Non-core assets to be sold: Newmont
There’s every likelihood that a takeover of Newcrest Mining by Newmont Corporation will be completed by the end of this year.
The ASX-listed company took a step closer to finding itself back within the stable of its original owner, United States-based Newmont Corporation, after its board agreed to accept a A$29 billion (FJ$42.5billion) takeover offer from the world’s biggest gold miner. Assuming Newmont’s takeover offer receives the necessary regulatory approvals and a thumbs-up from Newcrest shareholders in September/October, the takeover is likely to be complete by the end of 2023. Once completed, Newmont will own one of PNG’s biggest gold mines, the world-class Lihir mine, which Newcrest (itself a former subsidiary of Newmont) bought for A$10 billion (FJ$16.6billion) in 2010, then promptly wrote down by half.
It will also own a 50 per cent interest in the yet-to-be-licenced WafiGolpu copper-gold project. Assuming the long-awaited WafiGolpu proceeds as planned, and the State and Morobe Province take up their maximum allocations, Newmont will end up owning half a 70 per cent stake in the copper-gold project, along with joint venture partner, Harmony Gold.
“As part of this commitment, Newmont plans to establish PNG as a stand-alone fifth region in our portfolio, with senior leadership presence in Port Moresby,” says Newmont Mining CEO Tom Palmer.
However, it is not clear if Newmont will take over Newcrest’s secondary listing on PNG’s stock exchange, PNGX, as Santos did when it merged with Oil Search in 2021.
Lihir a ‘keeper’
While Lihir currently accounts for a third of Newcrest’s total annual gold production, the mine has continuously fallen short of its own one million ounces of gold a year projection and broker reports suggest the mine has historically struggled to generate a strong return on assets.
Mr Palmer believes low-cost ways could be found to squeeze more value from Lihir, which he regards as strategically important, especially given the company’s plans to boost its copper exposure.
He expects Lihir to ‘benefit from being in a bigger balanced portfolio.’
“Our immediate focus is on deconstraining the mine and focussing on medium-to-short-term planning and planning for productivity,” he said.
“We think that by doing this we can make a significant shift towards industry benchmarks, which will lead to a significant reduction in the mining cost.”
Newmont was quick to disclose that any assets deemed ‘non-core’ could be sold post-takeover.
The miner is already talking about creating US$2 billion (FJ$4.4 billion) in ‘additional cash flow’ through better utilisation of its portfolio of ‘core’ mining assets.
Given that it is not mentioned within Palmer’s plans to create an estimated US$500 million (FJ$1.1billion) in ‘annual synergies,’ Newmont’s plans for the WafiGolpu project appear less certain than they are for Lihir.
Assuming a special mining lease is finally granted, the Morobe Province-based Wafi-Golpu project is forecast to produce 320,000 ounces of gold and 150,000 tonnes of copper annually.
“We’re taking a ‘value over volume’ approach and the starting point is the 11 tier one assets that make up two-thirds of the production from the two companies,” Mr Palmer said.