Newcrest Lets Newmont Get its Foot in the Door With a Sweeter Offer

• Newmont is edging towards a deal to secure Aussie gold major Newcrest worth almost $30 billion
• Evolution knocks down guidance after Ernest Henry rainfall
• Forrest hoovers more of Mincor as billionaire closes on controlling stake

After seeing the gold price punch through US$2000/oz last week it was little surprise to see Newcrest’s (ASX:NCM) share price bound past the ~$27 a share, $24.5 billion scrip offer Newmont previously lobbed to take out its precious metals peer.

And after weeks peering longingly behind the curtain the US gold giant is back with an improved ‘best and final’ offer valuing Newcrest at $32.87 per share for a total of $29.4 billion.

The massive M & A deal would also allow Newcrest to candy up shareholders with a US$1.10 special dividend along with the offer of 0.4 Newmont shares for every Newcrest share in their portfolios.

At a premium of 46.4% over the price of NCM shares on February 3, before the initial offer lobbed, that would see investors in the Australian giant — producer of upwards of 2Moz of gold annually — hold 31.1% of the combined group.

The deal remains subject to due diligence on both sides over the next month before a binding proposal drops and NCM’s board decides what to make of it.

But it could be a catalyst for yet more M & A in the gold space, with Newmont likely to consider whether it will shave off some of the Newcrest assets after the potential merger.

Newcrest’s Cadia mine in New South Wales is its crown jewel, especially given its massive copper endowment and low all in sustaining cost base.

Its Lihir mine in Papua New Guinea is also a large-scale operation, and a recent MoU to underpin the development of the Wafi-Golpu JV with Harmony Gold and the PNG Government could make its Pacific assets more attractive.

But Newcrest also has large capital requirements on mines in Canada and WA, where its marginal Telfer mine is waiting on the development of the new, higher grade Havieron discovery to extend its life.

Evolution reveals impact of Queensland rainfall, Forrest hoovers more Mincor stock

Elsewhere in the world of large cap gold stocks, Evolution Mining (ASX:EVN) revealed a hit to guidance after tallying the impact of rainfall which temporarily shut its Ernest Henry copper and gold mine in Queensland.

The Mt Isa operation is important not just because of its gold and copper production, but because its copper tonnes provide by-product credits that drive EVN’s overall costs down.

Evolution now expects to produce 660,000oz of gold and 48,000t copper at $1390/oz in FY23, with all in sustaining costs lifting from the lower end of its guidance of $1240/oz.

Gold and copper production is expected to fall 17,000oz and 10,000t respectively, with EVN losing 6400oz of gold output and 4100t of copper out of Ernest Henry in the March quarter.

Overall EVN delivered 163,910oz of gold and 9668t copper at $1291/oz. A bright spot was the improvement at its troubled Red Lake project in British Columbia, Canada, where production rose 13% to 28,178oz and where EVN is targeting at least 35,000oz in the June quarter.

“The performance for the March quarter was solid despite the weather event impact at Ernest Henry. The team has continued to perform exceptionally to safely resume mining activities and I am extremely proud of their response. Red Lake has improved during the quarter with further improvements expected in the June quarter,” EVN MD Lawrie Conway said.

“The events at Ernest Henry are the main reason for the updated guidance of 660,000 ounces at an AISC of $1,390 per ounce. Once Ernest Henry returns to normal operating rates, Evolution will resume its sector-leading low-cost high-margin position.

“The transition to net cash generation, following a recent period of intensive capital investment in growth projects, at a time of very elevated gold and copper prices is opportune. The business is very well positioned to take advantage of this to further strengthen the balance sheet.”

Meanwhile, Andrew Forrest is moving quickly towards a controlling stake in nickel miner Mincor Resources (ASX:MCR) after the Kambalda producer recommended shareholders accept Twiggy’s on-market $760 million bid last week.

It came after Mincor revealed a major guidance hit when customer BHP (ASX:BHP) declined to alter its offtake specifications for ore delivered to the Kambalda nickel concentrator.

Mincor had been delivering ‘off-spec’ ore during its ramp up phase.

Forrest’s Wyloo now has 37.65% of the target, where it held a stake of just over 20% before announcing the bid last month. The acquisition of MCR could strengthen the case for a nickel sulphate facility currently under study by Wyloo and Nova nickel mine owner IGO (ASX:IGO).

Over to the market and materials stocks lifted 1.94%, led by a 5% gain for Newcrest and a host of battery metals players.

Despite flagging lithium prices Liontown Resources (ASX:LTR), recently the subject of a massive $5b-plus takeover offer from Albemarle, was up 3.86% to $2.69, well above ALB’s rejected $2.50 bid.

Elsewhere Lynas Rare Earths (ASX:LYC), MinRes (ASX:MIN), Allkem (ASX:AKE) and IGO were all among the top performers.

Uranium play Paladin Energy (ASX:PDN), nickel producer Nickel Industries (ASX:NIC) and rare earths hopeful Arafura (ASX:ARU) were all up more than 5%.

Arafura announced an offtake deal which will see it sell the world’s top offshore wind turbine producer Siemens Gamesa with 200t a year of NdPr metal from 2026 from its Nolans project, ramping up to 360t in year two and 400tpa from years three to five when its hits nameplate capacity.

Following deals with South Korean carmakers Hyundai and Kia last year, Arafura now has 53% of its target 85% of production locked up under long term supply deals.

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