By Nick Toscano
Australian gold miner Newcrest has opened its books to US mining giant Newmont after receiving a sweetened takeover offer that values the company at nearly $30 billion.
Newcrest in February rebuffed an earlier attempt from Newmont, the world’s largest listed gold company, to acquire its shares at a 22 per cent premium to their previous closing price, which would have valued the Australian gold miner at $24 billion.
Newcrest’s flagship Cadia gold mine near Orange, NSW.Credit: Rob Homer
However, Newcrest on Tuesday said Newmont had made a revised offer that implied a share price of $32.87 a share.
“After assessing the revised proposal, Newcrest has agreed to grant Newmont the opportunity to conduct confirmatory due diligence to enable it to put forward a binding proposal,” Newcrest said.
“Newmont has requested exclusivity during the due diligence period as a condition of the revised proposal and Newcrest intends to grant exclusivity on acceptable terms.”
Newmont has indicated that the new offer represents its best and final price unless a rival offer is made. Canadian gold mining giant Barrick Gold – widely considered to be a possible rival suitor for ASX-listed Newcrest – has indicated it is unlikely to challenge.
Based in Denver, Colorado, Newmont has mining operations across the globe spanning gold, copper, silver, zinc and lead. It has two major Australian gold mines – Boddington in Western Australia and Tanami in the Northern Territory.
Melbourne-based Newcrest owns gold and copper mines in NSW, Western Australia, PNG and Canada, and holds equity interests in gold assets in Ecuador.
If Newmont’s $29.4 billion bid for Newcrest succeeds, it would mark the biggest takeover in the history of the gold mining industry.
Tom Palmer, the Australian-born president of Newmont, on Tuesday pitched the proposal as an opportunity to create the industry’s best portfolio of world-class assets, with the highest concentration of tier-one operations.
Newmont chief executive Tom Palmer. The proposed takeover of Newcrest would be the biggest in the history of the gold mining industry.Credit: Trevor Collens
“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,” Palmer said.
“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.”
When Newmont made its previous bid earlier this year, analysts and shareholders said they did not believe the $27-a-share price was high enough for Newcrest, and questioned whether it adequately valued the company’s growth projects and exposure to copper, a metal that will be increasingly needed to build renewable energy and electric vehicles.
It was also suggested that Newcrest’s stock price had been undervalued at the time of the offer, partly due to management uncertainty amid the board’s ongoing search for a permanent CEO to replace Sandeep Biswas, who stepped down from the role last year.
“As widely expected, Newmont is back with a revised takeover bid for Newcrest,” Betashares senior investment strategist Cameron Gleeson said on Tuesday.
“The revised bid seems to be at least closer to Newcrest’s liking with the company opening its books further to Newmont for a further round of due diligence.”
The price of gold – a metal widely seen as a “safe haven” commodity where investors store wealth during times of political and economic uncertainty – has been rallying this year amid rising inflation and the concerns about the state of the global banking sector. The price of the precious metal is trading at near-record levels above $US1900 ($2850) an ounce.
Betashares, which provides exposure to gold producers through its $66 million Global Gold Miners exchange-traded fund, said it remains to be seen whether Newmont’s revised offer will be enough to seal a deal, but Newmont appeared determined “not to let the current strength in gold prices go to waste”.
“For Australia’s gold mining sector, the deal may spur a rush of further mergers and acquisitions as global miners seek to capitalise on the recent strength in gold prices and Australia’s reputation as a stable jurisdiction by looking at other ASX listed gold miners,” Gleeson said.
Newmont on Tuesday said it expected its due diligence of Newcrest would take four weeks.
Under the terms of the revised proposal, shareholders in Newcrest would receive 0.40 Newmont share for each Newcrest share they hold. The earlier offer would have entitled Newcrest shareholders to receive 0.38 Newmont shares for each Newcrest share they own.
Newmont’s new bid also permits Newcrest to pay a special dividend of up to US$1.10 per share.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.