By Nick Toscano
Top Australian gold miner Newcrest has rejected a takeover proposal from US mining giant Newmont, arguing it undervalues the business as it delivered a better-than-expected half-year profit, but has signalled it is willing to consider a higher offer.
Newmont, the world’s largest listed gold miner, launched a bid this month to acquire of ASX-listed Newcrest’s shares at a 22 per cent premium to their previous closing price in a deal that values the company at nearly $US17 billion ($24.4 billion).
Newcrest’s flagship Cadia gold mine near Orange, NSW.Credit: Rob Homer
In an update to investors on Thursday, Newcrest said its board had considered the indicative offer but had unanimously decided to reject it as it “does not represent sufficient value for Newcrest shareholders”. However, the board said it would open its books for limited due diligence to see if it could extract a better offer from the suitor.
“In order to determine if Newmont can provide an improved proposal for consideration by the board that appropriately reflects the value of Newcrest, the board has indicated to Newmont that it is prepared to provide access to limited, non-public information on a non-exclusive basis,” it said.
The news comes as Newcrest’s half-year financial performance beat analysts’ and investors’ expectations with a $US293 million profit, an interim dividend of 15¢ a share and a special dividend of 20¢ a share.
BetaShares senior investment strategist Cameron Gleeson said the strong result likely “changes the calculus” for the takeover bid, but believed Newcrest’s rejection of Newmont’s offer was “by no means sayonara”.
“Newmont is obviously on the hunt for growth assets in stable jurisdictions, so it’s a good chance they will favourably consider the opportunity to take a closer look at Newcrest’s books,” he said.
“In any case, it’s our view that strong gold prices and untapped gold deposits that need additional capital to develop will see higher interest in Australian assets from global gold miners.”
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 New South Wales, Western Australia, PNG and Canada, and holds equity interests in gold assets in Ecuador.
Shares in ASX-listed Newcrest have climbed more than 8 per cent since it told investors that it was assessing Newmont’s all-scrip takeover offer.
However, analysts and investors have raised questions about whether the $27-a-share bid is high enough for Newcrest.
Investment bank Citi said it did not think the offer adequately valued Newcrest’s growth options such as Canada’s Red Chris project and Wafi-Golpu in Papua New Guinea, as well as its considerable exposure to copper, a metal that will be increasingly needed to build renewable energy and electric vehicles.
Alex Barkley, an analyst with the Royal Bank of Canada, on Thursday said he expected Newcrest’s delivery of a “hefty dividend”, which was well above expectations, was in part to signal that it did not need external funding for its long-life projects, including via a potential deal with Newmont.
If Newmont’s bid for Newcrest succeeds, it would mark the biggest takeover in the history of the gold mining industry.
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