Imperial Metals sells stake in Red Chris mine to Newcrest.

Joint venture with Imperial at B.C.’S Red Chris

• Newcrest Mining Ltd., the thirdbiggest gold producer by market value, agreed on a Us$806.5-million deal to control an Imperial Metals Corp. mine in Canada, extending the spree of dealmaking in the sector.

Melbourne-based Newcrest, with assets in Australia, Indonesia and Papua New Guinea, will acquire a 70-per-cent joint-venture interest in the Red Chris copper and gold mine in British Columbia and become the operator of the site, the producer said Monday.

Newcrest’s move into Canada comes amid a bout of consolidation in the gold industry, as the largest producers seek to increase the quality of their portfolios, boost reserves or win operational savings.

Australia’s top gold producer remains in a strong position to complete further deals and will continue to review opportunities, chief executive Sandeep Biswas said in a phone interview.

Red Chris, on the northern edge of the Skeena Mountains, about 1,700 kilometres north of Vancouver, gives Newcrest a producing asset in North America and has significant underground development opportunities.

“It’s a modest operating asset at the moment — the real attraction for us is the size of ore body,” Biswas said. “It’s a multi-decade life potential mine, so that plays right into our portfolio of multi-decade operations. It’s got the potential of significant size.”

Newcrest rose as much as 2.7 per cent to A$25.17 ($23.84) in Sydney. The stock is up 15 per cent this year.

A study of the Red Chris site last year suggested the use of block cave mining — an underground technique — would offer access to deep lying copper and gold. Newcrest uses the technique in Australia and is regarded as the industry’s specialist in the method.

“That’s where our wheelhouse is — this is tailormade for Newcrest,” Biswas said. “That’s why we think we can add a tremendous amount of value to this opportunity and turn it into a tier-1 orebody.”

Red Chris has estimated resources of 20 million ounces of gold and 13 billion pounds of copper, according to Newcrest. The producer has previously set a deadline for the end of 2020 to increase its exposure from four to five so-called tier-1 assets — the industry’s highest quality mines.

In the past year, Newcrest has also held conversations about transactions with Barrick Gold Corp., Goldcorp Inc. and Nevsun Resources Ltd. before those miners opted for other deals, people familiar with the matter said last month.

Vancouver-based Imperial Metals last year began a restructuring process and appointed a special committee to explore options including a sale, a recapitalization and a joint venture arrangement.

The copper and gold miner is facing US$325million of bonds coming due this month and investors had been waiting to see if Fairholme Capital Management, the company’s biggest bondholder, and Canadian oil billionaire Murray Edwards, the largest shareholder, would step in to rescue the company, two people with knowledge of the matter said last month.

Imperial Metals in January forecast 2019 production at Red Chris of between 36,000 ounces and 38,000 ounces of gold and 72 million to 76 million pounds of copper.

Imperial shares finished trading Monday up $1.16 or 59 per cent to $3.14 on the Toronto Stock Exchange.

Newcrest will fund the acquisition from cash and undrawn bank facilities.