Business Context and Reporting Period
This Form 8-K is filed by Newmont Mining Corporation for the reporting period ending December 7, 2016. The filing addresses material impairments and asset retirement obligations related to the Minera Yanacocha S.R.L. mine in Peru, a joint venture with Compania de Minas Buenaventura S.A. and the International Finance Corporation.
Key Financial Metrics and Material Changes
The filing details significant non-cash charges expected in the fourth quarter of 2016 resulting from a revised closure plan for the Yanacocha mine:
- Asset Retirement Obligation (ARO): Management expects to record an increase to the ARO of between $400 million and $500 million.
- Reclamation Expense: The ARO increase will result in a non-cash charge to reclamation expense of between $60 million and $90 million for operations no longer in production.
- Impairment Charge: Due to increased estimated future closure costs, the Company expects to record a non-cash impairment charge of between $1.0 billion and $1.2 billion, reported as a write-down of long-lived assets.
The filing does not provide specific figures for total revenue, net profit, operating cash flow, margins, or total debt for the period.
Management Commentary and Risks
Management conducted a comprehensive study of the Yanacocha reclamation plan to meet Peruvian regulatory requirements for an updated closure plan. The primary drivers for the increased costs are higher estimated future water treatment costs, earthworks, demolition, and related support activities. The revised closure plan is subject to change pending submission and review by Peruvian regulators, expected in the second half of 2017. The Company notes that the closure study is ongoing and could result in future increases or decreases to the asset retirement obligation.
Investor Verification Checklist
- Verify the final impairment charge and ARO adjustment in the Annual Report on Form 10-K for the year ended December 31, 2016.
- Monitor the status of the revised Yanacocha closure plan submission to Peruvian regulators in the second half of 2017.
- Review the supplemental information and regional updates posted in the Investor Briefcase section of the Company's website.
- Assess the impact of the $1.0 billion to $1.2 billion non-cash write-down on the Company's long-term asset base and future depreciation schedules.