More Gold M&A As Newcrest Seals Canadian Mine Deal

By Glenn Dyer | More Articles by Glenn Dyer

Gold miner Newcrest Mining says it will finance the $1.1 billion purchase of a major new investment in Canada from its own internal resources and banks – a move that should win it the thumbs up from shareholders wary about being asked to help finance big deals by mining companies.

At the same time, Newcrest’s major purchase would seem to rule it out of contention for any assets that the possible $US18 billion all paper merger between Newmont Mining and Barrick Gold might liberate in Australia.

Newcrest revealed yesterday that it had agreed to acquire a majority stake in copper and gold mine in Canada for $US806.5 million ($1.12 billion).

Newcrest said in a statement it would acquire a 70% joint-venture interest in, and operatorship of, the Red Chris mine and surrounding tenements in British Columbia from Toronto-listed Imperial Metals Corp.

Newcrest shares rose 3.8% to $25.43 yesterday.

Red Chris is an operating open-pit mine with mineral resources of 20 million ounces of gold and 13 billion pounds of copper. The property comprised 57,200 acres of land with 77 mineral tenures, Newcrest said.

Newcrest said it would fund the acquisition through a mix of cash and undrawn bank facilities. Newcrest said its cash and finance facilities totaled $3 billion at the end of December last year.

“The acquisition of Red Chris is a measured entry into North America and aligns with Newcrest’s stated strategic goals of building a global portfolio of Tier 1 orebodies, where Newcrest can deliver value through the application of its unique operating capabilities,” the company explained yesterday.

“Red Chris is a copper-gold porphyry mine, located in the prospective ‘Golden Triangle’ of British Columbia, Canada, with the potential to be a Tier 1 orebody through block caving (which Newcrest uses at its Cadia and Ridgeway gold and copper mines in central western NSW).

“The acquisition of Red Chris adds a producing, multi-decade orebody to Newcrest’s already strong asset portfolio, providing immediate asset, geographic and earnings diversification.

” Newcrest believes it will be able to unlock significant value from the deposit by applying its unique technical expertise in block caving, operations optimisation, and selective processing. Newcrest sees promising exploration opportunities on the acquired prospective land package,” the company said in yesterday’s statement.

Red Chris is located on the northern edge of the Skeena Mountains, about 1700 kilometres north of Vancouver — started commercial production in July 2015 and employs about 500 people.

In the first nine months of 2018, it produced 44.8 million pounds of copper and 29,569 ounces of gold at a cash cost of $US2.41 per pound of copper (which makes it a high-cost operation).

So it’s no wonder Newcrest is looking at using Cave mining technology to try and reduce that cost dramatically.

OZ Minerals plan for a cave mining operation at its Carrapateena project in South Australia is being investigated for the same reason – to reduce costs.

Newcrest is the second major Australian gold miner to buy an operating mine in North America in the past few months. Late last year Northern Star Resources paid nearly $A350 million to buy the Pogo mine in Alaska.

It is a producing mine and so far Northern Star reckons there will be room for a significant upgrade of its reserves when a new study concludes and the results published this August.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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