newmont mining 04/2007MEMsConfPres
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Transcript of newmont mining 04/2007MEMsConfPres
MEMs Conference Presentation
Gold Industry M&A
Paul Brink Director, Newmont
CapitalApril, 2007
Slide 2
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
Slide 3
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)
Slide 4
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
Slide 5
Senior Gold Producers Senior Gold Producers –– 5yr trading5yr trading
Slide 6
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
Slide 7
$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
Slide 8
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
Slide 9
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
Slide 10
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
Slide 11
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
Slide 12
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
Slide 13
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
Slide 14
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
Slide 15
Gold Industry TransactionsGold Industry Transactions
Compiled by: BMO Capital Markets
Slide 16
Premium to NAVPremium to NAV
Slide 17
NAV AccretionNAV Accretion
Slide 18
Total Acquisition CostTotal Acquisition Cost
Slide 19
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
Slide 20
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
Slide 21
Freq
uenc
yScarcity of Large DepositsScarcity of Large Deposits
Slide 22
• 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
Slide 23
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
Slide 24
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
Slide 25
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
Slide 26
Gold Industry M&AGold Industry M&A
Gold Industry OverviewGold Industry Overview
Gold Market ValuationGold Market Valuation
M&A Transaction ValuationM&A Transaction Valuation
Transaction ChallengesTransaction Challenges
Newmont Growth StrategiesNewmont Growth Strategies
Slide 27
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
Slide 28
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
Slide 29
Growth StrategiesGrowth Strategies
Core Operations
Regional Operating Units
Partnering Strategy
Stake in future large deposits
Investment/Diversification
Non-core assets
Slide 30
Gold Industry M&AGold Industry M&A
Thank You