Newmont The World’s Largest Gold Miner Will Purchase Newcrest for $19 Billion

Newmont clinched a A$28.8 billion (US$19.2 billion) deal to acquire Australian competitor Newcrest Mining. The deal solidified its position as the world’s largest gold producer with mines in most of the continents.

The transaction, which has been unanimously agreed by Newcrest’s board but is still subject to approval from regulators, is the largest in the gold mining industry to date. It exceeded Newmont’s acquisition of competitor Goldcorp in 2019.

Newcrest, whose then-CEO abruptly resigned at the very end of last year, dismissed the initial approaches. Although it showed earlier in the month that it intended to endorse an improved buyout offer from its bidder.

Newmont’s acquisition increases its dependence on gold at a moment when the metal is nearing an all-time high. It will also significantly increase its copper resources, a metal where the need is likely to surpass supply as they move out of fossil fuels accelerates.

On Monday, Newcrest’s shares surged as high as 1.9% in Australia after the company announced the acquisition in a statement. At 9:32 in the morning, in New York, Newmont was up 0.4%.

Newmont was close to reaching a deal on its offer. Gold miners around the world are facing the potential of stagnant output as they deal with more difficult-to-mine resources and growing input prices.

The focus will now move to Newmont’s ability to combine its expensive and large target, extract savings, and divest non-core businesses to produce the projected $500 million in yearly synergies.

Through portfolio optimization, the Denver-based miner hopes to enhance revenues by $2 billion over the two years following the transaction’s conclusion.

It’s an excellent chance for Newmont because they’ll be getting some really solid assets at a reasonable price, according to an analyst in Barrenjoey. He described London-based Greatland Gold, which was already an associate in Havieron, as a suitable buyer.

Under the terms of the agreement, Newcrest shareholders will receive 0.4 Newmont shares for every share they possess, providing them with 31% ownership of the merged group. They will also receive a free-of-tax special dividend of up to $1.10 per share before the closing.

The transaction gives Newcrest an implicit stock price of 29.27 Australian dollars per share, which is more than a 30% gain from the company’s February 3 closing price of A$22.45. On February 5, Newmont offered an initial proposal.

As part of the buyout agreement, Newcrest is going to pay the last dividend to shareholders. The combined company will maintain an additional listing on the Australian stock exchange.

“The transaction provided exceptional value for shareholders,” Tom Palmer, Newmont’s senior executive explained. He is an Australian from the mining town of Broken Hill.

Newmont made an all-share offer to Newcrest in February but was turned down. It increased its proposal to A$29.4 billion in April, prompting Newcrest’s board to examine its records.

It still represents a more than 30% premium over where it was shortly before the initial proposal was made.

The transaction will bolster Denver-based Newmont’s businesses in Australia, Canada, and Papua New Guinea. It may have an industry-wide impact as small mines controlled by the combined company are sold.

It is yet another instance of global mining industry consolidation, as major corporations seek to acquire promising businesses to gain scale and exposure to vital minerals required for the energy shift.

Newmont’s move considerably enhances its copper exposure and follows BHP’s acquisition of competitor Oz Minerals, Rio Tinto’s acquisition of Turquoise Hill, and Allkem’s combination with Livent to form a larger lithium player.

Subject to shareholder approval and regulatory permission, Newmont will make a proposal of 0.4 shares for each share in Newcrest, which it formed in the 1960s until breaking out through its merger with BHP.

The Australian gold miner anticipates that “portfolio optimization opportunities” will generate an additional $2 billion in cash flow. Newcrest shareholders will have the option of acquiring either NYS Exchange-listed stocks or Australian-listed CDIs in exchange for their investment.

The takeover will be subject to a shareholder vote in September or October. It will also need permission from the FIRB and authorities in Canada and PNG.

The Denver-based company would additionally have a total merged annual gold production of nearly 8 million ounces. It will have over five million gold ounces spread among 10 long-life plus low-cost locations.

In addition to the continuing benefits of combining these excellent portfolios, the merged group will set an entirely novel standard in gold production while profiting from a product and rising exposure to copper.

It will also set a market-leading position in security and sustainability. The company thinks it’s shareholders and other partners can look forward to a prosperous and exciting future.

The acquisition would result in a collective annual copper manufacturing of around 350 million pounds in Canada and Australia for Newmont.

Furthermore, by integrating existing mines and development initiatives in British Columbia’s Golden Triangle, the purchase will improve the company’s position in Canada.

Through Newmont’s operational style, about $100 million in pre-tax business and administration efficiencies are also envisioned.

For eight consecutive years, Newmont has been named the highest gold producer in the Dow Jones Index of Sustainability. It is consistently ranked as the most transparent business in the S&P 500 for sustainability disclosure.

Newmont will bring its proven sustainable practices and leadership to Newcrest’s assets, in addition to its well-established environmental credentials and top quadrant industry position.

Newmont believes in developing a diverse, inclusive, and equitable workspace where everybody is welcome. The company believes in recruiting and maintaining the variety of skills and creativity required to consistently enhance performance.

Newmont’s scalable, integrated operational approach, as well as a large pool of senior leaders, subject matter experts, and established local teams in Australia and Canada, would instantly support the merged firm.

Additional value creation possibilities are expected as the Newcrest portfolio completes its integration into Newmont, putting together the industry’s finest individuals and processes throughout two important mining jurisdictions. It will also have the benefits of Newcrest’s world-class block-caving team experience.

The transaction ties together two of Australia’s leading gold producers. It reinforces Newmont’s long-standing dedication to safe, lucrative, and environmentally conscious copper and gold production in Australia for decades to come.

Following the transaction, Newmont will use its current regional model of operation in Australia and combine and optimize both companies’ executives, specialists in their fields, supply chains, and local infrastructure to create the best-in-class performance.

Following the completion of the transaction, Newmont will set up a presence in the region and in-country workplaces in Papua New Guinea.

It will come to develop and maintain strong, proactive, and mutually beneficial connections with the national governments and local communities, all while ensuring safe and profitable operations.

In the future, the company’s expanded presence in Canada, in addition to shared ore body knowledge and technical expertise, may uncover gold and copper potential from the merged organic project pipeline, which includes the primary endeavor, Galore Creek.

The combined company’s balance sheet will be bolstered by a stronger, lower-cost, more diverse portfolio centered on low-risk mining jurisdictions.

The merged organization will be in a very good position to drive the greatest value-accretive development possibilities and sustainably improve total shareholder returns since it will have the sector’s greatest reserve and resource base.

Proofread & Published By Naveenika Chauhan