Newmont Sees 'Significant' Shareholder Value In Buyout Of Gold Rival Newcrest

Gold miner Newmont Corp on Thursday said it believes a buyout of Newcrest Mining Ltd would create "significant value" for shareholders and that it is in talks with its Australian rival's board of directors about closing a deal.

Newmont is the world's largest gold producer by market value and ounces produced, but it would produce nearly twice as much of the precious metal as closest rival Barrick Gold Corp should it prevail in its bid for Newcrest.

Details of the Denver, Colorado-based company's $16.9 billion bid for Newcrest leaked out earlier this month. Newcrest, which was spun out of Newmont in the 1990s, rejected the offer last week as too low.

Newmont Chief Executive Officer Tom Palmer said on Thursday he was "disappointed" that Newcrest rejected the latest offer, but added that he is in active talks with Newcrest's board of directors. Newmont has been open to sweetening the bid, a source told Reuters earlier this month.

"Given the challenges in the mining industry, there has never been a better time for two friends to come together," Palmer told investors on a conference call after the company posted lower-than-expected quarterly results.

"If we can reach an agreement, this combination of industry-leading talents, decades of collective experience would create significant value across the global business with an ideal mix of gold and copper."

Newcrest's operations include its top-class Cadia asset in Australia, an expanding footprint in North America and Papua New Guinea, and growth potential in the mining of copper, highly prized as key to the world's energy transition.

Beyond the mines themselves, Newmont's argument for a tie-up centers on cost controls and other efficiencies of scale. Newmont struggled during the quarter with inflation as well as lower bullion prices.

Some Newcrest shareholders have called for an offer that would be a 30% premium to the company's stock price before details of the previous bid emerged. But one of Newmont's largest shareholders told Reuters it would not want the company overpaying for its rival.

"If someone pays 30% above market price, there needs to be a very good explanation for why they are doing it," said Simon Jager, portfolio manager at Flossbach von Storch, which is one of the ten largest investors in Newmont.

Several gold rivals have said in recent weeks they are not interested in large acquisitions, including Barrick, Gold Fields Ltd and Sibanye Stillwater Ltd.

Palmer said that regardless of the outcome of the Newcrest bid, Newmont will develop its 16 billion pounds of copper reserves.

REVENUE DECLINES

On an adjusted basis, Newmont posted a net income of 44 cents per share for the October-December period, compared with the average analyst estimate of 46 cents. Revenue for the quarter fell 6% to $3.2 billion compared to the year before.

Newmont said attributable gold production for the fourth quarter edged up to 1.63 million ounces from 1.62 million ounces in the comparable period a year ago.

The company said it expects costs for labor and supplies to remain high through at least 2025.

Average realized gold prices fell 2.2% to $1,758 per ounce in the quarter from a year earlier, while the all-in sustaining cost for gold, an industry metric that reflects total expenses associated with production, rose 15% to $1,215 per ounce.

For 2023, Newmont has given a production guidance between 5.7 million and 6.3 million ounces of gold and guided for an all-in sustaining cost between $1,150 and $1,250 per ounce.

Newmont's stock was down less than 1% at $43.89 per share in midday trading.