Monsters of Rock: Newcrest has finally picked up Newmont. That's nice. But both come with a lot of baggage

Newcrest shares up as goldie’s investors vote up Newmont mega-merger
The multi-billion dollar takeover will position Newmont comfortably as the world’s largest gold producer
Could Andrew Forrest backed Havieron JV partner Greatland make a play for the Telfer gold mine in WA

Australia’s mid-tier and emerging gold miners could position to sweep up the scraps falling out of the world’s largest gold miner Newmont after it secured a long-touted merger with our biggest bullion producer Newcrest Mining (ASX:NCM) today.

The scheme of arrangement has been secured after Newmont shareholders voted in America yesterday to approve the deal and Newcrest investors met this morning in Australia to rubber stamp the offer.

92.63% of votes were cast in favour of the scheme resolution with almost 85% of the Newcrest shareholders present and in proxy at the meeting in Melbourne this morning backing the deal.

It will deliver 0.4 Newmont shares for each Newcrest share held by Australian investors, who will receive newly listed Newmont shares either in New York or via CHESS depositary interests listed on the ASX or Papua New Guinea exchange.

Newcrest will also tip in a special dividend of US$1.10 per share to be paid in a couple weeks, its shares lifting 0.8% to $26 today on the scheme vote announcement.

The world class assets heading into the Newmont portfolio are obvious.

The Cadia mine has been under an environmental cloud of late, but remains one of Australia’s largest and lowest cost gold mines, delivering 597,000oz of gold and 98,000t of copper in FY23 at a costs of just US$45/oz.

That copper bounty is significant, giving Newmont a major in to a market expected to boom from the energy transition once a supply glut is swallowed by rising demand in the latter part of this decade.

Copper credits also help dramatically reduce the cost of the operation — something important to Newmont given it sits around the middle of the global cost curve despite its dominant production profile.

The Lihir mine in PNG too is a major operation, delivering 670,000oz at US$1466/oz in FY23.

Major extensions of both mines have recently been approved to execution.

Then there’s the rest

Newcrest has made a middling foray into Canada like many other Australian producers in recent years.

Its small but copper rich Red Chris mine in British Columbia is waiting on a block cave feasibility study to really demonstrate its potential after delivering just 39,000oz gold and 18,000t copper at US$3733/oz in FY23.

But the Brucejack mine acquired in 2022 produced 286,000oz at US$1157/oz. Newcrest also holds 32% of Lundin Gold, owner of the Fruta del Norte gold and silver mine in Ecuador, with its share delivering 164,000oz at US$819/oz.

Then there are the 50% owned Wafi-Golpu project in PNG where a framework MoU has been signed for the long stagnant project and a minority stake in Ecuadorian explorer Solgold, owner of the large Cascabel discovery, where it sits alongside BHP (ASX:BHP) on the share register.

Finally there is the asset everyone assumes is the most likely to hit the chopping block, the ancient Telfer mine in WA’s Pilbara, which produced 349,000oz gold and 17,000t of copper at an all in sustaining cost of US$1633/oz.

The latest cutback there will extend its life into early FY25. But there is a long term option there in Havieron.

The high grade gold and copper discovery, held in a 70-30 JV with London-listed Greatland Gold, is among the best gold finds in WA in the past decade and would deliver average annual output of 160,000ozpa at US$743/oz over its first nine years of life according to a PFS in 2021.

However, a feasibility study initially due in December last year, was extended and is yet to be released.

Who is in the market for Telfer

There could be pressure on Newmont to enter a cut after the massive bulk it is taking on with Newcrest’s 2Mozpa plus portfolio.

It already plans to deliver output of 5.7-6.3Moz in 2023, ramping up to 6.1-6.7Mozpa by 2026, with all in sustaining costs expected to fall from US$1150-1250/oz in 2023 to US$1000-1100/oz longer term from 2025.

Adding Newcrest’s portfolio will take its production capacity on the gold side to around double the output of its nearest competitor, and there should be fat to burn.

Conventional wisdom would have Evolution Mining (ASX:EVN) and Northern Star (ASX:NST) as two of the companies with the heft to pull an unloved asset out of the Newmont portfolio.

But neither appeared keen when the prospect of picking up the ageing, high cost Telfer mine was floated to them at Diggers and Dealers in Kalgoorlie a couple months back.

Rather Greatland Gold, the minority owner of Havieron which is looking to list on the ASX, reads as a more likely suitor.

Importantly, one of its top backers is Andrew Forrest’s private miner Wyloo.

The nickel miner backed by the Forrest family office has an 8.5% stake in Greatland, led by former Northern Star executive Shaun Day, and last month forwarded a $50 million loan facility to the junior to support the company during the feasibility study and ramp up of underground development at Havieron.

At the same time Greatland deferred a planned ASX listing and equity raising. It had $59m in cash at the end of the financial year and still boasts a letter of support from major banks for a $220m seven year project finance and hedging package.