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Date : 11/02/2023

Newcrest Mining (ASX: NCM) shares surge after receiving a second takeover bid from Newmont

Newcrest Mining Limited (ASX: NCM) is an Australian-based gold mining company listed on the ASX. NCM is one of the largest gold producers in the world, with operations and exploration activities in Australia, Canada, Papua New Guinea and Indonesia. Newcrest’s focus is on the discovery and development of large, long-life and low-cost mines.

On the 6th Feb morning, it was confirmed by NCM that on February 5, 2023, it received an indicative proposal from Newmont Corporation (Newmont) to purchase all of the outstanding shares of Newcrest via a plan of arrangement (Indicative Proposal). If the Indicative Proposal goes through, Newcrest shareholders will get 0.380 Newmont shares for every share of Newcrest they own.

Newcrest Mining ASX shares surge by 14.4% at one point today, reaching a high of $25.68, even though the firm has yet to decide whether or not to accept the offer. Newcrest share price (ASX-NCM) closed at $24.53, up 9.2% from the opening price.

Read on to find our Newcrest Mining Shares Analysis & Forecast:

NCM: Newmont returns with an improved offer

Today Newcrest announced that Newmont had approached the company with another offer. Last time, NCM rejected the offer by stating that Newmont undervalued NCM stock, showing that the offer was not in favour of its shareholders.

The earlier offer made by Newmont, which was promptly turned down, was for 0.363 shares of Newmont stock for each share of Newcrest Mining ASX stock, which is equivalent to an offer of $26.15 per share.

On Sunday, Newmont made an improved conditional and non-binding indicative offer to buy Newcrest, offering 0.380 Newmont shares for each Newcrest ASX share.

Applying today’s exchange rate and the previous trading day’s closing price for Newmont shares (US$49.85) amounts to $27.40. Compared to Newcrest’s closing price on Friday, this represents a premium of 22%.

NCM: Dominating the Gold Market

Newmont and Barrick’s acquisitions of Goldcorp and Randgold, respectively, sparked a gold arms race at the industry’s pinnacle around four and a half years ago. After Newmont rejected a hostile takeover proposal from Barrick, the two corporations could work out a joint venture for their adjacent Nevada gold mines. The opening of a new Barrick office in Perth clearly indicates the company’s plans to resume its pursuit of gold in Australia.

This comes after many years of the twice-bitten mining giants pulling out of part or all of their activities in Australia.

Following the 2013 gold market collapse, Barrick scurried out of Australia, selling its Plutonic, Kundana, and Kanowna Belle mines to Northern Star Resources (ASX: NST) and its Cowal mine to Evolution Mining (ASX: EVN) for pennies. The last three examples were ridiculous in every way. In 2014, Barrick earned just $75 million for Kundana, and Kanowna Belle combined.

By making these purchases and buying the Jundee mine from Newmont, Bill Beament’s Northern Star rose from an average former penny company to Australia’s second-biggest gold miner. In 2021, it sold just the Kundana part of the deal to Evolution Mining (ASX: EVN) for $400 million.

Following its 2019 merger with Saracen Mineral Holdings, Northern Star acquired full ownership of the renowned Super Pit and Mt. Charlotte gold mines in Kalgoorlie from Newmont and Barrick, the mines’ previous joint venture partners.

To this day, Newmont is one of Australia’s most invested mining companies, with two of the country’s five biggest gold mines—Boddington in Western Australia’s southwest and Callie on the Tanami Desert side of the Northern Territory—under its control.

NCM: Who Will Dominate the Gold Market?

Newmont will add two top ten Australian gold mines to its portfolio if the takeover succeeds. This will include the largest Australian gold mine Cadia Valley.

Last year, Newcrest Mining Limited announced that the company would invest $1.6 Billion in the project’s expansion. As a result, in FY23, it will produce:

  • 560-620,000oz of gold
  • 95,000-115,000t of copper

Its Lihir mine, the biggest in PNG, is anticipated to produce 720-840,000oz of gold in fiscal year 23. The province of British Columbia in Canada is home to the Red Chris development and the Brucejack mine, both of which were recently acquired by Newcrest.

In FY23, it anticipates delivering 335,000-405,000oz gold and 20,000t copper from its Telfer mine in WA, where a heavily hyped underground expansion named Havieron is in the research phase.

NCM: Will this offer seal the deal?

After receiving a second takeover bid from Newmont, there is a good chance that this proposal is in the ballpark of what Newcrest Mining is hoping to get. That’s why it hasn’t turned down the offer this time. Still, it hasn’t accepted it either. The board of Newcrest Mining Ltd is presently thinking through the indicative proposal along with its financial and legal advisors.

It is important to note that the transaction is still subject to various conditions, such as the granting of exclusivity to Newmont, the completion of due diligence, approval from Newmont shareholders, and other regulatory clearances. It also foresees a CDI listing on the ASX for the newly issued Newmont shares that would be distributed to Newcrest Mining ASX shareholders.

According to the Newcrest board, the shareholders don’t have to do anything about the proposal right now.

Take Away

What is the outlook and target for ASX-NCM shares?

Newcrest Mining Ltd is yet to respond to the offer. It is still determined whether the company will accept or decline the offer again. But it seems like the company is taking time to evaluate the offer this time. If Newcrest Mining accepts this offer, Newmont might be leading the gold industry in Australia with top-notch gold mines in its portfolio.

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