Newmont’s $24bn play for Newcrest highlights the majors’ increased interest in copper
Newmont’s headline-making multi-billion-dollar bid for Newcrest Mining is another move demonstrating just how keen the majors are to boost their exposure to copper, which is garnering more support to be declared a critical metal given its key role in electrifying the globe.
Copper M&A is on the rise and Newmont is the latest in a line of heavyweights to put its money where its mouth is and make strategic moves to quickly expand its copper portfolio.
Sam Spring, ex-Goldman Sachs analyst and now CEO of junior explorer Kincora Copper (ASX:KCC) – which has highly prospective copper ground in NSW’s prolific Lachlan Fold Belt near Newcrest Mining’s (ASX:NCM) large Cadia operation, said the international gold majors had recently made bullish comments about seeking to increase their copper exposure.
“The addition of Newcrest to Newmont’s portfolio would certainly be a big step towards achieving this and increase their capacity to consider further gold-copper porphyry opportunities,” he noted.
“The same could be said for Barrick, with more potential asset and jurisdictional level synergies, if they were to become a third party.”
The lure for Newmont is likely to be Cadia – one of the largest and lowest cost mines globally with an endowment of 50Moz of gold and 9.5Mt of copper.
“The key motivator for this approach appears to be Cadia, which continues to be Newcrest’s cash cow, and the growth project pipeline that Newcrest offers,” Spring said.
Newcrest’s December 2022 quarter report showed an impressively low all-in sustaining cost (AISC) for Cadia of just $32/oz.
The AISC was 70% lower than the previous September quarter thanks to higher gold and copper production driving an increase in sales, as well as a higher realised copper price combined with the benefit of a weaker Australian dollar.
This meant Cadia delivered Newcrest a massive quarterly profit margin of $1,661/oz in the final quarter of 2022.
A feasibility study into the next proposed panel cave at Cadia, PC1-2, completed in November last year estimated the extension would provide an internal rate of return of 18% and a net present value of $1.4 billion over a 16-year mine life.
Newcrest said the study confirmed the mine’s position as a world-class, long-life gold and copper producer.
“Within NSW, Newmont has recently and quietly picked up a sizeable land position of greenfield opportunities, while Newcrest has been focused on the Americas and done very little outside of Cadia,” Spring explained.
It’s a strong demonstration of the vast mineral potential in the Lachlan Fold, where other emerging producers like Alkane Resources (ASX:ALK) and Kincora Copper are advancing their projects.
Spring said a merged Newmont and Newcrest could certainly change the playing field a bit with Fortescue Metals Group (ASX:FMG) and Alkane being the largest groups active in the belt and currently focused on their existing land positions.
The same expert that led the discoveries at Cadia for Newcrest, John Holliday, is leading Kincora in advancing its highly prospective flagship Trundle project in the porphyry-rich Macquarie Arc region of the Lachlan Fold.
Trundle is the only brownfield project held by a listed junior in Australia’s foremost porphyry belt and is located within the same mineralised complex as Australia’s second largest porphyry mine, Northparkes, which has an endowment of 24Moz gold equivalent.
Drilling is currently underway to test five adjacent systems and separate large-scale porphyry targets across an existing 3.2km mineralised strike that remains open.
One of these targets is the Southern Extension Zone, where drilling is testing two settings for the porphyry source of what Kincora believes is the largest mineralised skarn system in NSW, with the size of the skarn representative of the size of the porphyry source.
These settings are similar to the respective Big Cadia skarn to Cadia Quarry porphyry and Little Cadia skarn to Cadia Far East porphyry settings.
Another target being drilled in the current exploration program is Dunn’s North, which was identified using the same geophysical tech that unearthed Rio Tinto’s (ASX:RIO) massive Oyu Tolgoi copper-gold mine in Mongolia.
Kincora is for the first time following up a previous shallow ore grade hit of 10m at 1.99 grams per tonne (g/t) gold and 0.12% copper from 36m (end of hole 48m).
Favourable gold, copper and pathfinder element results were identified at the Dunn’s North and South prospects during Kincora’s detailed 2022 technical reviews of the Trundle Park prospect and adjacent open mineral systems.
Kincora says the Dunn’s North and South targets have more favourable vectors than what led to the respective discovery holes at the initial E22 and E27 deposits and open pit mines at Northparkes, which were both found with their respective first diamond drill holes.
Politicians in the US are pushing for copper to be deemed a “critical mineral”.
The green transition has been labelled a “mega-trend”, with many market commentators predicting exponential growth in copper demand over the next decade due to the red metal being a key component in the electrification of the world.
“This should be a no-brainer,” Senator Kyrsten Sinema, an Independent from Arizona, was quoted as saying by Bloomberg.
“We have major gaps in both our ability to mine and process these minerals to ensure our energy security for the future, and the administration knows how important copper is to our domestic and national security.”
The call for copper to be added to the US’ critical minerals list stems from significant supply disruptions combined with a lack of major new production coming online.
These supply disruptions are the result of several economic and geopolitical events such as the Russia-Ukraine conflict, social unrest in the world’s second largest copper producing country – Peru, and tax and royalty disputes between the government and miners in Panama and the Democratic Republic of Congo.
This article was developed in collaboration with Kincora Copper, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.