DBRS Downgrades Newmont Mining to BBB (high) and R-2 (high)

DBRS has today downgraded the ratings of Newmont Mining Corporation’s (Newmont or the Company) Senior Unsecured Debt to BBB (high) from A (low) and its Commercial Paper to R-2 (high) from R-1 (low) as the Company’s business and financial profiles weakened in 2007. The trends are Stable. This action removes the ratings from Under Review with Negative Implications where they were placed on October 10, 2007. Newmont continues to be challenged on a number of fronts:

(1) During the first nine months of 2007, the Company’s financial profile weakened as cash costs increased substantially to $414 per ounce, up from $304/oz in 2006 -- due mostly to lower ore grades/production and higher waste removal costs (above the industry projected average of approximately $350/oz to $380/oz for 2007; $317/oz for 2006). Cash operating costs are expected to remain above $400/oz for 2007. However, the average realized gold price that Newmont received increased by only 10% (up to $665/oz in the first nine months of 2007, from $599/oz in F2006). Accordingly, the Company’s EBITDA margin decreased to 23% for the first nine months of 2007 (down from 38% in F2006). On the back of much higher cash costs, Newmont’s net profit margin decreased to -1% for the first nine months of 2007 (down from 17% in F2006). The Company’s profitability remains low for the ratings -- average return on equity over the last five years was 6.2% (versus -0.7% for the first nine months of 2007, excluding extraordinary items).

(2) Newmont’s capital expenditure program is substantial -- between $1.7 billion and $1.9 billion for 2007 -- and is forecasted to remain high in 2008 (as the Company brings its new projects into production). For 2006, cash flow from operations was strong at $1.5 billion; however, gross free cash flow was negative $0.5 billion as capex and dividends equalled $2.0 billion. The situation remains similar for 2007. Thus, partial funding of the Company’s capex program with additional debt seems probable.

(3) Replacing gold reserves is becoming more and more difficult -- large additional reserves are being acquired at high valuations. In early October 2007, Newmont announced that it was acquiring the outstanding common shares of gold explorer Miramar Mining Corporation (Miramar) that it did not already own for approximately $1.3 billion. Miramar, a non-producing gold company, has a 10.7 million ounce gold resource in Canada’s Nunavut region. Capex for the project is estimated at over $800 million. Production is expected to begin, at the earliest, in 2009.

(4) On November 20, 2007, the Company announced that it would be divesting its royalty and equity portfolio via an IPO into a new company -- Franco-Nevada Corporation. The sale of the royalty and equity portfolio, which provides stable earnings, will increase earnings volatility (in 2006, the portfolio produced royalty/dividend income of $120 million and sale of assets produced proceeds of over $300 million). The current ratings incorporate the expectation that the proceeds from the sale of the royalty and equity portfolio (approximately $1.0 billion) will be used toward either capex or the Miramar acquisition. Franco-Nevada Corporation will include royalties in 190 precious- and base-metal operations and 100 oil and natural-gas facilities; additionally, it will receive stakes in precious metals and energy projects that are being developed. The closing of the transaction is expected to occur in December 2007. Additionally, in the second quarter of 2007, Newmont closed out its remaining gold hedge contracts (for $531 million), further increasing volatility.

Newmont has an acceptable balance sheet for its current ratings, with gross debt-to-total-capital of 25% and net debt of 14% (at September 30, 2007). However, Newmont’s competitive cost position has been deteriorating over the last two years, putting pressure on earnings (and the balance sheet). Going forward, DBRS expects the balance sheet may weaken as the Company partially funds its capex program with additional debt (but still remain compatible for the current ratings).

Note:
All figures are in U.S. dollars unless otherwise noted.