Record earnings for Newmont in 2006 (March 05, 2007)

Vancouver — The world’s number two gold producer, Newmont Mining (NMC-T, NEM-N), posted record net income of US$791 million (US$1.76 per share) in 2006, topping its previous year’s performance of US$322 million (US72 per share) by 146% despite seeing lower bullion sales.

Consolidated gold sales of 7.36 million oz. (5.9 million attributable oz.) last year were almost 13% below 2005, but were offset by significantly higher prices for the yellow metal. The company’s average gold sale price rose to US$599 per oz. in 2006, up more than 35% from the US$441 per oz. booked in 2005.

Like most other major miners, Newmont saw a significant increase in operating costs over the year to average US$304 per oz. gold versus US$237 per oz. in the previous 12 months.

“During 2006, we brought the Phoenix and Leeville mines in Nevada and the Ahafo mine in Ghana into commercial production,” said company chairman and CEO Wayne Murdy. “We also continued development of the Boddington project in Australia, the power plant in Nevada and the gold mill at Yanacocha in Peru.”

Despite commissioning of the new mines, the gold giant anticipates a near-term production drop.

Murdy forecasted 2007 attributable gold sales to decline temporarily to between 5.2 and 5.6 million oz. before they pick up again with new production from Nevada, Ghana and Australia.

Fighting an industry-wide battle against declining grades and escalating costs, Newmont boosted its reserve base for a fifth straight year with 11.6 million oz. of gold moved to the reserve category last year through a combination of exploration and acquisition. Proven and probable attributable gold reserves stood at 93.9 million oz. at the end of 2006 at an average grade of about 1.2 grams gold per tonne. A US$500-per-oz. gold price was used in last year’s reserve calculation, up from the US$400 per oz. employed in 2005.

With a majority of its mines open-pit operations, the company’s global average strip ratio inched up to 2.08 last year from 1.93 in 2005.

Buoyed by its new Phoenix and Leeville mines, the company’s flagship Nevada gold operations contributed over 2.4 million attributable oz. to last year’s sales, up slightly from 2005’s 2.3 million oz. Average annual operating costs in 2006 came in at US$403 per oz., a 21% increase over the previous year’s US$333 per oz.

The company also reported greater underground production from its Twin Creeks mine, as well as increased access to additional open-pit ore. However, the Lone Tree operation was closed in 2006.

Total gold sales from Newmont’s 51.35%-owned Yanacocha operations in northern Peru fell by 756,000 oz. in 2006, to 2.57 million oz., a decline of about 23% from the 3.39 million oz. sold in 2005. Annual operating costs increased 31% to US$193 per oz. from US$147 per oz. in the previous year.

As anticipated in the mining plan, average ore grades at the giant South American mining complex fell about 46% last year while ore mined and placed on the leach pads decreased by 33%. The stripping ratio increased from 0.5:1 in late 2005 to 1.2:1 at the end of last year.

Newmont’s Australia-New Zealand operations (the Tanami, Kalgoorlie, Jundee, Pajingo and Martha mines) saw gold output slip almost 16% in 2006 to 1.35 million oz. from 1.6 million oz. the previous year. A drop in ore mined led to decreased mill throughput, with total operating costs totalling US$384 per oz. last year, up from US$317 per oz. in 2005.

Batu Hijau

At the 45%-owned Batu Hijau mine in Indonesia (a joint venture with a Sumitomo subsidiary and Indonesian company Pukuafu Indah) copper and gold sales declined 24% and 40%, respectively. Copper output was slightly buoyed by higher mill throughput and increased grades in the fourth quarter, however, average gold grades dropped compared with the previous year.

Mining activities at the large copper-gold porphyry deposit generated metal sales of 425 million lbs. copper (230 million lbs. attributable to Newmont) and 435,300 oz. gold (230,200 attributable oz.) last year at operating costs of US71 per lb. and US$209 per oz., respectively.

With production launched in mid-2006 at the Ahafo mine in Ghana, gold sales totalled 202,100 oz. for the year at an operating cost of US$297 per oz. Country-wide power shortages due to low water levels at hydroelectric facilities negatively affected production, prompting Newmont to install diesel-generating units at the operation.

Metal output from the company’s other operations (Kori Kollo in Bolivia, La Herradura in Mexico and Golden Giant in Canada) contributed to attributable gold sales of 252,000 oz. in 2006, off from 325,000 oz. a year earlier. Golden Giant was closed at the end of 2005, while the strip ratio at Kori Kollo increased over the year resulting in less ore placed on the leach pads.

Newmont realized a pretax net gain of about US$296 million in 2006 from the sale of its heavy oil project in northern Alberta and the Martabe project in Indonesia. Additionally, the gold major took to diversifying into the diamond sector, investing US$152 million to acquire a 40% interest in Shore Gold’s (SGF-T, SHGDF-O) Fort la Corne joint venture in Saskatchewan.

The year also saw the Republic of Uzbekistan expropriate the company’s 50% interest in the Zarafshan joint venture, prompting a US$101-million pretax writeoff. Newmont is seeking compensation through international arbitration.

Construction of a 200-megawatt coal-fired power plant in Nevada was reported 37% complete at the end of last year. The project’s capital cost is estimated at about US$630 million, but it is expected to reduce operating costs in the state by about US$25 per oz.

Newmont also began construction of a gold mill at Yanacocha, expected to cost about US$260 million, during the year.

Development of its 66.7%-owned Boddington mine in Western Australia, with joint-venture partner AngloGold Ashanti (AU-N, AGD-L, ANG-J), was on schedule at year-end at about 20% complete. Newmont expects its share of capital costs to come in at around US$1 billion for the operation, which is forecast to produce about 1 million oz. annually during its first five years. The mine is projected to produce about 850,000 oz. per year over a mine life of more than 15 years and will also produce significant byproduct copper.

The company expects a development decision for its Akyem project in Ghana by the end of 2007. The deposit hosts reserves of about 7.7 million contained oz. attributable to Newmont.

The quest to boost reserves saw exploration spending of US$170 million in 2006, up from the US$147 million in 2005.

Shares of the gold major recently closed around the US$47.70-level in New York Stock Exchange trading, around the mid-point of its 52-week range of US$39.74-US$59.70.