New $19.6 billion proposal deemed fair by Newcrest board; companies advance one step closer to merger.

With a new US$19.6 billion (A$29.4 billion) offer, Newmont Corp. is one step closer to completing a merger with Newcrest Mining Ltd.

For Newmont, which is already the world's largest gold mining company, the proposed combination with Newcrest would add gold and copper production from mines in Australia, Canada, and Papua New Guinea.

In February, it was revealed that Newmont had made an all-shares merger offer of 0.363 Newmont shares for each Newcrest share held and then a second for 0.38 Newmont shares per Newcrest share.

"If we can reach an agreement, this combination of industry-leading talent and decades of collective experience would create significant value across the global business with an ideal mix of gold and copper, strengthening Newmont's overall position as the world's leading gold company," Newmont President and CEO Tom Palmer said at the time of the second offer.

The Newcrest board of directors, however, did not believe either of Newmont's first two proposals represented the true worth of the Australia-based gold and copper mining company. To provide Newmont executives with an inside look at the missed value, Newcrest's board agreed to provide Newmont with access to limited, non-public information on a non-exclusive basis.

Better look, sweeter offer

After taking a look behind the Newcrest curtain, Newmont increased its offer to 0.4 Newmont shares in exchange for every Newcrest share.

To further sweeten the deal, Newmont also agreed to allow Newcrest to pay a special dividend of roughly US$1.10 per share to its shareholders around the time of the closing of the proposed transaction.

Combined, this offer represents a 16% better deal for Newcrest shareholders than was originally put forward by Newmont.

Overall, Newmont's merger offer implies a roughly A$32.87 per share value for Newcrest, which is a 46.4% premium over the Australian mining company's closing price of A$22.45 per share on Feb. 3, the last trading day before the proposed merger offer was made public.

Newcrest's board found this offer to be compelling enough to unanimously recommend that shareholders vote in favor of the revised proposal, unless another company makes a better offer.

With an initial proposal on the table that both sides can agree on, Newcrest is now providing Newmont the opportunity to conduct due diligence ahead of putting forward a binding proposal. During this roughly four-week assessment, Newcrest will be carrying out its own due diligence to ensure the proposed merger will be good for its shareholders.

Palmer believes the offer is a good deal for both companies. This includes creating cost-saving synergies that would be achieved through the consolidation of producing mines and development stage projects held by the companies.

"We are entering a new era in which mining companies must hold themselves to a higher standard of sustainability and long-term value creation," the Newmont CEO said on April 10. "This transaction would strengthen our position as the world's leading gold company by joining two of the sector's top senior gold producers and setting the new standard in safe, profitable and responsible mining."

The merger would also bolster and further diversify Newmont's portfolio with the addition of nearly 50 billion pounds of copper reserves and resources.

Northern connection

The seemingly likely Newmont-Newcrest merger would have major implications for Northern British Columbia and the Yukon, an area where the portfolios of these two majors are already intertwined.

Earlier this year, Palmer said the Newcrest acquisition "would build upon the district potential in British Columbia's highly prospective Golden Triangle through a combination of operating mines and development projects that would deliver value through shared technology, local capabilities, and orebody experience."

Newcrest operates Red Chris and Brucejack, the only large-scale mines currently in production in the Golden Triangle region of Northern BC.

Red Chris is a large porphyry gold-copper mining operation that Newcrest bought a 70% interest in 2019 and now operates under its joint venture with Imperial Metals Corp.

Brucejack, which lies about 100 miles (160 kilometers) south of Red Chris, is a high-grade underground gold mine that Newcrest bought full ownership of in 2022.

Over the past five years, Newmont has built an impressive portfolio of development-staged gold and copper projects in Northern BC and the Yukon.

This began with a 50% interest in the world-class Galore Creek, a world-class copper-gold project about 75 miles (120 kilometers) southwest of Red Chris that is being advanced under a joint venture with Teck Resources Ltd.

In 2021, Newmont further strengthened its foothold in Northern BC with the US$311 million buyout of GT Gold Corp. and that company's advanced-staged Tatogga gold-silver-copper exploration project about 20 kilometers (12.5 miles) south of Red Chris.

Newcrest Mining Ltd.

A merger with Newcrest would give Newmont ownership of the high-grade Brucejack gold mine in BC's Golden Triangle.

Newmont also owns the 2.1-million-oz Coffee gold mine project in the Yukon, which it acquired through the 2019 buyout of Goldcorp.

While Coffee was a bit of an outlier at the northern edge of its portfolio at the time, Newmont says its acquisition of Goldcorp demonstrates both the near-term and long-term benefits that can be leveraged through the combination of companies with complementary portfolios.

Over the three years since the Goldcorp buyout, Newmont has delivered annual synergies of more than US$1 billion.

Newmont said it would apply the same strategy to optimize the combined Newmont-Newcrest portfolio to maximize value for shareholders and stakeholders.

"Together as the clear gold-mining leader, we would be well-positioned to generate strong, stable and lasting returns with best-in-class sustainability performance for decades to come," said Palmer.

Author Bio

Shane Lasley, Publisher

Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.

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