Newcrest Offers Newmont Hope After Rejecting $17 Billion Offer

James Fernyhough
·2 min read

(Bloomberg) -- Australian gold miner Newcrest Mining Ltd. rejected an initial $17 billion takeover bid by US rival Newmont Corp. that would have been the biggest deal globally so far this year.

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The offer “does not represent sufficient value for Newcrest shareholders,” the company said Thursday in a statement, but said it indicated to Newmont that it’s prepared to provide access to limited, non-public information on a non-exclusive basis.

Newmont offered to acquire Newcrest earlier this month in an all-shares deal that at the time valued the Melbourne-based company at $17 billion and that would create the world’s biggest gold miner. Newcrest is seen as attractive because of the comparatively long life of its assets of more than 20 years as well as its deposits of copper.

Newcrest has attractive gold, copper reserves

Newcrest’s decision to reject the offer was “justified,” Bloomberg Intelligence analyst Mohsen Crofts said Thursday in a note. “At 112 million ounces of gold equivalent, Newcrest has the largest reserve base behind Newmont, priced at a lower enterprise value to reserves compared with peers.”

Read More: Top Gold Miner Newmont Offers $17 Billion for Newcrest

Gold mining executives and analysts have said an upswing in gold mergers is overdue, driven by dwindling production at existing mines, a lack of new discoveries and a sustained period of historically high gold prices.

Newcrest’s copper assets account for around a quarter of revenue. Demand for the metal that’s key for renewable energy infrastructure, electric vehicles and electricity networks is expected to surge as the world moves away from fossil fuels.

Some analysts had earlier questioned Newmont’s valuation, with Citi analyst Kate McCutcheon saying in a research note on Feb. 12 that a “bump to the offer price will be required to get a deal over the line.”

Read more: Newmont Bets That Big Is Beautiful: Elements by Clara F. Marques

Newcrest on Thursday reported a slight drop in profit in the six months through December, compared with the same period a year earlier, even as gold production increased 25% and copper output rose 32%.

Newcrest shares fell as much as 2.5% in Sydney on Thursday. They have risen 6.6% since the close on Feb. 3, the last trading day before the Newmont offer.

--With assistance from Victoria Batchelor.

(Updates with comment in fourth paragraph)

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