US gold miner snaps up Australian rival in $19 billion deal

Australian mining company Newcrest said Monday (15 May) it had agreed to a takeover by US rival Newmont, creating a world-leading gold producer in a deal worth AUD28.8 billion ($19 billion).

By swallowing up Newcrest, the US mining giant will cement its position as the world's biggest gold producer, with operations extending across North and South America, Africa, Australia and Papua New Guinea.

Melbourne-based Newcrest's shareholders will receive 0.4 of the US firm's shares for each Newcrest share, giving them 31% of the combined group, the Australian firm said.

The takeover, expected to be completed by the end of 2023, has an implied value of AUD28.8 billion, it said.

"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," Newcrest chairman Peter Tomsett said in a statement.

Newcrest had "unanimously" recommended the takeover offer to shareholders, he said, three months after its board rejected an earlier US$17 billion approach as too cheap.

"It's a fantastic opportunity for Newmont because they're going to be acquiring some very good assets at what I consider to be an attractive price," said Daniel Morgan, mining equity analyst at financial services firm Barrenjoey.

The takeover still needs approval from Newcrest shareholders at a meeting expected in September or October, and agreement from competition authorities in Australia, Canada and Papua New Guinea.

'Substantial value'

It is unlikely to face serious competition challenges, Morgan said.

"Even though it is going to create the world's largest gold miner, it is not going to lead to consolidation in any sense that is going to be harmful for consumers," he told AFP.

Newmont chief executive Tom Palmer said the combined group would have an industry-leading portfolio with a "multi-decade gold and copper production profile" in the world's most favourable mining jurisdictions.

"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," he said in a statement.

Denver-based Newmont expects to deliver US$500 million in annual "synergies" and to generate an estimated $2 billion in cash flow as a result of the takeover, it said.

"This transaction also increases Newmont's annual copper production -- a metal vital for the new energy economy -- and adds nearly 50 billion pounds of copper reserves and resources from Newcrest to our robust and balanced portfolio," Palmer said.

Newcrest shares were trading 1.3% higher at AUD28.61 in early afternoon trade on the Australian stock exchange.

If the deal goes through, Newcrest will also pay its shareholders a tax-paid dividend of up to $1.10 per share.