Newmont set to become a major player in Canadian mining with $19.5 billion

Newmont will gain the Red Chris and Brucejack mines that produce gold, silver and copper. Photo by Newcrest Mining

British Columbia is set to become a key mining destination for Newmont Corp., as the world’s largest gold producer inked an agreement on May 15 to take over Australia’s largest gold company, Newcrest Mining Ltd., for about US$19.5 billion.

The agreement, which is subject to shareholder approval, will increase Newmont’s presence in B.C.’s “Golden Triangle,” the loosely defined region in northwestern B.C. that has been a favourite of prospectors seeking gold and copper since the 19th century. Nearly 150 mines have operated in the region over that time.

Denver-based Newmont was already in the process of developing the Saddle North and Galore Creek copper-gold deposits that are located in the area. After acquiring Newcrest, Newmont will inherit the Red Chris and Brucejack mines that produce gold, silver and copper.

Newmont’s chief executive, Tom Palmer, said on a conference call on May 15 that he expects the transaction to “significantly strengthen Newmont’s position in Canada” by combining the projects in the Golden Triangle. “Newmont will be operating for decades to come,” he said.

Palmer singled out the Red Chris mine, indicating that he expects it will anchor Newmont’s operations in B.C. and that the mine will have a “very, very long” operating life.

Newmont’s takeover of Newcrest comes at a time when the mining industry is witnessing a series of big takeover attempts as resource companies tackle issues linked to climate change, rising costs and poorer quality of deposits.

Newmont’s bid to get even bigger comes after Yamana Gold Inc. agreed to sell itself to two Canadian rivals, Agnico Eagle Mines Ltd. and Pan American Silver Corp., for about US$4.8 billion late last year.

The trend of large mergers has also extended outside the gold sector. Mining giant Glencore PLC has been pursuing a takeover of Canada’s largest diversified miner, Teck Resources Ltd., since April. Teck, however, has twice rejected Glencore’s bid.

Mark Bristow, head of Newmont’s main rival, Toronto-based Barrick Gold Corp., said earlier this year that he was “struggling” to understand the logic behind Newmont’s takeover, which will create a global behemoth. Bristow questioned whether the consolidation plan had been “thought through properly.”

Newmont’s Palmer, however, pointed out three reasons to buy Newcrest. First, he said he expects Newcrest’s producing mines to be top-notch; second, Newcrest’s assets are mostly located in relatively calm jurisdictions such as the U.S., Canada and Australia; and third, the transaction will add 50 billion pounds of copper reserves and resources from Newcrest at a time when global miners are racing to supply metals that will be central to the energy transition.

“Newcrest was on top of our list with daylight to the next,” said Palmer.

While both companies define themselves as large gold miners, mining analyst Patricia Mohr said the copper assets involved in the transaction were what attracted Newmont.

“Gold miners are finding it difficult to find good projects, hence there is consolidation … but this is not just about the gold market, I actually think the price Newmont is paying for copper here is modest,” said Mohr, who expects the price of copper to greatly rise in a few years’ time. “Newmont is probably getting a bit of a bargain,” she added.

When Palmer was asked if he was interested in taking over any other mining companies, he indicated that for now he was solely focused on properly integrating Newcrest’s projects.

Once the transaction is completed, there is a high chance that Newmont might sell some of its mining projects in a bid to optimize its portfolio.

After the takeover is completed, Newmont will extend its lead at the top of the league table of gold producers, generating 8 million ounces annually. It will also produce about 350 million pounds of copper from Canada and Australia.

Newmont set to become a major player in Canadian mining with $19.5 billion deal for Newcrest

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