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Newmont spends $578 million to close gold hedges early
Company Press Release
Thursday, July 5, 2007
DENVER -- Newmont Mining Corp. today announced the elimination of its entire 1.85 million-ounce gold hedge position, establishing the company as the world's largest unhedged gold producer.
Newmont also announced plans to monetize components of its royalty and equity portfolio in the next 12 months, resulting in the discontinuation of the company's merchant banking segment as a separate business unit.
Commenting on the company's strategic initiatives, newly appointed Chief Executive Officer Richard O'Brien said:
"With the elimination of our gold hedge book, we have renewed our commitment to maximizing gold price leverage for our shareholders. In addition, we are focused on delivering improvements in our operating performance and cost structure going forward. We intend to realize the value from a significant portion of our non-core, merchant banking portfolio and use the proceeds to fund the development and growth of our core gold business."
During June 2007 the company spent $578 million to eliminate its entire 1.85 million-ounce price-capped forward sales contracts. The company will report a pre-tax loss of approximately $531 million on the early settlement of these contracts, after a $47 million reversal of previously recognized deferred revenue.
In addition, as a result of the company's decision to discontinue its merchant banking segment and monetize components of its equity and royalty portfolio, the carrying value of the merchant banking segment goodwill was impaired as of June 30, 2007. Consequently, the company expects to incur a non-cash impairment charge of approximately $1.7 billion, to be recorded as part of discontinued operations, in the second quarter of 2007. The company has engaged financial and legal advisers to evaluate alternatives to maximize the realized value of the discontinued merchant banking portfolio. Potential alternatives include, among others, a public offering and/or private sale transactions.
Commenting on the company's path forward, Mr. O'Brien said:
"These transactions form the foundation of a renewed focus on our core gold business. Looking forward, we intend to maximize gold price leverage for our shareholders, establish a sustainable and reliable production base at competitive operating and capital costs, maintain our financial strength and flexibility, and capitalize on our exploration portfolio and land position."
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