Newmont Mining makes third offer for Newcrest Mining in a “best and final” bid

After first purchasing the company in October 2022, readers of The Montgomery Fund reports will know we have steadily added to the position in Newcrest Mining (ASX:NCM) over recent months. The market continued to positively reappraise the company’s progress to strengthen its production profile through acquisitions (in Tier 1 sites) and extend the mine life of its existing high-quality assets.

And yesterday, the world’s largest gold mining corporation, Newmont Mining, improved its takeover bid for NCM to 0.4 Newmont shares for every one NCM shares plus a US$1.10 special fully franked dividend (worth US$1.0 billion). At today’s Newmont share price of US$50.00 and the US$/A$ exchange rate of US$0.6650, this values each NCM share at around A$32.00 (ex-dividend), double the multi-year low recorded in September 2022 of sub $16.00.

The original bid was 0.363 Newmont shares for every one NCM shares, and this was swiftly rejected by the NCM board, and the third and latest “best and final” bid is seen as a 16 per cent improvement. In 2022, Newmont Mining consolidated gold production was 5.8 million ounces, whilst NCM is expected in Fiscal 2023 to produce 2.1-2.4 million ounces of Gold and around 150,000 tonnes of Copper, the majority which comes from the Cadia mine, near Orange NSW. The combined business, with a nominal market capitalisation of around US$55 billion, would see its tier 1 gold production split as follows: 35 per cent North America, 34 per cent Australia, 11 per cent South America, 10 per cent Papua New Guinea, and 7 per cent Africa.

Of particular interest is NCM’s copper production capability, which surpasses OZ Minerals. For context, OZ Minerals was purchased by BHP for A$9.6 billion. Continued copper demand from the transition away from fossil fuels will likely bring this aspect of NCM’s asset portfolio into sharp focus. Large quantities of copper are required to facilitate the decarbonisation of energy delivery and transition. A copper supply deficit is projected to increase along with demand for renewable energy and storage infrastructure.

The team at Australian Eagle Asset Management have done a wonderful job with NCM, first entering the stock in October 2022, near the multi-year lows. The NCM weighting increased over recent months, as the Company’s fundamentals improved. And the five per cent increase in the NCM share price yesterday saw the company become a top five holding in The Montgomery Fund, with an approximate 6 per cent weighting.

The Montgomery Funds own shares in Newcrest Mining. This article was prepared 12 April 2023 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Newcrest Mining you should seek financial advice.


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