The major Australian miner Newcrest Mining (ASX: NCM) has accepted the latest takeover bid from Colorado’s Newmont Corporation (TSX: NGT) (NYSE: NEM), a deal which will make the world’s largest gold mining company even bigger.
The companies announced finalizing the agreement on Monday for an all share deal valued at approximately US$19.2 billion. Through the deal, Newmont expects that the combined company could generate annual pre-tax synergies of US$500 million within the first two years.
The news follows Newcrest rejecting a US$17 billion takeover bid in mid February prior to Newmont deciding to raise its bid by over US$2 billion last month.
Newcrest shareholders will be receiving 0.4 of a Newmont share for each share they own and a US$1.14 dividend payment for each stock as well, which Newmont says represents a 30.4 per cent premium.
The transaction’s conclusion is subject to certain conditions such as approval from the Federal Court of Australia and the country’s Foreign Investment Review Board (FIRB).
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Newcrest generates about 25 per cent of its revenue from copper and Newmont expects to add about 50 billion pounds of copper resources and reserves to its portfolio through the acquisition.
“Following a robust due diligence process, we have identified a number of opportunities to unlock substantial value and will apply our experience and expertise to Newcrest’s complementary and exceptional portfolio of long-life, low-cost gold and copper assets,” said Newmont’s President and CEO Tom Palmer.
The merger will result in annual copper production from Canada and Australia of approximately 350 million pounds. It will also allow the combined company to generate about eight million ounces of gold annually.
“In addition to the ongoing benefits of merging these premier portfolios, the combined group will set a new benchmark in gold production while benefitting from a material and growing exposure to copper and a market leading position in safety and sustainability,” said Peter Tomsett, Chairman of Newcrest.
Newcrest has projects throughout Australia, Canada and Papua New Guinea and Newmont has mining operations throughout North America, Africa, South America and Australia as well.
Newmont’s mineral reserves increased by 3.3 million ounces in February and Newcrest signed a memorandum of understanding (MOU) with the government of Papua New Guinea last month to help establish a framework for the development of its Wafi-Golpu joint copper-gold venture with Harmony Gold Mining Co. (NYSE: HMY).
The ultimate goal of the MOU will be to secure a special mining lease for the project.
Newmont’s shares rose by 2.3 per cent Monday to $63.74 on the Toronto Stock Exchange.
Newcrest’s stock rose by 1.52 per cent to AUD$28.68 on the Australian Securities Exchange.
rowan@mugglehead.com
