The board of Australia’s Newcrest Mining has unanimously backed a A$29bn ($19bn) takeover offer by its US rival Newmont, paving the way for the world’s largest gold miner to strengthen its grip on the sector.
Subject to a shareholder vote and regulatory approval, Newmont will acquire Newcrest — which it originally founded in the 1960s before spinning off through a merger with BHP — with an offer of 0.4 shares for every one in the Australian business.
The deal will strengthen Denver-based Newmont’s operations in Australia, Canada and Papua New Guinea and potentially create a ripple effect in the industry as smaller mines owned by the combined business are shed.
It is the latest example of consolidation within the global mining industry as major companies look to buy promising operations to increase scale and exposure to critical minerals needed for the energy transition. Newmont’s move significantly increases its exposure to copper and follows BHP’s takeover of rival Oz Minerals, Rio Tinto’s buyout of Turquoise Hill and Allkem’s merger with Livent to create a more substantial lithium player.
Newmont first approached Newcrest in February with an all-share offer but was rebuffed. It raised its bid in April to A$29.4bn, which led Newcrest’s board to open its books.
The slightly lower value of the deal, which includes debt, reflects a decline in Newmont’s share price in the past two months but still amounts to a more than 30 per cent premium on where it stood just before the initial offer was made.
US-listed Newmont’s chief executive Tom Palmer — an Australian who hails from the mining town of Broken Hill — said the takeover represented “exceptional value” for shareholders. “It creates an industry-leading portfolio with a multi-decade gold and copper production profile in the world’s most favourable mining jurisdictions,” he said.
The deal comes against a backdrop of gold prices rising to near record highs as banking sector issues, a dovish stance from the Federal Reserve and uncertainty around the US debt ceiling boosted gold’s safe haven status, said ANZ bank.
Rahul Anand, an analyst with Morgan Stanley, said in a note: “We see the deal, if approved, yielding operational synergies around project sequencing and growth optionality, as well as the combined entity increasing its diversification of operations in low-risk jurisdictions.”
Palmer said due diligence had identified synergies of $500mn that the company expected to achieve within two years of the deal completing, as well as opportunities to enhance cash flow by $2bn in that period.
Newcrest will pay a final dividend to shareholders as part of the takeover agreement. The combined business will retain a secondary listing on Australia’s stock exchange.
