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Mining
Newmont let its Australian business Newcrest (ASX:NCM) fly the coop back in 1990, when its local subsidiary’s merger with BHP’s gold division formed the largest Antipodean gold miner on the market.
Today it returns to the nest after Newcrest and Newmont’s boards agreed what will be, on our record, the largest Aussie mining takeover in history, eclipsing BHP’s (ASX:BHP) $9.6 billion buyout of OZ Minerals this year and BHP’s $9.2b 2005 takeover of Western Mining Corporation, as well as Barrick’s $14b acquisition of Placer Dome in 2006.
The deal will also eclipse in value Newmont’s more recent takeover of Goldcorp, Agnico Eagle’s merger with Kirkland Lake and Barrick’s merger with Randgold.
While no cash will be changing hands, the Denver based gold giant will send 0.4 Newmont shares to NCM shareholders for each share of the Australian listed gold major they hold, while investors will walk away with a US$1.10 per share special franked dividend to be paid on the implementation of the scheme of arrangement.
The whole thing comes in at an equivalent of $29.27 per share, giving NCM an implied equity value of $26.2b and enterprise value of $28.8b, with its investors walking away with 31% of the combined group at a 30.4% premium to its pre-bid closing price of $22.45 per share on February 3.
NCM shares are up 0.7% to $28.46 this morning.
With Nikola Jokic’s Denver Nuggets clawing their way to an Eastern Conference Final against Lebron James’ LA Lakers with a playoff win over Kevin Durant’s Phoenix Suns the other day, you may be forgiven for thinking Newmont’s Denver-based board has finally pulled the trigger in the middle of a celebratory bender.
M & A of this magnitude typically stinks to high hell. What does Newmont get out of this deal? Copper and scale.
Already the world’s largest gold miner with a production base of around 6Moz, its lead in the pissing contest against over Canada’s Barrick will get wider with the addition of Newcrest’s 2.1-2.4Mozpa portfolio.
It is also getting Cadia, one of Australia’s largest and lowest cost gold mines which counts also as one of its largest copper mines.
Along with Cadia, Newmont will also get the Telfer mine and associated Havieron development in WA (which could well be a candidate for a sale to a mid-tier goldie if it goes the ‘portfolio rationalisation’ route).
That will give foreign companies control of virtually all of Australia’s largest five gold mines, with Newmont also holding the Tanami and Boddington assets and AngloGold Ashanti boasting 70% of the Tropicana project alongside ASX-listed Regis Resources (ASX:RRL).
De Grey Mining’s (ASX:DEG) Hemi looks likely to join those assets once developed, but could well be the subject of a buyout with its more than 10Moz Pilbara gold bounty an attractive proposition for gold majors.
But copper as much as gold is the target, with Newcrest flagging plans in 2021 to grow its copper output by 2030 by 37% to 175,000tpa to capture tailwinds for the commodity from demand growth due to electrification, decarbonisation, EVs and renewables.
On top of Cadia, Newcrest’s copper tonnes will come from Telfer/Havieron as well as the Brucejack and Red Chris operations in Canada. It also owns the massive Lihir gold project in PNG.
“The combination of Newmont and Newcrest represents an exceptional value proposition for shareholders and other stakeholders. It creates an industry-leading portfolio with a multi-decade gold and copper production profile in the world’s most favorable mining jurisdictions,” Newmont’s Australian CEO Tom Palmer said.
“Following a robust due diligence process, we have identified a number of opportunities to unlock substantial value and will apply our experience and expertise to Newcrest’s complementary and exceptional portfolio of long-life, low-cost gold and copper assets.
“Leveraging our experience from the acquisition of Goldcorp four years ago, we are positioned to deliver an estimated $500 million in annual synergies and an estimated $2 billion in incremental cash flow from portfolio optimisation opportunities, both part of our strategy to maximise value for shareholders and other stakeholders.”
“This transaction also increases Newmont’s annual copper production – a metal vital for the new energy economy – and adds nearly 50 billion pounds of copper reserves and resources from Newcrest to our robust and balanced portfolio. We intend to quickly realise these opportunities to create superior value for our shareholders, workforce, host communities and governments.”
And the three-way dance between St Barbara (ASX:SBM), Genesis Minerals (ASX:GMD) and Silver Lake Resources (ASX:SLR) continues to play out.
It remains a handicap match with St Barbs firmly in the Genesis corner.
To redux, St Barbara’s underperforming Gwalia gold mine and surrounding Leonora gold project is in need of a fresh pair of eyes and will be sold to eradicate the company’s debt.
St Barbs will walk away with the Simberi and Atlantic gold operations in PNG and Canada.
Genesis was initially the successful bidder, having rearranged the deal after first wanting a merger with SBM that would have allowed the Raleigh Finlayson led miner to combine its Ulysses and Mt Morgans projects with Gwalia to largely consolidate the Leonora gold district.
Enter mid-tier gold miner Silver Lake Resources, whose boss Luke Tonkin briefly managed Gwalia as the head of the Sons of Gwalia company (formed and led for most of its life, ironically, by Finlayson’s uncles Peter and Chris Lalor) while its affairs were in the hands of administrators in the mid-2000s.
After Silver Lake improved on an initial $707 million offer last week by removing some of its conditions and offering SBM 7.5% of its shares to provide an additional $111m of liquidity on completion, Genesis is back with a new bid to try seal the deal.
The new $631m binding agreement ($604m after tax) agreed between GMD and SBM’s board will see GMD offer $370m in cash and 205m Genesis shares valued at $261m.
That includes the 147.8m shares presented in the initial offer, plus an additional 5m shares and 52.2m shares previously conditional on the development of the Tower Hill gold project.
SBM shareholders will hold 19.9% of Genesis on a post-transaction basis, issued in-specie by the selling company after its completion.
The next move is Silver Lake’s. Do SLR’s shareholders really want it to win this thing though?
After Genesis upped its bid, SLR’s shares are up 7.9%. GMD’s are down 1.2%. Makes you wonder.
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