Newmont Corporation has made a takeover offer for Newcrest Mining, Australia’s top gold miner, in a deal that would leverage both miners' operations, Newcrest announced and Newmont confirmed.
The indicative $16.9 billion takeover offer implies a premium of about 21% to Newcrest's Friday closing price of $22.450 Australian dollars.
Newcrest closed up 9.27% at $24.530 Australian dollars in Sydney.
"Newmont’s offer puts Newcrest at almost 1.5 times book value, a small premium to the 1.3 times average that prevails across the major US-listed producers and the 1.1 times aggregate upon which the London market’s gold diggers trade," said AJ Bell Investment Director Russ Mould.
Mould explained that skeptics will see the offer as another attempt to manufacture growth and momentum where little or none exists while gold bugs will argue that gold company executives see value that the stock market is overlooking.
Bell noted that gold mining shares are floundering, despite fresh advances in the price of the precious metal. He added that gold output grows slowly and right now all-in sustained costs (AISC) are rising quickly, in no small part due to surging energy and staff costs.
GOLD DEMAND AT ITS HIGHEST SINCE 2011
Newcrest shareholders will receive 0.380 Newmont shares for every share of the Australian firm. They would own 30% of the combined company. Newmont stockholders would own the other 70%.
"We believe a combination of Newmont and Newcrest presents a powerful value proposition to our respective shareholders, workforce and the communities in which we operate," said Tom Palmer, President and CEO of Newmont in a statement.
The offer follows a rejected stock bid of 0.363 Newmont share per every Newcrest share, which the Australian gold miner said "would not deliver sufficiently compelling value to Newcrest shareholders and on that basis".
Newcrest has been expected to announce a new chief executive this year after Sandeep Biswas said in December he would retire from his role after eight years.
Sherry Duhe, formerly chief financial officer, who joined Newcrest in February last year, is interim chief executive while a global internal and external search for a replacement is underway.
SILVER AND GOLD POISED TO SHINE IN 2023
Comex gold for February delivery gained $3.30 per troy ounce, or 0.18% to $1866.20, snapping a three-day losing streak.
Comex gold is up 2.56% year-to-date.
AJ Bel's Mould observed the price of gold is up by a quarter since the start of 2020 and the NYSE Arca Gold Bugs index, known as the HUI, is all but unchanged over the same time frame.
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Reuters contributed to this report.
