U.S. REPORT Newmont working to reduce debt

The controlling shareholder of Newmont Gold (NYSE), the largest gold producer in North America, reports making progress in its efforts to reduce its debt load. In its 1990 annual report, Newmont Mining (NYSE) said the successful sale last year of its interest in Peabody Holding Co. acted to cut indebtedness to the level where annual interest costs in 1991 are expected to be below US$20 million at current interest rates.

“This very manageable cost arises from the fact that the majority of Newmont’s remaining indebtedness is in low-interest-rate gold debt associated with the 750,000 oz. still outstanding as of Dec. 31, 1990, under the one-million-ounce gold loan undertaken in 1988,” the company reported.

“During 1990, the average interest rate on the gold loan was under 2%, compared with an average market rate of 9% for dollar-based borrowings.” Newmont Mining borrowed one million ounces in early 1988 and sold forward all of it for US$448.8 million. The borrowings are repayable in 16 equal quarterly instalments of gold ounces beginning March, 1990.

Cost of the gold purchased by Newmont for 1990 repayments averaged US$377 per oz., netting Newmont extra revenue of US$18 million. The company said hedging strategies also produced US$14 million in additional revenue last year; the strategies are aimed at providing a floor against declines in the sales price of the precious metal.

The company said its hedging protects an amount of gold equal to about 58% of its 90.1% equity interest in Newmont Gold’s planned 1991 output of 1.5 million oz.

Newmont Gold, which produced 1.68 million oz. in 1990 at a cash cost of US$218 per oz., does not participate in hedging programs.

Denver-based Newmont Mining reported net income for 1990 of US$342.6 million, up from US$125.9 million the previous year.