Newcrest Mining, Australia’s largest gold miner is under threat from a major global producer. Negotiations are underway to merge the $20 billion Australian firm with a North American counterpart.
Newcrest’s board is believed to have received an early-stage offer to purchase the group. They called in legal and financial advisers to assess whether it would be in the shareholders’ best interests.
It is understood @NewcrestMining board "Has Received" an early-stage approach to buying the group/called in financial and legal advisers to help assess whether the proposal would be in shareholders’ interests $NCM spokesman declined to comment on the approach on Sunday. #GGP https://t.co/EciLbnYcMu
— Share_Talk ™ (@Share_Talk) February 5, 2023
Barrick Gold, a Toronto-based company, and Newmont Corporation, based in the United States, are the most obvious suitors. Both have long-standing associations with gold mining in Australia and Canada’s Agnico Ear Mines.
These three gold producers are among the largest in the world and are well-known to Newcrest’s board as well as its institutional shareholders. Each of these global players does not have an ASX listing and could benefit from a Newcrest merger, or takeover to access Australia’s investment markets.
Both companies would see obvious synergies, as would the large passive fund managers who typically hold a large proportion of the shares of gold miners via their exchange-traded funds. Two of Newcrest’s biggest investors are State Street and BlackRock.
A spokesperson for Newcrest declined to comment on Sunday’s approach.
Newcrest’s board is currently conducting a global search to find a chief executive. Ex-Woodside Petroleum executive Sherry duhe was appointed interim boss to replace Sandeep Biswas as former boss.
Newcrest’s board has retained Herbert Smith Freehills’ Melbourne lawyers and investment bank Lazard Australia for assistance in the negotiations. For advice and funding, other banks may be involved.
As consolidation continues in the industry, Newcrest is now in talks for a global tie-up for the second time in a short period of time.
This ASX-listed miner is a target for global producers who have large North American portfolios.
Dream deal
Newcrest, the largest producer of gold in Australia and British Columbia is also the owner of the Lihir mine, in Papua New Guinea. It is expected that Newcrest will produce more than 2,000,000 ounces this financial year. Newmont and Barrick buying Newcrest are the kind of deal that has been circulating in investment banks’ pitchbooks for years. It gives either exposure to large Australian assets or Newmont.
Newcrest was last in serious negotiations in late 2018. This was when the battle for supremacy between two of the largest gold companies in the world, Barrick Gold and Newmont Gold, sparked an aggressive arms race. Newcrest was close to a merger with Canada’s Goldcorp. However, Newmont won the fight for supremacy between Barrick and Newmont in a scrip agreement that made Newmont the largest gold miner in the world.
Barrick approached Newcrest earlier to do the exact same thing.
Newmont is currently the most valuable North American gold miner with a market capitalization of $57 billion. Barrick is valued at $46 billion, and Agnico Eagle, at $35 billion. Newcrest’s shares closed trading Friday at $20 billion.
Newcrest shares have fallen 0.13 per cent in the last year and risen 17.2 per cent in the past six months.
