By Rhiannon Hoyle
Newmont will look for assets to offload and projects to resequence following a planned takeover of Australia’s Newcrest Mining, although it views Newcrest’s giant Lihir operation in Papua New Guinea as a core part of the combined company, its chief executive said in an interview.
Tom Palmer, president and CEO of Newmont, said the $17.5 billion takeover of Newcrest–now recommended by the Australian company’s board–will be “transformational” for the world’s largest gold miner, giving it more large-scale, long-life and low-cost mines and boosting its copper reserves.
“It’s a transaction that’s not about volume, it’s value,” Mr. Palmer told The Wall Street Journal, highlighting plans to generate $2 billion of cash within the first two years from reshaping the enlarged company.
“The core of our business are the 10 tier-one operations,” he said, referring to the companies’ biggest and most-profitable mines. “We’ll work through a very considered process over the weeks and months ahead… and ensure that we get full value for anything we choose to resequence or ultimately divest,” he said.
Mr. Palmer said no decisions have been made yet on which assets may be affected. Newmont views a number of operations as having potential to “move from tier-two to tier-one,” and has other assets it may be interested in keeping because they are “in great jurisdictions and they’re great development beds for future leaders of our business,” he said.
Combining the companies’ assets should be relatively straightforward, he said, highlighting that most of Newcrest’s assets are in Australia or Canada, where Newmont already operates. Newmont has estimated it can find $500 million a year of savings from the tie-up within the first two years.
“And so we’re really introducing one new jurisdiction in Papua New Guinea and the Lihir operation into a business that is already set up to manage a global set of mining operations,” said Mr. Palmer.
He called Newcrest’s Lihir operation “one of the great gold mines in the world” and said a visit to Papua New Guinea during Newmont’s monthlong due diligence on the Australian company reassured him about operating in that country.
“We’ve come out the other side of our due diligence very comfortable to be able to work in Papua New Guinea over the long term,” he said. “So Lihir is a very, very important part of Newmont going forward.”
Newcrest on Monday said it recommends shareholders vote in favor of Newmont’s offer, which comprises 0.400 of its own shares for each Newcrest share. In addition, Newcrest is permitted to pay a special dividend of up to $1.10 a share around the time any deal completes. Those terms were in line with a revised offer pitched by Newmont that was announced to the market by Newcrest on April 11.
The deal is expected to complete in the fourth quarter of 2023, Newmont said.
Mr. Palmer said Newmont has had its eye on Newcrest for some time. He said the gold-mining industry needs to consolidate, in part because there are many more publicly listed gold companies when contrasted with producers of other types of commodities. “There simply has to be consolidation,” he said.
Mr. Palmer previously worked with former Newcrest CEO Sandeep Biswas at Rio Tinto, and the pair had been talking for some time about whether there was a way the two companies could partner or combine, he said.
When Newcrest said in December that Mr. Biswas would be leaving the company, “we chose to ask the Newcrest board the question as to whether they were interested in a potential combination and that then led to the discussions that have taken place over the last four months or so,” said Mr. Palmer.
Write to Rhiannon Hoyle at [email protected]
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