From the Newmont perspective, the deal is certainly achievable.
It was only back in 2019 when the company tabled a successful US$10bn for Goldcorp.
Now, less than four years and one pandemic later, the company looks to have finished digesting that meal, and to be looking around for its next.
Whether Newcrest will actually end up inside the Newmont whale still remains very much open to question.
For a start, some of Newcrest’s shareholders are making noises about wanting more money. That ought not to be too much of an obstacle, given that in a transaction like this the opening offer rarely ends up being the same by the time the deal comes to close.
There are other issues, though.
Yes, Newmont managed to absorb Goldcorp easily enough, and that kept it at the top of the table in terms of valuation, ahead of rival Barrick. But there was also a brief moment earlier in the same year, which came as an opening act to the Goldcorp deal, when a formal combination of Barrick and Newmont was proposed.
That worked out less well, at least in terms of the stated intent. The practical outcome, though, was what was deemed a fair division of the spoils in one of the USA’s richest gold states, Nevada. So, things aren’t always what they seem.
Is there a hidden agenda behind this latest bid for Newcrest?
At this point, it’s hard to tell.
Newcrest is easily the biggest gold miner in Australia, and is by some measures ranked sixth in the world overall.
It has extensive operations across Australia, operating some of that country’s richest and highest margin mines, most notably Telfer and Cadia. And given that in terms of gold, Australia is one of the most well-endowed countries in the world, that’s no mean position.
There are also substantial assets in Papua New Guinea, most notably the Lihir mine, one of the world’s largest, and the substantial operation at Wafi-Golpu. Other famous names that fall under the Newcrest umbrella elsewhere include Red Chris and Brucejack.
And it also has a substantial interest in Havieron in Australia’s Paterson region, a project that was initially discovered and pushed forward by the UK’s Greatland Gold.
So there’s plenty of strength in depth, and Newcrest isn’t shy about presenting its future as a rosy one. Once you get past all the usual community-related spin on its website, you can find talk of 15mln ounces of reserve growth and the addition of A$1bn in net present value on short order.
No question, then, that whoever controls Newcrest’s assets will become the dominant force in precious metals mining globally, assuming that it’s one of the big two or three.
So, will Newcrest now go into play?
Barrick’s Mark Bristow is no stranger to corporate action himself, and in fact has an extremely adroit track record at it going back decades. There may yet be a counter-move from him. And it’s just possible that another large company, say world number four Agnico-Eagle, might enter the frame. Beyond that, not many other pure-play precious metals miners really have the firepower, although it’s always conceivable that a diversified company may take an interest, or that a Chinese producer like Shandong may come in from leftfield.
Perhaps a greater risk to Newmont’s proposed deal comes from its very nature. The question now arises: who controls Australia’s gold? Is it to be a home-grown, and to a broad degree, well-liked national champion?
Or is to be a North American behemoth, to which Australia, even with all its precious metals might, would necessarily play second string? Will the Australian government countenance the foreign ownership of one of its national champions? Mining is after all, one of the mainstays of the Australian economy, and to watch control slip away, even to a friendly North American power, may not be politically acceptable.
The Australians have been selling lesser businesses to the Chinese for years. But note that the world’s number one mining company by size, BHP (ASX:BHP), recently repatriated itself from the UK back to Australia.
And it’s not so long ago that in the oil and gas space the proposed acquisition of Australia’s national champion Woodside was stymied by government intervention, even though most other parties were in favour.
So, there are a lot of moving parts here.
But all told, the Newmont move is likely to set the cat amongst the pigeons once more in mining mergers and acquisitions, and investors should expect the ante to go higher rather than lower.
In the UK, industry-watchers will be keeping an eye in particular on a swather of mid-tier producers like Shanta, Caledonia, Chaarat and Pan African.