Newcrest Mining has inked a new framework deal for Wafi-Golpu with the PNG government of James Marape
The mining group has bolstered its case for a bump in the merger offer from gold giant Newmont, taking a fresh step towards the development of the long-stalled Wafi-Golpu mine in PNG.
Newcrest Mining has bolstered its case for a bump in the merger offer from gold giant Newmont, taking a significant step forward in the path to developing the long-stalled Wafi-Golpu mine in Papua New Guinea.
The company said on Thursday it had finally signed a framework agreement for the mine with the PNG government, setting out the key terms of the deposit’s development including tax rates, equity ownership for PNG and an outline of the environmental permitting process required for the development of the multi-billion mine.
Newcrest owns half of the giant gold and copper deposit, along with partner Harmony, which is estimated to contain more than 20 million ounces of gold at an average grade of 0.84 grams a tonne.
The last feasibility study on the project tipped capital costs of about $US2.8bn, with the two gold majors looking to build a mine capable of producing 266,000 ounces of gold and 161,000 tonnes of copper each year for 28 years.
Its development has been one of the keys to Newcrest’s expansion for years, but the project has long been stalled amid political and economic turmoil in PNG.
Newcrest signed a similar framework agreement with the former PNG government of Prime Minister Peter O’Neill in 2019, but that agreement was torn up in early 2020 after a new government headed by James Marape took a stronger nationalistic stance on the development of major resources projects.
The company did not disclose the terms of its new agreement with the PNG government on Thursday, but said the memorandum of understanding clears the way for accelerated negotiations over permitting and the eventual development of the deposit.
The agreement bolsters Newcrest’s case in ongoing talks with gold giant Newmont over a potential tie-up between the two companies, after Newcrest’s board rejected an all-scrip merger offer from the US gold giant in early February.
Newmont had offered 0.363 Newmont shares for each Newcrest share on offer, but the Australian gold giant’s board rejected the deal on February 16.
With top tier gold and copper growth projects hard to come by in the current market, the value of Newcrest’s expansion projects is understood to have been a major factor in the board’s decision to knock back the Newmont approach.
At the time Newcrest said it was prepared to offer its US rival a peek inside its books, hoping an inside look would convince Newmont to improve its offering.
While the framework agreement with the PNG government is only a small step on the way to the development of the giant project, it also represents a key derisking event for Newcrest, boosting its case in talks with Newmont.
Interim Newcrest boss Sherry Duhe said the agreement was a “pivotal” moment for the company.
“This MOU is a pivotal milestone towards the development of one of the world’s premier undeveloped copper-gold deposits,” she said.
“The commitment of Prime Minister Marape, his government and the Morobe provincial governor to this MOU gives us the confidence that permitting will progress constructively and in a timely manner to the grant of an special mining lease to the joint venture. We will then move swiftly to update the 2018 Feasibility Study and commence engineering towards development.”
Newcrest shares were up 0.6 per cent to $28.18 on the ASX late Thursday afternoon.
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