Newmont Corp, the world’s largest gold miner by market cap and production, has offered $16.9 billion to acquire Newcrest Mining Ltd, but this may not be enough amid the management reshuffle in the latter, Reuters reported on Monday, citing analysts.
The current all-share no-cash bid represents a 21% premium to Newcrest’s stock price before the offer was announced, but analysts believe that the premium should be at least 30%, or AUD 31 (USD 21.5) per share. Newcrest is trading just below AUD 25 (USD 17.3) per share on Tuesday.
“We don’t want to see big premiums paid,” Simon Jäger, investment manager at Newmont’s eighth-largest shareholder, German-based Flossbach von Storch, told the agency.
“We think Newcrest is now in play, but if a deal is to be done, it will likely need to be at a higher price,” Morningstar analyst Jon Mills said, as quoted by Reuters. He added that the traditional premium in similar deals should be around 30%.
Why it matters:
If the deal is completed, it will be the largest ever mining acquisition in Australia, and the merged company’s gold production will be almost double of that of the second-ranked Barrick Gold Corp.
Last year, Newcrest produced 1.9 million ounces of gold. In the third-quarter 2022 report, Newmont projected its full-year gold production at 5.9 million ounces. Barrick is set to report 4.2-4.6 million ounces in 2022, according to its latest quarterly report.
Newcrest, initially founded as Newmont’s subsidiary in 1966 and then spun out in the 1990s, is now looking for a new CEO after the previous one, Sandeep Biswas, resigned in December. CFO Sherry Duhe is serving as the interim CEO while the search is underway.
Gold is trading around $1,870 on Tuesday.