Newmont Corporation, one of the world’s largest gold mining forces, has finally entered a definitive agreement to acquire Australian-based Newcrest Mining after months of negotiation. Back in February, Newmont offered a hefty $16.9 billion proposal, though many analysts saw the attempt as a low-ball offer considering Newcrest’s previous denial of an $18 billion bid from Barrick Gold, Newmont’s top competitor. Clearly, Newmont’s proposal details have changed, given the definitive agreement report released on May 14.
Newmont Corporation will acquire 100% of Newcrest Mining, allowing Newcrest shareholders to receive 0.400 Newmont shares per Newcrest share, plus a maximum $1.10 dividend per share, reflecting a 30.4% premium. The opportunity for Newmont to acquire Newcrest will strengthen its operations across the globe, including ten Tier 1 mining districts.
“The combination of Newmont and Newcrest represents an exceptional value proposition for shareholders and other stakeholders. It creates an industry-leading portfolio with a multi-decade gold and copper production profile in the world’s most favorable mining jurisdictions,” Tom Palmer, the president and CEO of Newmont, explained in the release.
“Following a robust due diligence process, we have identified a number of opportunities to unlock substantial value and will apply our experience and expertise to Newcrest’s complementary and exceptional portfolio of long-life, low-cost gold, and copper assets,” he continued.
Many expect Newmont to become an unstoppable mining force following this acquisition. As the current top gold producer, the newly added Australian district will allow Newmont to produce nearly twice as much gold as its current closest competitor, Barrick. Aside from gold production, the “geographically diverse green metals company” will unlock endless potential for Newmont, including copper assets.
“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. We intend to quickly realize these opportunities to create superior value for our shareholders, workforce, host communities and governments,” Palmer continued. Copper provides an excellent path toward the emerging green economy, and Newmont wants to capitalize on this opportunity.
Newmont estimates pre-tax synergies of $500 million within the first 24 months, allowing the company and shareholders to achieve excellent growth. Through portfolio optimization, Newmont believes shareholders can achieve $2 billion in near-term cash flows.
Newmont plans to maintain its current “balanced capital allocation priorities and industry-leading dividend framework” through future endeavors. Since October 2020, Newmont shareholders have yielded $4.5 billion in returns with the company’s effective strategies, so they should expect similar results at an accelerated pace following this acquisition.
Newcrest’s Board of Directors unanimously recommended the acquisition, with firm belief that the transaction will be in all shareholders’ best interests. Newmont’s board also unanimously believes that shareholders should vote in favor of the required stockholder resolution. The transaction requires a few customary conditions, including shareholder approval, which will hopefully occur in the fourth quarter of 2023.
The Dow Jones Sustainability Index, which recognizes transparent companies for sustainability practices, has ranked Newmont as the top gold miner for the last eight years. The company intends to keep its standing and continue prioritizing safe, effective, and sustainable mining practices through this acquisition. Newmont wants to continue focusing on mitigating safety risks for a fatality-free business, building social engagement through sustainability efforts, staying committed to environmental goals, and creating diverse and inclusive workplace environments.
With this new portfolio, Newmont will unlock access to approximately 8 million ounces of gold per year, including 5 million ounces from Tier 1, long-life, low-cost assets. Most of the company’s resources will remain in North America and Australia, including 96 million ounces from Newmont and the new 52 million ounces declared by Newcrest. Upon acquisition, Newmont will control one of the world’s greatest mining districts in Australia, allowing it to nearly double its production rates with high-yielding reserves.
“This transaction combines two of the world’s leading gold producers, bringing forward significant value to Newcrest shareholders through the recognition of our outstanding growth pipeline. In addition to the ongoing benefits of merging these premier portfolios, the combined group will set a new benchmark in gold production while benefiting from a material and growing exposure to copper and a market-leading position in safety and sustainability. The Newcrest Board is unanimously recommending the proposal,” Palmer explained in the statement.
“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. We believe our shareholders and other stakeholders can look forward to an exciting and prosperous future,” he concluded.
