Newmont offers $16.9 billion for Newcrest

Australia’s number one gold miner, Newcrest Mining Ltd said it was considering a $16.9 billion takeover offer from the US giant Newmont Corp after having rejected an earlier offer, in a deal that would take advantage of both miners’ operations in Australia and Canada.

The share offering comes as Newcrest searches for a new boss, as previous CEO Sandeep Biswas resigned in December, and global interest rates are expected to peak this year and fall, improving price expectations. of gold.

The indicative offer price implies a premium of around 21% over Newcrest’s latest closing value of A$22.45, and Newcrest shareholders receive 0.380 Newmont shares for each Newcrest share. It’s a 4.7% improvement on an earlier offer of 0.363 a share that Newcrest rejected, the miner revealed on Monday, Reuters reported.

Newcrest shares rose as much as 14.4% to the highest level since May 2022.

“Newcrest’s board, together with its financial and legal advisers, is considering the indicative proposal,” the Australian gold miner said in a statement that came in response to media speculation over the weekend.

ALSO READ: Swiss group Glencore retakes Newmont stake in gold-copper mine in Argentina

The earlier offer was rejected because it did not provide enough shareholder value, Newcrest said.

Newmont He did not immediately respond to a request for comment.

The deal would be attractive to Newmont given Newcrest’s blue-chip Cadia asset in Australia and its expanding presence in North America, said Andy Forster, chief investment officer at Argo Investments in Sydney, which owns Newcrest shares.

“It’s probably a good time. Newcrest is a little vulnerable right now with his leadership transition,” he added.

Newcrest was expected to announce a new chief executive this year after Biswas announced his retirement after eight years.

Sherry Duhe, a former chief financial officer, who joined Newcrest in February last year, is acting chief executive while a global internal and external search for a replacement is underway.

ALSO READ: Since mid-December, mining suppliers have lost S/ 120 million due to protests

Newcrest has been seen as a target in recent years because of its lackluster performance, but only a handful of buyers are big enough to take it out, said an investment banker who was not authorized to speak publicly on the matter.

Newmont, with a market value of $39.6 billion, is already the world’s largest gold producer by market capitalization and by ounces produced. His last major deal was the purchase of Goldcorp Inc for $10 billion in 2019.

The all-action nature of the offering meant the timing is more likely related to leadership vulnerability at Newcrest than a big gold price decision, but likely also reflects a constructive view on the precious metal, he added. The banker.

Risks are growing that gold will break out, Morgan Stanley in a January 16 note, noting that its macroeconomists were now forecasting lower rates and a weaker US dollar as tailwinds for the metal.

Morgan Stanley is eyeing a bullish case for spot gold reaching $2,160 in the fourth quarter, up from $1,866 an ounce.

Prepared with information from Reuters