Following is an Economic Impact Report prepared for Newmont Waihi Gold by Brent Wheeler Ltd, 20th July 2003

Economic Impact of Present and Future Mining Operations in Waihi: An update

Brent Wheeler Limited
20 July 2003

Monetary values are provided in New Zealand dollars.

The Economic Impact of Current Operations

The company forms an integral part of the Waihi community and the surrounding district. The economic impacts and contribution of the mining and ore processing industries stretch back well over a century. The company’s activities form an inseparable part of the economic and social fabric of the area as well as contributing well beyond Waihi itself and indeed in some cases beyond New Zealand.

Present Economic Activity

The company’s immediate economic activity is the operating of the Martha project joint venture and the planning of the Favona Project (see below). The Martha Project was the first major hard rock mining operation to be commissioned following the resurgence of the gold mining industry in New Zealand in the late 1970s.

The mine operates by open pit methods with crushed ore being transported by a 2.7 kilometre conveyor for processing to extract gold and silver from the ore. Tailings are contained by engineered earth embankment and excess waste water is treated prior to discharge.

Adding Economic Value

As with any commercial operation the key economic impact is the value added by the company in extracting and processing the raw material and its subsequent sale into markets for end uses. That value generates returns for shareholders, capital for re-investment, tax for central and local government and income for all of the company’s stakeholders.

A good idea of the direct economic value which the company’s activities produce is given in the following table which shows the value added by gold and silver operations for the year ended December 2002. Value added is simply the difference between revenue earned in the market and the costs of producing that revenue.

Value added is an economic rather than an accounting term and in that sense should not be compared directly with company profits as reported.

Clearly the size of the value added by the company is substantial. Even more importantly the value added component is achieved with a high level of efficiency reflecting the state of the art extraction technology and project management approach used by the company. The margin of value added over raw products is high by world standards both in general and for the industry.

Economic Impact Beyond the Operation

The economic impact of value added by the companies operations does not end with the value at the “gate” however. There are numerous complex and subtle multiplier effects which generate wealth for the community and improve social and economic well being. These may be identified by considering the expenditure (also termed output) associated with the operation.

The full impact of the companies operations is best understood by considering each type of effect. These are:

Direct Impacts

• Those impacts created by the project itself. In this case the direct impacts are the dollar outputs and the jobs directly generated by the project. Thus the mine’s earnings and the persons on the company payroll or contracted to work on the project make up the direct impact.

Indirect Impacts

• Those impacts created by the need to support and service all of the activity which the project involves. Examples include provision of fuel for vehicles, provision of plant and equipment, and provision of administrative or like services.

Induced Impacts

• The impacts created by the fact that households (of all descriptions) exist, consume and produce as a result of the project thus generating further economic activity in the form of dollar output and jobs generated.

The size of each impact is estimated and measured using statistics known as multipliers. The following table shows the estimated impacts for the year ended December 2002:

Economic Impacts – Output, District Level

The values shown are for the year ended December 2002 and in some years numbers will be considerably higher, in others somewhat lower.

The relationship between each of these impacts, and their size, can be seen readily in the following diagram:

Economic Impacts – Output, District Level

An identical set of impacts exists in respect of employment measured as FTEs. Estimates of present employment impacts are as follows:

Employment Impacts – Annual Full Time Equivalents

The “Full Time Equivalent” (FTE) is a way of measuring employment which takes account of part time work and converts all jobs to the equivalent of full time positions.

Employment Impacts – Annual Full Time Equivalents, District Level

Where Does Expenditure Take Place

The following table and diagram show whereabouts expenditure takes place. This is a generalised view. Some goods and services are paid for in head office locations others locally. Most significantly over a third of expenditure occurs in the local district and region and only a small amount overseas.

Area Spend Percent Waihi $33,797,333 41% Tauranga $ 4,285,386 5% Hauraki-Waikato $ 6,942,325 8% Auckland $20,484,144 24% Wellington $ 3,771,140 4% Australia $15,255,974 18% Rest of World $ 85,708 0% TOTAL $85,707,717 100%

What Form Does Expenditure Take

Expenditure has been broken out into general categories reflecting both the wide scope of goods and services purchased for the operation and the problems of separating expenditure into meaningful categories.

Of particular note is the size of the wage and salary expenditure most of which is spent in the local area (creating the “induced impacts” discussed above) and the contractor category which is not surprising given the nature of the company’s operation.

Category Spend Percent Contractors $42,561,503 50% General Expenses $16,789,646 20% Consumable $11,021,758 13% Consultants $ 1,942,414 2% Energy $ 4,680,086 5% Government $ 1,242,881 1% Wage & Salaries $ 7,469,429 9% TOTAL $85,707,717 100%

The Future and Favona

Operations at the Martha Mine are expected to gradually wind down with a finish date around 2008. By then it is expected that the economic life of the mine will be over. That however will not be the end of gold extraction in Waihi or the economic benefits it brings to the area.

At present final preparations are being made for commencement of the Favona Project. The Company is to construct and operate a modern underground gold mine to extract the ore body.

The expected economic impacts of the Favona Project are as follows:

Economic Impacts, Favona Project – Output in Millions

Economic Impacts, Favona Project – Output in Millions

The employment impacts of the Favona project, at a national, regional and district level are estimated to be as follows:

Employment Impacts Favona Project – Average Project Full Time Equivalents

Employment Impacts Favona Project – Average District Full Time Equivalents

Conclusion

The operations of the company have had a significant contribution to the local community and the districts surrounding it for many years. These benefits stretch well beyond the mine head and the company.

While the work of the Martha Joint Venture is drawing to a close the new Favona Project will continue to add economic benefit to the community for many years to come.

Note on Sources

Estimates and data are drawn from the Census of Population and Dwellings, Annual Reports of the commercial operators involved, company data and several reports prepared by Brent Wheeler Limited to support various resource applications. This economic impact update has been prepared independently of the company.