Newmont, Newcrest agree on merger deal
North of 60 Mining News - May 15, 2023
Last updated 6/1/2023 at 11:48am
Merged company will hold several world-class gold, copper assets in Northern BC's Golden Triangle.
In a deal that will bring together several world-class copper and gold projects in British Columbia's Golden Triangle, Newmont Corp. and Newcrest Mining Ltd. have agreed upon a merger worth A$28.8 billion (US$19.3 billion) to Newcrest shareholders.
"The combination of Newmont and Newcrest represents an exceptional value proposition for shareholders and other stakeholders," said Newmont President and CEO Tom Palmer. "It creates an industry-leading portfolio with a multi-decade gold and copper production profile in the world's most favorable mining jurisdictions."
The final deal reflects a sweetened offer Newmont made in April, which involves the issuance of 0.4 Newmont shares in exchange for every Newcrest share. 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, which is currently expected to happen in September or October.
"This transaction will combine two of the world's leading gold producers, bringing forward significant value to Newcrest shareholders through the recognition of our outstanding growth pipeline," said Newcrest Mining Chairman Peter Tomsett.
Combined, these two companies have 161 million ounces of gold in reserves – Newmont (96 million oz) and Newcrest (52 million oz) – plus 179 million oz of gold resources – Newmont (111 million oz) and Newcrest (68 million oz).
In addition to a significant boost to its already world-leading gold reserves, the merger with Newcrest will substantially bolster Newmont's reserves of copper, a metal that is critical to the renewable energy transition.
By onboarding Newcrest's current mines, the enlarged Newmont will produce roughly 8 million oz of gold and 350 million pounds of copper annually.
"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," said Palmer. "We intend to quickly realize these opportunities to create superior value for our shareholders, workforce, host communities and governments."
Golden Triangle portfolio
The consolidation of Newmont and Newcrest assets would create major synergies in Northern British Columbia and the Yukon.
Newcrest operates Red Chris and Brucejack, the only two 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 operates under a 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.
A prefeasibility study completed in 2011 envisioned a mine at Galore Creek producing 6.2 lb of copper over an 18-year span, which would rank as the largest copper operation in Canada.
Crediting the value of the 4 million oz of gold and 65.8 million oz of silver forecast to be recovered over that mine life, Galore Creek also would be the lowest-cost copper producer in the country.
Galore Creek Mining Corp. – a JV owned equally by Newmont and Teck Resources Ltd. – is currently working on an updated prefeasibility study that is expected to be finalized around midyear.
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.
At the time of Newmont's acquisition, the Saddle North deposit on the Tatogga property hosted 298 million metric tons of indicated resource averaging 0.28% (1.81 billion pounds) copper, 0.36 grams per metric ton (3.47 million ounces) gold, and 0.8 g/t (7.58 million oz) silver; plus 543 million metric tons of inferred resource averaging 0.25% (2.98 billion lb) copper, 0.31 g/t (5.46 million oz) gold, and 0.7 g/t (11.64 million oz) silver.
While both companies have impressive portfolios of mining assets outside of the Golden Triangle, Northern BC is a major hub where their assets meet.
"By combining the two existing Newcrest operations, Brucejack and Red Chris, with Newmont's Saddle North and Galore Creek projects, a Tier 1 district in the highly prospective golden triangle region of British Columbia will be created – a district in which Newmont will be operating for decades to come," Palmer said during a May 15 webcast on the definitive agreement to acquire Newcrest.
Newmont also owns the 2.1-million-oz Coffee gold mine project in the Yukon, which it acquired through the 2019 buyout of Goldcorp.
US$500 million of synergies
With both companies also holding major operating assets in Australia, the synergies will extend well beyond BC's Golden Triangle.
Newmont says its 2019 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 acquisition, Newmont has delivered annual synergies of more than US$1 billion.
The world's largest gold mining company says it will apply the same strategy to optimize the combined Newmont-Newcrest portfolio to maximize value for shareholders and stakeholders.
Newmont anticipates US$500 million of total annual pre-tax synergies to be achieved within the first two years after the merger is complete.
"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 optimization opportunities, both part of our strategy to maximize value for shareholders and other stakeholders," said Palmer.
Above the potential synergies, Newmont's merger offer implies a roughly A$29.27 per share value for Newcrest, which is a 39% 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.
"We are very proud of the entire Newcrest team for building a world class metals business, which will form a key part of the combined group," said Tomsett. "We believe our shareholders and other stakeholders can look forward to an exciting and prosperous future."
A special meeting for Newcrest shareholders to vote on the proposed buyout by Newmont is slated to be held in September or October.