Gold giant Newmont secured a A$28.8 billion deal, or $19.2 billion in U.S. dollars, to buy Australian rival Newcrest Mining, consolidating its position as the world’s biggest bullion producer with mines across the Americas, Africa, Australia and Papua New Guinea.
The transaction, now unanimously approved by Newcrest’s board but pending regulatory approval, is the gold mining sector’s largest deal to date, surpassing Newmont’s purchase of rival Goldcorp in 2019. Newcrest, whose then chief executive officer stepped down abruptly at the end of last year, rejected initial overtures, though it had indicated earlier this month that it planned to recommend an improved takeover offer from its suitor.
Newmont’s acquisition adds more exposure to gold at a time when bullion is testing a record high, and the deal will crucially also boost its resources of copper – a metal where demand is expected to outpace supply as the transition away from fossil fuels gathers pace.
Newcrest’s shares rose as much as 1.9% in Sydney on Monday, after the producer confirmed details of the deal in a statement. Newmont rose 0.4% at 9:32 a.m. in New York. Bloomberg News reported Sunday that Newmont was nearing an agreement on its offer.
Gold miners worldwide are facing the prospect of stagnating production as they contend with harder-to-mine deposits and rising input costs. That’s seen as a catalyst for more mergers and acquisitions, as companies seek to increase their size to boost volumes and improve efficiencies.
Attention will now shift to Newmont’s ability to integrate its costly and hefty target, extract savings and dispose of noncore assets to generate a promised $500 million in annual synergies. The Denver-based miner will aim to increase cash flows by $2 billion in the two years after the deal closes through portfolio optimization.
Newcrest’s Telfer and Havieron mines in Western Australia are likely to be among assets to be earmarked for sales, because the former is too mature and the latter too small for the enlarged Newmont, according to Daniel Morgan, an analyst with Sydney-based investment bank Barrenjoey.
“There’s a long list of gold companies that would look at all assets that become available,” Morgan said. London-based Greatland Gold, already a partner in Havieron, was a logical buyer, he said.
Under the deal, Newcrest shareholders will get 0.4 shares in Newmont for every share they own, giving them 31% ownership of the combined group. They will also get a tax-free special dividend before closing, of as much as $1.10 per share.
The deal gives Newcrest an implied share price of A$29.27 per share, a more than 30% premium to the company’s closing price of A$22.45 on Feb. 3. Newmont made an initial proposal on Feb. 5.