newmont mining 04/2007MEMsConfPres
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  • 1. MEMs Conference Presentation Gold Industry M&A Paul Brink Director, Newmont Capital April, 2007
  • 2. Gold Industry M&A Gold Industry Overview Gold Market Valuation M&A Transactions Transaction Challenges Newmont M&A Approach Slide 2
  • 3. Gold Price Net Long/(Short) Positions & Gold Price 180,000 $750 Net Long / (Short) Position 150,000 $700 Gold Price (Spot FR) 120,000 $650 90,000 $600 60,000 $550 30,000 $500 0 $450 (30,000) $400 (60,000) $350 (90,000) $300 (120,000) $250 1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 Slide 3
  • 4. Market Capitalization Ba rr i c Ne $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 wm k G on old tM in in g G An ol gl dc oG or p ol d As Senior Gold Producers ha G nt i ol d Fi el Ki ds nr os s Ne G wc ol re d st M i Ha rm nin g on y G Po ol lyu d s M in in g Slide 4
  • 5. Senior Gold Producers – 5yr trading Slide 5
  • 6. Market Capitalization Ag Ya ni ma n co $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $0 -E a G ag ol d le M in es Li M hi er r G id ol d ia n G o IA M ld G Ce nt OL e D El rra G d Ra Intermediate Gold Producers ol nd ora go do d ld R Go e ld Pe sou rc te r H es DR DG amb r O LD o Lt d. Slide 6
  • 7. Market Capitalization C re C w ry s t M Go al i ra l d l $0 $200 $400 $600 $800 $1,000 $1,200 G ex m a Co ab In r rp rie ter Mi . l R n a ni n e tio g R sou na Al io N rc l am a es rc H Mi n os G ea ig e o h C Pe Ri fin d l d um a ve e be Au k G r G rs D K rl an ri zo old ol d un i r d n L de k la R M td e nd es ine . Pr L ou s e R ci o ak e rce Et ed u G s ru sc B s M ol d a Junior Gold Producers an Se ck eta R Ml G J a e s m a in s BS g ou fo in g u G ar rc e Inc N old M s . in In ev su Int ing c . n ern In Rac es tio . AX ou na C Gl la en M rce l ud c IN s e air In Rn c O Ce e ly n m tu P s o Go . pu ry a ur ld s M ci ce Q Ne Pa ini fi c s ue v a ci ng Ri m e d fic St ns a P M Cor A tak ac i ne p. nd e ifi ra re Re c G ls wso G ou l d o l rc df e ie s ld s Slide 7
  • 8. Exploration Companies Market Market Market Market Company Company Company Company Cap. Cap. Cap. Cap. Silver Standard Resources Gold Reserve Inc. Acadian Gold Canarc Resource Corp. $2,447 $307 $104 $43 NovaGold Resources Bear Creek Mining Northern Mining African Gold Group $1,627 $291 $98 $43 Aurelian Resources Inc. Moto Goldmines Ltd Alexis Minerals Cassidy Gold $1,046 $283 $88 $41 Fronteer Development Orezone Resources YGC Resources Ltd. Merrex Gold Inc. $949 $283 $88 $40 Palmarejo Gold Corp. Fortuna Silver Mines Atna Resources Ltd. IMA Exploration Inc. $740 $187 $87 $39 Gold Eagle Mines Ltd. Chesapeake Gold Keegan Resources Inc. SearchGold Resources $707 $183 $85 $32 Seabridge Gold New Gold Inc. Exeter Resource Corp. Sulliden Exploration $605 $180 $81 $31 Osisko Exploration Andina Minerals Pelangio Mines North Atlantic Resources $585 $179 $81 $28 Metallica Resources Petaquilla Minerals Kimber Resources Inc. Radius Gold $504 $178 $79 $25 Arizona Star Lake Shore Gold Capital Gold Corp. Gateway Gold $494 $177 $73 $22 International Minerals San Anton Resource StrataGold Corporation Temex Resources $479 $171 $73 $20 Banro Corporation Detour Gold Corporati Mines Management Inc Robex Resources $419 $155 $68 $18 Guyana Goldfields Rubicon Minerals Queenston Mining Trade Winds Ventures $413 $153 $63 $18 Aquiline Resources Carpathian Gold Goldbelt Resources Maximus Ventures Ltd. $410 $137 $61 $17 Rusoro Mining Ltd San Gold Corporation Reunion Gold Corp. Tagish Lake Gold $408 $135 $60 $17 Anatolia Minerals Solitario Resources Plexmar Resources Goldcrest Resources $393 $131 $56 $15 U.S. Gold Corporation Linear Gold Corp. Gold-Ore Resources Portal Resources $327 $129 $52 $15 Southwestern Resources Dynasty Metals & Mini Royal Standard Minerals Alturas Minerals Corp. $323 $126 $52 $14 Minera Andes Inc. Mansfield Minerals Inc Klondex Pacific Comox $316 $125 $45 $14 Greystar Resources Marathon PGM Corp. Committee Bay Resources Goldrush Resources $316 $105 $45 $14 Slide 8
  • 9. M&A Universe 175 150 31-Dec-2005 Reserve Ounces (millions oz) 125 Agnico-Eagle Barrick Meridian 100 New m ont Bem a Gold 75 Fields Lihir Anglo Harm ony Polyus Gold New crest 50 Goldcorp 25 Kinross BUBBLE SIZE DENOTES MARKET CAP IAMGold Randgold 0 0.0 2.0 4.0 6.0 8.0 10.0 2007E Production (millions ozs) Slide 9
  • 10. Gold Industry M&A Gold Industry Overview Gold Market Valuation M&A Transactions Transaction Challenges Newmont M&A Approach Slide 10
  • 11. Valuation Factors Financials Growth NAV CFPS CF Reserves/Share Free Cash Flow Production/Share Quality Option Value Management Leverage Premium deposits Reserves/Share Margins Production/Share Reserve Life Slide 11
  • 12. NAV Premiums – Spot Gold NAV premiums - Senior and Intermediate Producers 160% 140% 120% 100% 80% 60% 40% 20% 0% -20% 1/97 1/98 1/99 1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 Slide 12
  • 13. Price to Cash Flow Price to Cash Flow - Senior Producers 25.0x Sr Cur Yr Sr 1 Yr Out Sr 2 Yr Out 20.0x 15.0x 10.0x 5.0x 1/97 1/98 1/99 1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 Slide 13
  • 14. Gold Industry M&A Gold Industry Overview Gold Market Valuation M&A Transactions Transaction Challenges Newmont M&A Approach Slide 14
  • 15. Gold Industry Transactions Compiled by: BMO Capital Markets Slide 15
  • 16. Premium to NAV Slide 16
  • 17. NAV Accretion Slide 17
  • 18. Total Acquisition Cost Slide 18
  • 19. US/Canada Deal Structure Considerations Tender Offer Plan of Arrangement Cash In the market for min. 40-50 days 66.7% threshold, single process Ability to control the transaction In the market for min. 50-60 days documentation and transaction timing ×Target controls transaction Ability to respond fast to competing bid documentation and timing to a greater degree ×90% threshold for compulsory acquisition of remainder or 2nd stage “squeeze-out” transaction (additional 45 days) Shares In the market for min. 40-50 days 66.7% threshold, single process Ability to control the transaction May be exempt from SEC review documentation and transaction timing ×In the market for min. 60-70 days Ability to respond fast to competing bid ×Target controls transaction Tax free roll for shareholder documentation and timing to a greater degree ×90% threshold for compulsory acquisition of remainder or 2nd stage “squeeze-out” ×43-101 compliance required transaction (additional 45 days) ×Fairness opinion valuing acquirer ×SEC review and 43-101 compliance required ×Fairness opinion valuing acquiror Slide 19
  • 20. Gold Industry M&A Gold Industry Overview Gold Market Valuation M&A Transactions Transaction Challenges Newmont M&A Approach Slide 20
  • 21. Scarcity of Large Deposits Frequency Slide 21
  • 22. Scarcity 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 Slide 22
  • 23. ETF – Double Edged Sword 18000 750 16000 700 14000 650 12000 600 New Gold (JSE) GBS (ASX) 10000 550 Lyxor GBS (LSE) GLD(NYSE) 8000 500 Barclays iShares Gold Price 6000 450 4000 400 2000 350 0 300 2003 2004 2005 2006 Source: Murenbeeld Slide 23
  • 24. Gold Price Discounted Gold Price Discounted by by Seniors Intermediates Intermediates at Senior Multiples Source: BMO Nesbitt Burns Slide 24
  • 25. Life Cycle of a Project Full Value • Competitive High Risk • Sponsorship Opportunities • Potentially High Value • Few Competitors and lower Risk 10 Exploration Corporate Focus Focus 8 Relative Value Speculative Stock 6 Ahead Of Known Value Speculators Leave Orphan 4 Institutional Period Investing Begins 2 2-3 Years 2 Years 1 Year 1 - 2 Years Depletion Feasibility & Development Start-Up Discovery Greenfields Pre-Discovery ~4 - 5 Years Permitting 0 Years 0 5 7 10 12 13 Development Projects Mergers/Acquisitions: Early Mover Advantage •Strategic, • Limited Information •Permitting Issues •Synergistic • Portfolio Approach •Lack of Operating/Technical Skills •Capital Constraints Slide 25
  • 26. Gold Industry M&A Gold Industry Overview Gold Market Valuation M&A Transaction Valuation Transaction Challenges Newmont Growth Strategies Slide 26
  • 27. Reserve Additions and Depletions Gold Majors 2001-2005 89% 99% 17% 68% 0% -15% 213% 484% -51% 484% 0% 264% 4% 127% 65% -100% Slide 27
  • 28. Exploration Spend Gold Majors 200 Barrick 180 Diamond Explorers 2006 160 Exploration Budgets (US$ Millions) Newmont 140 Diversified Miners 2006 120 AngloGold 100 80 60 Gold Fields 40 20 0 2001 2002 2003 2004 2005 2006 Slide 28 Source: Corporate Exploration Strategies (Metals Economics Group, October 2006)
  • 29. Growth Strategies Core Operations Regional Operating Units Partnering Strategy Stake in future large deposits Investment/Diversification Non-core assets Slide 29
  • 30. Gold Industry M&A Thank You Slide 30