Australian gold miner Newcrest Mining Ltd. rejected an initial $17 billion takeover bid by Newmont Corp., but did provide some hope for its US suitor by opening its books.
(Bloomberg) — Australian gold miner Newcrest Mining Ltd. rejected an initial $17 billion takeover bid by Newmont Corp., but did provide some hope for its US suitor by opening its books.
The offer “does not represent sufficient value for Newcrest shareholders,” the company said in a statement on Thursday, but said it indicated to Newmont that it’s prepared to provide access to limited, non-public information on a non-exclusive basis.
Newmont offered to acquire Newcrest earlier this month in an all-shares deal that would have been the largest globally this year and created the world’s biggest gold miner. Newcrest is an attractive target because of the comparatively long life of its gold assets — more than 20 years — as well as its deposits of copper.
Newcrest shares fell as much as 2.5% in Sydney on Thursday. They are still up around 6% since the close on Feb. 3, the last trading day before the Newmont offer.
Newcrest has attractive gold, copper reserves
The Australian miner is going through a period of management transition after its veteran chief executive officer, Sandeep Biswas, left at the end of last year. For Newmont, eager to put some distance between itself and rival Barrick Gold Corp., the deal is an opportunity to acquire future ounces but also scale, which matters as gold miners seek to attract more non-specialist investors.
Newcrest has “left a door open to a higher premium deal,” Alex Barkley, an analyst at RBC Capital Markets, said in a note. The onus is now on Newmont to find a premium for Newcrest that also satisfies its own shareholders, although the deal not occurring is a possibility, he said.
Newmont didn’t immediately respond to a request for comment.
Gold mining executives and analysts have said an upswing in gold mergers is overdue, driven by dwindling production at existing mines, a lack of new discoveries and a sustained period of historically high gold prices.
Newcrest’s copper assets account for around a quarter of revenue. Demand for the metal that’s key for renewable energy infrastructure, electric vehicles and electricity networks is expected to surge as the world moves away from fossil fuels.
See also: Newmont’s Bid for Newcrest Marks New Era for Mining Mega Deals
“We had previously felt that the offer was too low initially,” said Simon Mawhinney, chief investment officer at Allan Gray, one of Newcrest’s biggest shareholders. “More important is their willingness to engage and offer Newmont some limited due diligence.”
Some analysts had earlier questioned Newmont’s valuation, with Citigroup Inc.’s Kate McCutcheon saying in a research note on Feb. 12 that a “bump to the offer price will be required.”
Newcrest’s decision to reject the offer was “justified,” Bloomberg Intelligence analyst Mohsen Crofts said in a note. “At 112 million ounces of gold equivalent, Newcrest has the largest reserve base behind Newmont, priced at a lower enterprise value to reserves compared with peers.”
Newcrest on Thursday reported a slight drop in profit in the six months through December, compared with a year earlier, even as gold production increased 25% and copper output rose 32%.
The rebuff of Newmont allows other parties to consider buying all or some of Newcrest’s assets, Daniel Morgan, an analyst at Barrenjoey Markets Pty Ltd., said in a note. Options worthy of consideration include asset sales followed by a buyback and/or a de-merger of Lihir, a gold mine Newcrest operates in Papua New Guinea, he said.
–With assistance from Victoria Batchelor, Jacob Lorinc and David Marino.
(Updates throughout with additional details and analyst, investor comments)
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