Newcrest Mining’s board in Australia has unanimously supported a takeover bid of A$29bn (US$19bn) from its American counterpart, Newmont. This move sets the stage for the world’s largest gold miner to further tighten its hold on the industry.
Pending shareholder approval and regulatory compliance, Newmont will acquire Newcrest, a company it originally established in the 1960s before divesting it through a merger with BHP. The offer is at a ratio of 0.4 shares for every share in the Australian company.
The agreement will enhance the operations of Denver-based Newmont in Australia, Canada, and Papua New Guinea. It could also trigger industry-wide changes as smaller mines owned by the merged entity are discarded.
This move is the latest in a series of consolidations in the global mining industry. Major companies are acquiring promising operations to increase their scale and reach in vital minerals necessary for the energy transition. Newmont’s action notably boosts its involvement in copper and follows BHP’s acquisition of Oz Minerals, Rio Tinto’s purchase of Turquoise Hill, and Allkem’s merger with Livent to form a more significant lithium player.
Newmont first made an all-share offer to Newcrest in February, which was declined. It upped its offer to A$29.4bn in April, prompting Newcrest’s board to disclose its financials.
The somewhat reduced value of the deal, which includes debt, is a result of a drop in Newmont’s share price over the past two months. However, it still represents a premium of over 30% on the price just before the initial offer was proposed.
Tom Palmer, the CEO of US-listed Newmont, who is originally from the mining town of Broken Hill in Australia, stated that the acquisition offered “exceptional value” to shareholders. He said, “It creates an industry-leading portfolio with a multi-decade gold and copper production profile in the world’s most favourable mining jurisdictions.”
The agreement coincides with a surge in gold prices to near-record levels. The reasons for this rise include problems in the banking sector, a soft approach by the Federal Reserve, and the uncertainty surrounding the US debt ceiling, which has enhanced gold’s status as a safe haven, according to ANZ bank.
Morgan Stanley analyst Rahul Anand stated in a note, “If approved, we expect the deal to generate operational synergies around project sequencing and growth options. The combined entity would also increase its operational diversification in low-risk jurisdictions.”
Newmont’s CEO, Palmer, indicated that due diligence had revealed $500 million in synergies that the company anticipates realizing within two years after the deal’s completion. Additionally, there are opportunities to boost cash flow by $2 billion during the same period.
As part of the takeover agreement, Newcrest will distribute a final dividend to its shareholders. The merged business will maintain a secondary listing on the Australian stock exchange.
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