The company is partnering with Lundin Gold, investing US$250m to acquire a 27.1% interest. The deal includes a standstill whereby Newcrest will not increase its stake beyond 32% during an eight-year period.
UBS finds it difficult to assess the Ecuador project against the company’s targets as there are no financial hurdles. The deal also includes an exploration joint venture whereby Newcrest can earn a 50% interest.
The deal does not move the dial significantly, in the broker’s opinion, and a Sell rating is maintained. Target is $13.90.
Target price is $13.90.Current Price is $21.85. Difference: ($7.95) – (brackets indicate current price is over target). If NCM meets the UBS target it will return approximately -57% (excluding dividends, fees and charges – negative figures indicate an expected loss).