newmont mining 04/2007MEMsConfPres

MEMs Conference Presentation

Gold Industry M&A

Paul Brink Director, Newmont

CapitalApril, 2007

Gold Industry M&AGold Industry M&A

Gold Industry OverviewGold Industry Overview

Gold Market ValuationGold Market Valuation

M&A TransactionsM&A Transactions

Transaction ChallengesTransaction Challenges

Newmont M&A ApproachNewmont M&A Approach

Gold PriceGold Price

Net Long/(Short) Positions & Gold Price

(120,000)

(90,000)

(60,000)

(30,000)

0

30,000

60,000

90,000

120,000

150,000

180,000

1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

$750

Net Long / (Short) Position

Gold Price (Spot FR)

Senior Gold ProducersSenior Gold Producers

Mar

ket C

apita

lizat

ion

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Barrick

Gold

Newmont M

iningGold

corp

AngloG

old Ash

anti

Gold Fiel

dsKinr

oss G

old

Newcrest

Mining

Harmon

y Gold

Polyus M

ining

Senior Gold Producers Senior Gold Producers –– 5yr trading5yr trading

Intermediate Gold ProducersIntermediate Gold Producers

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Yaman

a Gold

Agnico

-Eag

le Mine

sLih

ir Gold

Meridian G

oldIAMGOLD

Centerra

Gold

Eldorado

Gold

Randgo

ld Res

ource

s

Peter H

ambro

DRDGOLD Ltd.

Mar

ket C

apita

lizat

ion

$0

$200

$400

$600

$800

$1,000

$1,200

Crew G

old C

orp.

Miramar

Mining

Crystal

lex In

ternati

onal

Gabrie

l Res

ource

s

Rio Narc

ea

Alamos

Gold

Minefin

ders

High Rive

r Gold

Peak G

old Ltd.

Aurizo

n Mine

s

Cumbe

rland

Res

ource

s

Kirkland

Lake

Gold

Dunde

e Preciou

s Meta

ls

Red B

ack M

ining

Semafo

Inc.

Etrusc

an R

esourc

es In

c.

Jagu

ar Mining

Inc.

GBS Gold

Inter

natio

nal

Nevsu

n Res

ource

sAXMIN

Inc.

Glenca

irn G

old

Claude R

esou

rces

Pacific

Rim

Centur

y Mini

ng C

orp.

Olympu

s Pac

ific M

ineral

s

Nevad

a Pac

ific G

old

Queen

stake

Reso

urces

St And

rew G

oldfiel

ds

Junior Gold ProducersJunior Gold ProducersM

arke

t Cap

italiz

atio

n

Exploration CompaniesExploration Companies

Company Market Cap.

Company Market Cap.

Company Market Cap.

Company Market Cap.

Silver Standard Resources $2,447 Gold Reserve Inc. $307 Acadian Gold $104 Canarc Resource Corp. $43NovaGold Resources $1,627 Bear Creek Mining $291 Northern Mining $98 African Gold Group $43Aurelian Resources Inc. $1,046 Moto Goldmines Ltd $283 Alexis Minerals $88 Cassidy Gold $41Fronteer Development $949 Orezone Resources $283 YGC Resources Ltd. $88 Merrex Gold Inc. $40Palmarejo Gold Corp. $740 Fortuna Silver Mines $187 Atna Resources Ltd. $87 IMA Exploration Inc. $39Gold Eagle Mines Ltd. $707 Chesapeake Gold $183 Keegan Resources Inc. $85 SearchGold Resources $32Seabridge Gold $605 New Gold Inc. $180 Exeter Resource Corp. $81 Sulliden Exploration $31Osisko Exploration $585 Andina Minerals $179 Pelangio Mines $81 North Atlantic Resources $28Metallica Resources $504 Petaquilla Minerals $178 Kimber Resources Inc. $79 Radius Gold $25Arizona Star $494 Lake Shore Gold $177 Capital Gold Corp. $73 Gateway Gold $22International Minerals $479 San Anton Resource $171 StrataGold Corporation $73 Temex Resources $20Banro Corporation $419 Detour Gold Corporati $155 Mines Management Inc $68 Robex Resources $18Guyana Goldfields $413 Rubicon Minerals $153 Queenston Mining $63 Trade Winds Ventures $18Aquiline Resources $410 Carpathian Gold $137 Goldbelt Resources $61 Maximus Ventures Ltd. $17Rusoro Mining Ltd $408 San Gold Corporation $135 Reunion Gold Corp. $60 Tagish Lake Gold $17Anatolia Minerals $393 Solitario Resources $131 Plexmar Resources $56 Goldcrest Resources $15U.S. Gold Corporation $327 Linear Gold Corp. $129 Gold-Ore Resources $52 Portal Resources $15Southwestern Resources $323 Dynasty Metals & Mini $126 Royal Standard Minerals $52 Alturas Minerals Corp. $14Minera Andes Inc. $316 Mansfield Minerals Inc $125 Klondex $45 Pacific Comox $14Greystar Resources $316 Marathon PGM Corp. $105 Committee Bay Resources $45 Goldrush Resources $14

M&A UniverseM&A Universe

Meridian

Agnico-Eagle

Lihir

Newcrest

Bema

AngloGold

Gold Fields

Newmont

Barrick

Randgold

Polyus

Goldcorp

Harmony

IAMGold

Kinross

0

25

50

75

100

125

150

175

0.0 2.0 4.0 6.0 8.0 10.0

2007E Production (millions ozs)

31-D

ec-2

005

Res

erve

Oun

ces

(mill

ions

oz)

BUBBLE SIZE DENOTES MARKET CAP

Valuation FactorsValuation Factors

Financials NAV CF Free Cash Flow

Growth CFPS Reserves/Share Production/Share

Option Value Leverage Reserves/Share Production/Share

Quality Management Premium deposits Margins Reserve Life

NAV Premiums NAV Premiums –– Spot GoldSpot Gold

NAV premiums - Senior and Intermediate Producers

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

1/97 1/98 1/99 1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07

Price to Cash Flow Price to Cash Flow

Price to Cash Flow - Senior Producers

5.0x

10.0x

15.0x

20.0x

25.0x

1/97 1/98 1/99 1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07

Sr Cur Yr Sr 1 Yr Out Sr 2 Yr Out

Gold Industry TransactionsGold Industry Transactions

Compiled by: BMO Capital Markets

Premium to NAVPremium to NAV

NAV AccretionNAV Accretion

Total Acquisition CostTotal Acquisition Cost

US/Canada Deal Structure ConsiderationsUS/Canada Deal Structure Considerations

66.7% threshold, single process May be exempt from SEC review

×In the market for min. 60-70 days×Target controls transaction

documentation and timing to a greater degree

×43-101 compliance required×Fairness opinion valuing acquirer

In the market for min. 40-50 days Ability to control the transaction documentation and transaction timingAbility to respond fast to competing bidTax free roll for shareholder

×90% threshold for compulsory acquisition of remainder or 2nd stage “squeeze-out”transaction (additional 45 days)

×SEC review and 43-101 compliance required

×Fairness opinion valuing acquiror

Shares

66.7% threshold, single processIn the market for min. 50-60 days

×Target controls transaction documentation and timing to a greater degree

In the market for min. 40-50 days Ability to control the transaction documentation and transaction timingAbility to respond fast to competing bid

×90% threshold for compulsory acquisition of remainder or 2nd stage “squeeze-out”transaction (additional 45 days)

Cash

Plan of ArrangementTender Offer

Freq

uenc

yScarcity of Large DepositsScarcity of Large Deposits

• Industry Data from Schodde (1985-2003)

190 deposits > 1 Moz containing 895 Moz

discovered

Discovery rate is about 10 deposits > 1Moz per year

Approximately 5 of 10 are >3Moz

Only 14 of the total 190 deposits are >10 Moz

Scarcity of Large DepositsScarcity of Large Deposits

ETF ETF –– Double Edged SwordDouble Edged Sword

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2003 2004 2005 2006300

350

400

450

500

550

600

650

700

750

New Gold (JSE)GBS (ASX)Lyxor GBS (LSE)GLD(NYSE)Barclays iSharesGold Price

Source: Murenbeeld

Intermediates at Senior MultiplesIntermediates at Senior Multiples

Gol

d Pr

ice

Dis

coun

ted

by S

enio

rsG

old

Pric

e D

isco

unte

d by

In

term

edia

tes

Source: BMO Nesbitt Burns

Life Cycle of a ProjectLife Cycle of a Project

0

2

4

6

8

10

• Competitive High Risk• Potentially High Value

ExplorationFocus

• Sponsorship Opportunities• Few Competitors and lower Risk

CorporateFocus

Greenfields ~4 - 5 Years Pre-Discovery1 - 2 YearsDiscovery

2-3 YearsFeasibility &Permitting

2 YearsDevelopment

Rel

ativ

e Va

lue

Speculative Stock Ahead Of Known Value

Orphan Period

Speculators Leave

Institutional Investing Begins

Depletion1 YearStart-Up

Full Value

Development Projects•Permitting Issues•Lack of Operating/Technical Skills•Capital Constraints

Early Mover Advantage• Limited Information• Portfolio Approach

Mergers/Acquisitions:•Strategic,•Synergistic

5 7 10 12 130 Years




M&A Transaction ValuationM&A Transaction Valuation


Newmont Growth StrategiesNewmont Growth Strategies

Reserve Additions and DepletionsReserve Additions and Depletions

65%

264%

213%

127%

484%484%

68%

4%

-100%

-51%

-15%

0%

99%

89%

17%

0%

Gold Majors 2001-2005

0

20

40

60

80

100

120

140

160

180

200

200620052004200320022001

Expl

orat

ion

Budg

ets

(US$

Mill

ions

)

Barrick

AngloGold

Diam

ond Explorers 2006 D

iversified Miners 2006

Newmont

Gold Fields

Source: Corporate Exploration Strategies (Metals Economics Group, October 2006)

Exploration Spend Gold MajorsExploration Spend Gold Majors

Growth StrategiesGrowth Strategies

Core Operations

Regional Operating Units

Partnering Strategy

Stake in future large deposits

Investment/Diversification

Non-core assets


Thank You

newmont mining 04/2007MEMsConfPres

Economy & Finance

Transcript of newmont mining 04/2007MEMsConfPres