MELBOURNE: Newmont Corp has gained partial access to the corporate books of Australian rival Newcrest Mining Ltd, according to sources, a sign that the US company can make a revised offer to seal what would be the world’s largest gold takeover.
Newmont is undertaking limited due diligence on Newcrest weeks after management of the Melbourne-based miner dismissed a US$17bil (RM75.4bil) proposal from the world’s top bullion producer, according to the sources.
Newcrest rebuffed Newmont’s all-stock offer in mid-February, with management saying the company is “worth a lot more” than what the Denver-based suitors proposed. But investors see few options for Newcrest, with no obvious alternative buyers to challenge Newmont.
Barrick Gold Corp, the world’s No. 2 bullion producer, has said it doesn’t plan to make a rival offer and Agnico Eagle Mines Ltd, the third-largest gold miner, is busy wrapping up its second big gold takeover in 13 months.
Shares of Newmont rose 0.2% to US$46.71 (RM207.28) in New York.
Newmont’s push to buy Newcrest comes as gold miners face the prospect of stagnating production, harder-to-mine deposits and rising input costs.
Such industry challenges are seen as a catalyst for more mergers and acquisitions, as companies seek to get larger to boost production and increase efficiencies through economies of scale.
At least one top investor has warned Newmont chief executive officer (CEO) Tom Palmer not to overpay, according to a source.
Finding a price tag that satisfies both sides could stretch negotiations over weeks, if not months, Douglas Groh, a senior portfolio manager at Sprott Asset Management USA, said in an interview.
“I think a deal is inevitable, but I wouldn’t be surprised for Newcrest if they’re still dealing with this in August,” said Groh, whose firm holds Newmont shares.
Adding to Newcrest’s challenges is the abrupt departure of its CEO in December.
“It’s obvious to the market there’s no leadership” at Newcrest, Groh said.
“The board would’ve had to come out with a plan to show how they’re going to create value. And I don’t know if that’s forthcoming.”Newcrest has pushed back against comments on leadership weakness.
“As far as the executive team goes, it’s very much business as usual,” a spokesman said, adding the team has the “strategic, financial, commercial, operational, project delivery and innovation capability to produce results and are doing just that”.
Newcrest investors certainly hope the Australian company can convince its suitor that it’s worth more than the initial proposal.
Newcrest operates five gold mines across three continents and generates around a quarter of its revenue from copper.
Newmont, in turn, is facing a decade-long gold rut and has said it wants more of the energy-transition metal in its portfolio.
“I think Newmont’s a very good company, but I think Newcrest is a very good company, too,” said Simon Mawhinney, chief investment officer at Allan Gray, Newcrest’s second-largest shareholder.
“And I just think Newmont needs to pay more, or more of their shares, for each Newcrest share in order to get this over the line.” Newmont didn’t respond to email and phone requests seeking comment. — Bloomberg