Yahoo Finance Newmont CEO 'disappointed' by Newcrest's rejection, but vows to continue pursuit
Newmont Corp. chief executive Tom Palmer said he was disappointed that Newcrest Mining Ltd. rejected his US$17 billion to take over the company, but stressed that he hadn’t given up trying to purchase Australia’s biggest gold miner.
A consolidation trend has been playing out in the gold industry for several years, but Palmer took it to another level on Feb. 6 when he went public with his attempts to make Newmont, already the world’s biggest gold miner, even bigger.
However, Newcrest rejected the approach last week, saying it was worth more than Palmer had put on the table. But it didn’t close the door, inviting Newmont to review its books, a process that could lead to a higher bid.
“Given the challenges the mining industry is currently facing from a volatile macroeconomic environment there has never been a better time for Newmont and Newcrest to come together,” Palmer said on a conference call with analysts on Feb. 23. “We are currently engaging with the Newcrest team in relation to their offer to provide us access to more information.”
A combination of Newmont and Newcrest would send ripples throughout the mining industry, including in Canada, as Newmont would acquire Newcrest’s Red Chris and Brucejack mines in northern British Columbia.
Palmer said on the call that his takeover of Newcrest would create “significant value” through an “ideal mix” of gold and copper projects and would further strengthen its overall position as the world’s leading gold company.
There are doubts about that. Mark Bristow, chief executive of Barrick Gold Corp., the world’s second-largest gold company, told the Financial Post on Feb. 15 that he was struggling to understand the logic behind the potential merger. He said Newmont’s pursuit of Newcrest looked like an attempt to get big for “big’s sake,” as the company would simply be bulking up, rather than improving its mix of assets.
Palmer, however, said that Newmont has shown in the past that it can generate millions of dollars in profits by improving the “performance stability” of projects that it acquires and expects to do the same if the deal with Newcrest goes through.
“I wanted to be clear with everyone on today’s call that we will continue to be disciplined as we assess all of the options to move forward and we will act in the best interest of our shareholders,” said Palmer.
Newmont’s bid to get even bigger extends a series of consolidations in the gold sector in recent years. Late last year, Yamana Gold Inc. agreed to sell itself to two Canadian rivals, Agnico Eagle Mines Ltd. and Pan American Silver Corp., for about US$4.8 billion.
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Resource industries are on the front lines of the climate challenge, whether it be coping directly with extreme weather, or indirectly through rising costs associated with adjustment and policies such as carbon taxes. Gold miners face an additional layer of difficulty because their deposits are yielding less ore that’s dense with gold. Lower grade mines can still be profitable, but only if extraction costs are lowered.
Aside from the sale of Yamana, which has properties and mines in Canada, Brazil, Chile and Argentina, there have been at least eight notable combinations since 2018, when Barrick Gold Corp. and Randgold Resources Ltd. announced an $18-billion, zero-premium, all-share merger.
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