Newmont Mining Corp. is the world's second largest gold company. As of December 31, 2005, Newmont had proven and probable gold reserves of almost 100 million equity ounces and an aggregate land position of over 50,000 square miles. Newmont also produces copper (about 4-pct of total revenue to 96-pct for gold), mostly through its Batu Hijau operation in Indonesia.

The major gold operations are located in many countries.. It has two large development projects in Ghana, West Africa.

Newmont also has an Exploration Segment and a Merchant Banking Segment that manages a royalty portfolio, an equity portfolio, and a downstream gold refining business, and engages in portfolio management activities in oil and gas, iron ore, and coal properties.

Proven and probable gold reserves totaled 93.2 million oz (Y/E 2005), versus 92.4 million oz (2004), using a gold price of $400 per oz ($350 per oz, 2004). At Y/E 2005, 33.2 million oz were located in Nevada, 16.8 million oz in Peru, 18.7 million oz in Ghana, 14.9 million oz in Australia/New Zealand, 6.7 million oz in Indonesia, and 2.9 million oz in Canada, Mexico, Bolivia, Turkey and Uzbekistan.

Copper reserves totaled 9.1 billion lbs (Y/E 2005), using a copper price assumption of $1.00 per lb, versus 8.9 billion lbs at Y/E 2004, (assuming $0.90 per lb).

About 35% of Newmont's equity gold sales in 2005 came from the United States, 27% from Peru, 25% from Australia/New Zealand, 6% from Indonesia, and 7% from other operations.

Gold mining is a highly capital intensive business. NEM plans $1.8 billion in exploration and development capex from 2006 to 2010 to offset the decline in production of mature operations. NEM estimates that its new mines will have project lives of over 16 years and add 2.6 million oz. of annual equity production at costs below the industry average.

Newmont is a Cara 100 component. I have the highest regard for Pierre Lassonde, Newmont's President, and Chairman of the World Gold Council. But, the company has had a tough go of it for a couple years, although thankfully appears to be coming out of its doldrums.

Production in 2006 is expected to fall from 8.83 million oz in 2004 and 8.55 million oz in 2005 to just 5.6-6.0 million oz this year, and maybe lower. Moreover, cash costs are rising: $216 in 2004; $236 in 2005; and up to $290-$310 per oz this year.

The problems facing many of the goldminers are well-known. There have been very few major discoveries in recent years, and yet the operating costs and social costs have skyrocketed. With Newmont, production fell off mainly due to the expropriation of the Uzbekistan JV, Ghana power shortages, and the expected sale of the Holloway mine in Canada.

That last paragraph is one of the reasons, along with excessive money printing by governments, why long-term oriented traders cannot ignore gold.

According to one of the Wall Street analysts:

• "Newmont announced that equity gold sales are expected to decline before development projects in Nevada, Ghana, and Australia reach full production in 2008 and 2009. The company is expecting 2006 equity gold sales between 5.6 and 5.8 mmoz, attributing the revised guidance to the expropriation of Newmont's stake in Zarafshan and lower production in Ghana. Costs applicable to sales guidance remain $290-310/oz.
• In 2007, Newmont is expecting equity gold sales of 5.2"5.6 mmoz, primarily due to lost sales from Zarafshan and previously announced lower production from Yanacocha. Costs applicable to sales are expected to be 20"25% higher than 2006, mainly due to higher costs at Yanacocha. (Zarafshan accounts for only about $0.42/sh of the Newmont NAV.)

• In Q3/06, Newmont expects a pre-tax gain of approximately $295 million from the sale of the Alberta Oil Sands Project and Martabe. This gain is likely to be offset by an anticipated $94 million write-off of Zarafshan.
• Newmont also announced that it is deferring development of the Akyem project, pending completion of permitting and resolution of power shortages in Ghana. The proposed Akyem processing facilities could burden power sources further and a longer-term solution is required.
• As for permitting, it has been particularly challenging at Akyem due to the project's proximity to a forest reserve. The Akyem project was originally approved by the Board of Directors in July 2005 and was expected to commence annual production of 500"550 koz by mid-2008.
• We understand that production could be deferred to begin in 2010 or beyond. With this slower approach to development, Newmont is likely to re-evaluate the capital program at Akyem.
• Newmont acquired a 40% interest in Shore Gold's Fort a la Corne Joint Venture (FALC JV) for $153 million. Newmont already owns 9.7% of Shore Gold and believes the investment provides an opportunity to participate in a "significant district-scale" diamond project."

At the Denver Gold Forum, another Wall Street analyst wrote up his notes as follws:

• "Wayne Murdy, Chairman and CEO, and Pierre Lassonde, President, provided an overview of Newmont's assets and discussed the outlook for gold. Costs continue to be challenging as input prices continue to rise. Costs are expected to peak in 2007 and improve in 2008.
• Leeville is expected to continue ramping up until mid-2007. The start-up of the mill at Ahafo progressed well; however, production is expected to be negatively impacted by power shortages in Ghana in H2/06 and into 2007.
• The presentation highlighted Ghana (particularly the area around Ahafo) and Boddington as prospective for reserve growth. The company is evaluating the potential to add 250 to 300 koz production from a high grade underground at Ahafo.
• Mr. Lassonde remains bullish on gold, highlighting the expanding current account deficit and the potential weakening in the U.S. dollar. However, Mr. Lassonde cautioned that there could be a "hiccup" in this long-term gold bull market.

NEM is currently trading at 2.17x NAV, well within the historical range of 1x-3x that North American gold producers have traded within. Based on a 2.50x-2.60x NAV multiple, I am setting a 12-month Price Tarket of $60.00.

Risks of this target not being achieved include unforeseen operating problems and/or commodity price weakness, and political situations becoming more permanent.

I continue to like NEM shares as a long-term core position because I can see the company strengthening through the 2007-2010 period, and I believe that $GOLD will trade at an average of US$750 through that stretch, without consideration given the prospects of a major financial accident happening that would send $GOLD shooting over US$1,000.

For readers who are interested in Newmont Mining as one of the world-leading goldminers, I urge you to review their presentation at the recent Denver Gold Forum.
NEM NMC.TO Newmont Mining