Newmont Mining Corp. (NYSE: NEM) mines for gold and, to a lesser degree, copper. That hasn't always been the company's makeup, but it defines the miner's operations today. And that means the one item on the asset side of the ledger that's vital for investors to understand: its mines.

The normal stuff
When you look at Newmont's balance sheet, its assets include the usual things; cash, receivables, tax assets, and the like. But two items stand out in importance, gold and gold mines. Gold, the first item, shows up in two places, current assets and long-term assets. But it isn't gold bricks. Mining gold is a process, so at any given time the yellow metal is in some form of completion. For example, a pile of dirt with gold particles in it waiting to be processed, gold being processed via leaching or some other extraction method, or the dore bars (a mixture of 85% gold and 15% silver) that are the final step before gold is shipped to smelters to be turned into gold bars and coins. At the end of 2014, long-term and short-term gold in some form of processing was valued at nearly $3.5 billion. That's a lot of gold!

This is worth keeping an eye on, because this gold should be easy enough to convert into revenue. The company had a little over $7 billion in sales in 2014, so there's enough gold already out of the ground in some form to make up about a half a year's worth of sales -- though only the current portion, about $650 million worth, would be considered convertible to cash over the next 12 months. (That's effectively the definition of a current asset.)

Of course, as noted, mining gold is a process, so there's always gold being readied for market. Thus, this isn't the defining asset of the company, but it is a big and important one worth at least checking in on every so often. If the numbers start falling, it could indicate the company is having trouble on the mining side of the business or slowing production levels. It could also mean gold prices are exceptionally high and the company is making hay while it can. You should be interested in finding out why there's a change.

The BIG one!
When it comes to defining assets, the largest one on Newmont's balance sheet is its mines. At the end of 2014 this asset was valued at about $13.6 billion, far and away the miner's largest asset. It's akin to a chipmaker's microchip fabrication plants. Without a chip factory, a chipmaker has no business. Without gold mines, Newmont has no business.

There's plenty to look at here both within the company and compared to peers. Mine location is one factor to examine, and Newmont has mines throughout the world, many are located in politically stable countries such as the United States, Australia, and New Zealand. These mines combined made up around 63% of the company's gold sales last year. While it has other operations in less-stable regions , particularly Africa, Indonesia, and South America, it has avoided major political issues of late.

Source: Randi Ang, via Wikimedia Commons.

Indonesia is a notable sore point, however. Changes to the country's regulations could ultimately mean Newmont loses operational control of its Batu Hijau mine. This wouldn't be ideal for Newmont and shows the risks inherent to operating in foreign countries. Indonesia represents about 6% of Newmont's sales last year, so problems in the country won't put it out of business. That said, without a controlling stake, it won't be able to ensure the mine's operations live up to Newmont safety, quality, and efficiency standards. This could lead to increased costs and leave Newmont little recourse to fix the problem.

Problems on this front can be material, too. For example, Barrick Gold Corp. (GOLD 1.75%), the industry's largest player, has invested billions of dollars into a mine that straddles Chile and Argentina. In late 2013 it suspended development due to regulatory and environmental issues in both nations.

War-torn African nations and other countries can be even riskier.

For example, Gold Fields Ltd. (GFI 2.06%) has two mines in Ghana. According to the U.S. State Department: "There are a number of ongoing chieftaincy disputes in Ghana that generally involve competition over limited resources." This country accounted for about a third of Gold Fields' production last year. That's not to suggest the company will have problems in Ghana, but that the risks are higher there than in, say, Nevada, where Barrick's U.S. mines are located. (To be fair, Barrick has mines in Ghana, too, but has far more exposure in its portfolio to very stable countries.)

Not all mines are created equal
Location is clearly an important feature of a mine, but it isn't the only one. That's because some mines are harder to work than others. For example, Newmont's portfolio of mines has an average all-in sustaining cost, a measure of how much it costs to produce an ounce of gold, of around $1,000. However, it's all-in sustaining costs range from $423 an ounce to $1,458 an ounce. So some mines are cheaper to run than others. About a third of the miner's gold had all-in sustaining costs of more than $1,000 an ounce last year.

Newmont Gold Mine Complex Source: Uncle Kick-Kick, via Wikimedia Commons.

Then there's the issue of how much gold is actually left in the ground, known as gold reserves. Mines don't last forever, since miners are pulling a limited resource out of the ground every day. In fact, older mines tend to be more expensive to run because ore quality declines and mining often becomes more difficult over time. Mines have a "life"; once they are no longer economic to work, miners have to move on.

Thus, acquisition and expansion opportunities are key issues to look at, too. That's exactly why Barrick Gold initiated its now-shuttered project on the border between Chile and Argentina. And why it's noteworthy that Newmont has invested in smaller expansion projects at existing mines to keep production up. Although this might not always be an avenue for replacing the gold pulled out of the ground and declining production at older mines, over the next couple years it will keep the company's production stable.

Once a miner
Newmont has changed over its history from owning mines and stakes in mines for a broad portfolio of commodities, to a pure-play gold miner, to what it is now a gold miner with some copper assets. Over this time, the company has increasingly been involved directly in mining so that, now, Newmont's mines are, indeed, its defining asset. If you are looking at Newmont, you'll want to take some time to read about the mines it owns.