Deal would put Newmont neck-and-neck with global leader Barrick in proven gold reserves
Gold industry has undergone a wave of consolidation in recent years
Investors may expect a higher price for Newcrest
Denver-based gold miner Newmont Corp. (NEM) said it proposed a $17 billion all-stock buyout of rival Newcrest Mining, Australia’s largest gold producer, in a deal that would mark this year’s biggest U.S. merger.
The deal would significantly close the supply gap between Newmont, the world’s largest gold miner by market value, and Toronto-based global leader Barrick Gold, the world’s leader in gold reserves. The two formed a small joint venture four years ago after Newmont rejected a takeover bid from Barrick.
The gold mining industry, struggling to find new sources for a metal desired as both a financial asset and luxurious commodity, has undergone a wave of consolidation in recent years. Rising costs in the wake of the pandemic have underpinned that trend.
Newmont said it offered 0.38 of its own shares for each outstanding share of Newcrest. Newmont would own 70% of the new entity, with Newcrest keeping the remaining 30%.
Newcrest’s board reportedly rejected a previous Newmont bid of 0.363 per share but hasn’t made a decision regarding the latest one, which values Newcrest’s shares at $18.80, representing a 22% premium to their closing price Friday.
Newcrest’s shares gained 9.3% Monday to $16.93, indicating investors may suspect higher bids remain possible. Newmont’s shares fell as much as 5.6%.
Newcrest’s largest shareholder doubted the necessary “symmetry” exists between the two firms’ price expectations. In addition, Jon Mills, an analyst with Morningstar, stated in a research note to clients that other gold miners may find Newcrest attractive because of the quality of its assets.
“We think Newcrest is now in play, but if a deal is to be done, it will likely need to be at a higher price,” Mills wrote in his note.
The takeover bid comes as Newcrest searches for a new chief executive. The company announced in December that Sandeep Biswas, its CEO for the past eight years, would leave the company. Chief financial officer Sherry Duhe will serve as interim CEO while the company determines Biswas’ successor.
Shoring Up Reserves
Global gold miners have faced a challenging environment since the pandemic eased as surging wages and rising energy prices have pushed labor and production costs higher.
At the same time, they’re having less success finding new deposits. Of the world’s gold that miners have discovered since 1990, they’ve only found 6% in the past decade, according to S&P Global Market Intelligence.
That difficulty has fed large gold miners’ appetites for finding deals to increase their proven but untapped reserves. Newmont has 96 million in gold mineral reserves. Buying Newcrest would boost that figure to about 155 million, just shy of Barrick’s 160 million,
Barrick attempted to buy Newmont in 2019, shortly after the latter bought Barrick’s biggest rival in Canada, Goldcorp Inc., for $10 billion. Newmont rejected the deal but formed a joint venture with Barrick in Nevada to cut costs.
Late last year, Canada’s Agnico Eagle and Pan American Silver Corp. announced a $4.8 billion joint bid to buy Toronto-based Yamana Gold.
If completed, the latest proposal would be more than double Emerson Electric’s planned purchase of National Instruments for $7.6 billion, making it this year’s largest U.S. merger deal.
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
Cookie
Duration
Description
cookielawinfo-checkbox-analytics
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional
11 months
The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy
11 months
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.