Australia’s Newcrest Mining has confirmed it received a $24 billion takeover offer from Newmont Corporation, the world’s largest gold mining company.
The offer, which constitutes a non-binding indicative proposal, would entitle Newcrest shareholders to receive 0.38 Newmont shares for each Newcrest share held, making for a hefty total value of close to $24.45 billion, which is a 22 per cent premium on Newcrest’s market cap on Friday.
The proposal follows a previous offer from Newmont at an exchange ratio of 0.363 shares, which Newcrest rejected on the grounds that it undervalued the company.
“The Newcrest board had considered that the earlier proposal would not deliver sufficiently compelling value to Newcrest shareholders and, on that basis, rejected the earlier proposal,” Newcrest said in a statement.
It also appears that Newmont will have a a clear runway in its move on Newcrest, with Barrick Gold reportedly making clear that it has no intention of entering into a bidding war for the Australian gold miner.
“There is a difference between value merger acquisitions and getting bigger for the sake of getting bigger,” Barrick chief executive Mark Bristow told media at the Mining Indaba conference in Cape Town on Monday.
“(The deal) doesn’t make sense right now.”
Newcrest – originally a Newmont subsidiary spun off in the 1960s – operates mines in Australia, Canada and Papua New Guinea, with the latter including the notable Lihir mine, one of the largest gold mines in the world.
As the biggest gold miner on the ASX, Newcrest has been a major player in the Australian market, clocking a market capitalisation of $6 billion, a whole 30 per cent higher than its nearest ASX rival, Northern Star, at Friday’s close.
But the company’s stock has recently had a rough go of it, trading below $27 for most of the past 18 months, dipping as low as $15.72 in September.
However, since the offer from Newmont was first reported, Newcrest’s share prices have seen a healthy spike, as investors anticipate the birth of a new giant in the Australian gold sphere.
Australian-born Tom Palmer has run Newmont since 2019. The US gold titan already produces seven million ounces of gold per year, more than three times the amount of Newcrest. Indeed, acceptance of the $24.45 billion offer would mean four of the world’s five largest gold mines would fall under the control of Newmont.
Newmont has been a busy acquirer in recent years, scooping up the Canadian company Goldcorp in 2019 in a stock-for-stock transaction valued at $US10 billion. The company also acquired GT Gold Corp for a healthy $US311 million in 2021.
The Newcrest board, with its financial and legal advisors, has indicated that it is considering the proposal.
“The Newcrest board advises that shareholders need not take any action in relation to thwe indicative proposal and remains fully committed to acting in the best interests of the Newcrest shareholders,” the company said.