Newmont Reaches Acquisition Agreement With Newcrest

Newcrest Mining Ltd. has reached an acquisition agreement with Newmont Corp. valued at around US$19.2 billion to create the world's largest gold producer. Newcrest shareholders will receive 0.4 Newmont shares for each Newcrest share they own, giving them a 31% stake in the combined group, as reported by the Melbourne-based company on Monday, Bloomberg News reported on Sunday.

The deal gives Newcrest an implied enterprise value of US$19.2 billion, including net debt. Newcrest will also pay a special dividend of up to US$1.10 per share. Newcrest had previously agreed to extend Newmont's due diligence rights until May 18, following the expiration of an earlier deadline, the company said on Thursday.

"This transaction will combine two of the world's leading gold producers, delivering significant value to Newcrest shareholders through the recognition of our extraordinary growth plan," said Peter Tomsett, Chairman, Newcrest in the statement.

The expanded Newmont will have gold assets in North and South America, Africa, Australia and Papua New Guinea. It will also increase its exposure to copper, a key metal in the transition to clean energy.

“We believe a combination of Newmont and Newcrest presents a powerful value proposition to our respective shareholders, workforce and the communities in which we operate,” said Tom Palmer, President and CEO, Newmont. “The proposed transaction would join industry-leading portfolios of assets and projects to create long-term value across the combined global business and we welcome the consideration of Newcrest’s board of directors,” he added.

Newmont first approached its Australian rival in February with a non-binding offer of US$17 billion, which was rejected by the Newcrest board. In April, the US company raised the offer to US$19.5 billion and deemed it best and final. Newcrest CEO Sherry Duhe stated that the board was willing to recommend the proposal to its shareholders, provided that due diligence was satisfactory.

Gold miners worldwide are facing stagnant production, more challenging deposits and rising input costs. These sector challenges are seen as a catalyst for further mergers and acquisitions as companies seek to increase their size to boost production and improve efficiency through economies of scale.

It is not just Newcrest's five gold mines on three continents that attract Newmont, as the Australian company generates about a quarter of its revenue from copper. Newmont faces a decade of gold stagnation and has expressed a desire for more of this transitional energy metal in its portfolio.

Furthermore, Newmont recently announced it reached an agreement following negotiations headed by MORENA Senator and President of the National Union of Mining, Metallurgic, Iron, Steel and Similar Workers of the Mexican Republic (SNTMMSSRM), Napoleón Gómez. Under the agreement, the company agreed to pay its 2,500 unionized employees an uncapped bonus of up to 10 percent, costing the company around US$70 million, similar to the payments of 2021’s production results. According to the company, the agreement was reached without strikes and via a respectful dialogue between the company and the workers represented by Gómez. The agreement will also ensure continued operation at the Peñasquito unit in the future.