER EVENTS
On October 23, 2002, Newmont Mining Corporation (the "Company") announced
that it will correct the accounting treatment for a prepaid forward gold sales
contract (the "Prepaid Forward") and a forward gold purchase contract (the
"Forward Purchase") that it entered into in July 1999. The correction resulted
from a review of the Company's accounting policies conducted by the Company's
new independent public accountants, PricewaterhouseCoopers LLP ("PwC"), in
preparation for its upcoming annual audit of the Company's 2002 financial
statements. PwC was appointed in May 2002 as the Company's independent public
accountants replacing Arthur Andersen LLP ("Arthur Andersen"). The Company, in
consultation with PwC, concluded that the Prepaid Forward did not meet the
technical criteria to be accounted for in the manner reflected in the Company's
historical financial statements. As a result, the Company will restate its
financial statements beginning with the third quarter of 1999 through the second
quarter of 2002.
Under the Prepaid Forward, the Company agreed to sell 483,333 ounces of
gold, to be delivered in June of each of 2005, 2006 and 2007 in annual
installments of 161,111 ounces (the "Annual Delivery Requirements"). The Company
also agreed under the Prepaid Forward to deliver semi-annually 17,951 ounces of
gold, beginning June 2000 through June 2007 (the "Semi-Annual Delivery
Requirements") for a total gold delivery obligation over the life of the Prepaid
Forward of 752,598 ounces. At the time the Prepaid Forward was entered into, the
Company received net proceeds of $137.2 million ($145.0 million of gross
proceeds before transaction costs of $653,000 and the purchase of a $7.1 million
surety bond to guarantee delivery of the Annual Delivery Requirements). The
Company may also be entitled to receive additional proceeds in the future in
connection with each annual delivery of 161,111 ounces referred to above, to be
determined at each delivery date based on the excess, if any, of the then market
price for gold (up to a maximum of $380 per ounce) over $300 per ounce. At the
time the Company entered into the Prepaid Forward, it also entered into the
Forward Purchase, with the same counterparty, to hedge the price risk with
respect to the Semi-Annual Delivery Requirements under the Prepaid Forward. The
Forward Purchase provides for semi-annual purchases of 17,951 ounces of gold on
each semi-annual delivery date under the Prepaid Forward at prices increasing
from $263 per ounce in 2000 to $354 per ounce in 2007. On each semi-annual
delivery date, the ounces purchased under the Forward Purchase were delivered in
satisfaction of the Company's delivery requirements under the Prepaid Forward.
The Prepaid Forward and the Forward Purchase were fully described in the
notes to the Company's financial statements contained in the Company's quarterly
report on Form 10-Q for the second quarter of 1999 and in each subsequent
quarterly and annual report filed by the Company with the Securities and
Exchange Commission.
The Company accounted for these transactions by recording the net $137.2
million that it received under the Prepaid Forward as deferred revenue under the
long-term liabilities section of its balance sheet to be recognized
incrementally as income when the 161,111 ounce annual gold deliveries were made
in 2005, 2006 and 2007. On each semi-annual delivery date, the cost of
purchasing the Semi-Annual Delivery Requirements under the Forward Purchase was
deducted from sales revenue. No revenue, however, was recognized in respect of
the Semi-Annual Delivery Requirements that were delivered under the Prepaid
Forward. The Company believed
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that this accounting treatment was appropriate based on its understanding of the
accounting literature and advice it received from Arthur Andersen in 1999 that
the Prepaid Forward met the criteria to be accounted for as a mineral conveyance
similar to a volumetric production payment under SFAS 19.
As a result of PwC's review of the Company's accounting policies, the
Company, in consultation with PwC, concluded that the Prepaid Forward did not
meet the technical criteria to be accounted for as a mineral conveyance similar
to a volumetric production payment because the Semi-Annual Delivery Requirements
are not being satisfied from actual Company production, but instead by ounces
purchased by the Company under the Forward Purchase and because the Prepaid
Forward and the Forward Purchase were entered into contemporaneously, are with
the same counterparty and relate to the same Semi-Annual Delivery Requirements.
Accordingly, the Company now believes that the Prepaid Forward and the Forward
Purchase should be considered together as a single transaction and, therefore,
the Company has determined to account for the Prepaid Forward and the Forward
Purchase as a financing. Under a financing accounting model the Prepaid Forward
and the Forward Purchase would be accounted for as a single borrowing of $145.0
million in July 1999, with interest accruing, based on an effective interest
rate recognized over the full term of the borrowing. As the Annual Delivery
Requirements are made under the Prepaid Forward, the Company will recognize a
corresponding amount of sales revenue. Any additional proceeds received in
connection with the Annual Delivery Requirements will be reflected as additional
revenue at the time such proceeds are received.
As a result of this correction in accounting, the Company estimates that
its net loss will be increased by approximately $3.6 million, $1.3 million and
$1.1 million for 1999, 2000 and 2001, respectively, and net income for the first
half of 2002 will be decreased by $0.5 million, resulting in a $6.5 million
reduction in earnings over the three year period. The Company's net loss per
share will be increased by $0.02 per share for 1999, $0.01 per share for 2000
and less than one cent per share for 2001, and net income per share will be
decreased by less than one cent per share for the first half of 2002. There will
be no change in the cash and cash equivalents previously reported by the
Company.
The Company's long-term debt will be increased by $145.0 million ($137.2
million plus transaction costs), at December 31, 1999, 2000, 2001 and June 30,
2002, although its long-term liabilities will be largely unchanged since the
$137.2 million of deferred revenue was originally recorded as a long-term
liability.
The correction in accounting will not result in any default under any
debt-related covenants contained in any of the Company's credit agreements or
other material agreements, and would not have resulted in any such default in
any of the relevant periods. Furthermore, over the full term of the
transactions, the total cost incurred will be the same under the new accounting
treatment as under the accounting treatment that had been used historically. The
only difference will be in the recognition of interest expense on an accrual
basis over the life of the contract compared to the Company recording a
reduction in revenue on a cash basis under its previous accounting model.
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Because Arthur Andersen is unavailable to provide a current audit opinion
for the Company's historical financial statements once they are restated, PwC is
re-auditing the Company's financial statements for the three years ended
December 31, 2001. Based on currently available information, the re-audit is
expected to be completed prior to the filing deadline for the Company's
quarterly report on Form 10-Q for the third quarter of 2002. Following
completion of the re-audit, the Company will file amendments to its annual
report on Form 10-K for the year ended 2001 and its quarterly reports on Form
10-Q for the quarterly periods ended March 31 and June 30, 2002.
A copy of the Company's press release announcing the accounting change is
filed as an exhibit to this Form 8-K.
Item 7. EXHIBITS
(c) Exhibits.
Exhibit No. Description
99.1 Press Release dated October 23, 2002.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
NEWMONT MINING CORPORATION
DATE: October 23, 2002 By: /s/ Bruce D. Hansen
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Name: Bruce D. Hansen
Title: Senior Vice President and Chief
Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release dated October 23, 2002.
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