Newmont sweetens Newcrest takeover bid to $19.5 billion

Newmont sweetens Newcrest takeover bid to $19.5 billion

Agreement between the two companies could be reached within next month

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Newmont Corp., the world’s largest gold miner by output, has sweetened its previous offer to buy Newcrest Mining Ltd., Australia’s largest gold producer, for the equivalent of US$19.5 billion, as the companies move closer to conducting one of the sector’s biggest mergers.

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The takeover would ripple into Canada, as both companies operate mines here and are listed on the Toronto Stock Exchange. If the deal goes through, Newmont could strengthen its position in British Columbia by acquiring Newcrest’s Red Chris mine, situated about 1,700 kilometres north of Vancouver, and its Brucejack gold mine, which is located about 950 kilometres north of Vancouver.

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Newmont already owns the Éléonore gold operation in northern Quebec and the Musselwhite and Porcupine operations in Ontario.

The new offer is a non-binding proposal, which means the companies are not legally bound and can withdraw at any time. However, the Newcrest board has agreed to allow Newmont the opportunity to conduct due diligence and put forward a binding proposal in four weeks, which indicates that an agreement between the two companies could be reached within the next month.

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“We are entering a new era in which mining companies must hold themselves to a higher standard of sustainability and long-term value creation,” Newmont chief executive Tom Palmer, said in a press release on April 11. “Together as the clear gold-mining leader, we would be well-positioned to generate strong, stable and lasting returns.”

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The mining industry in general has witnessed a series of big takeover attempts in the past few years as resource industries tackle issues linked to climate change, rising costs and poorer quality of deposits.

Newmont’s bid to get even bigger comes after Yamana Gold Inc. agreed to sell itself to two Canadian rivals, Agnico Eagle Mines Ltd. and Pan American Silver Corp., for about US$4.8 billion, late last year.

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Yamana’s outgoing executive chair Peter Marrone said in January that he expected more mergers, as executives and investors seek to maintain margins amid higher production costs and declining grades of the metal.

Mark Bristow, head of Newmont’s rival company, Barrick Gold Corp., however, said he was “struggling” to understand the logic behind Newmont’s takeover, which will create a global behemoth. He believes the consolidation hasn’t been “thought through properly.”

The trend of large mergers has also extended outside the gold sector. Mining giant Glencore PLC offered to take over Canada’s largest diversified miner, Teck Resources Ltd., earlier this month. Teck has rejected the offer but Glencore hasn’t stopped its pursuit.

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Glencore’s bid for Canada’s largest diversified miner came days after Teck produced its first copper concentrate from its Quebrada Blanca 2 (QB2) project in Chile, its largest project in terms of construction and which is expected to double its copper production in the near future. Copper is expected to play a key role in the shift away from fossil fuels.

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As per Newmont’s new offer, each Newcrest shareholder would receive 0.400 Newmont shares for each Newcrest share held. This is higher than the previous proposal which offered 0.38 Newmont shares and amounted to a total of about US$17 billion. Newcrest would own about 31 per cent of the new combined company.

The new offer from Newmont represents its best and final price in the absence of a competing proposal, the company said.

  1. Teck Resources' Quebrada Blanca 2 project in Chile is expected to double its copper production in the near future.

    Teck rejects ‘opportunistic’ bid from mining giant Glencore

  2. U.S. President Joe Biden speaks during a joint news conference with Prime Minister Justin Trudeau, in Ottawa, on March 24.

    Biden comment shows Ottawa can’t take mining boom for granted

  3. Newmont Corp. chief executive Tom Palmer says there has never been a better time for Newmont and Newcrest Mining Ltd. to come together.

    Newmont CEO ‘disappointed’ by Newcrest’s rejection

Bank of Nova Scotia analyst Tanya Jakusconek in a research note sent to clients on April 10 said the deal could lead to possible synergies in projects held by both the companies. However, she doesn’t expect the offer to impact Newmont’s share price.

• Email: nkarim@postmedia.com | Twitter:

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