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Australian copper mining major Newcrest has decided to back an acquisition bid by bigger sector player Newmont that will create a new copper and gold giant on the mining scene.
The deal, worth some $17.8 billion, is one of the biggest acquisitions since the start of the year. It will make Newmont the biggest U.S. copper and gold miner in terms of market value, according to Reuters.
Newmont first made a non-binding offer for Newcrest in February, which valued the company at $16.9 billion, but Newcrest rejected that as too low. Then the gold miner tried again, sweetening the offer.
The sweetened offer stood at some $19.5 billion, which appears to have been negotiated lower in the final stages of the talks.
The Wall Street Journal noted in a report about the acquisition that the deal is evidence of the situation that the mining industry has found itself in: there are nowhere near enough new discoveries being made so the large players are growing through acquisitions.
This is happening at a time when demand for new discoveries, theoretically at least, is through the roof: the energy transition requires a lot of metals and minerals that have yet to be mined.
Yet with funding tight and investors reluctant to bet big money on greenfield projects, consolidations appears to be the only way to secure additional assets for those who can afford it.
“We will still be clearly known as a gold-mining company,” Newmont president and CEO Tom Palmer told the WSJ in an interview. “But we’ll have a good exposure to copper and a growing exposure to copper, and certainly that rationale is landing with everyone that we engage with.”
Copper is critical for the transition and there has been a growing chorus of warnings that supply is dangerously close to a deficit that could materialize as early as this year. Any additional exposure to copper would add a competitive advantage to the company that’s getting that exposure.
The deal is still subject to regulatory hurdles and shareholder approvals from both companies.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.