Newcrest will acquire a 70% stake in the copper-gold mine, Red Chris, Canada, for US$806.5m. Morgan Stanley considers this a natural fit, as few operators globally have block caving experience.
Newcrest’s expertise means there was likely to have been less competition for the transaction. The company’s coarse ore processing technology could also help improve recoveries. Mine life is likely to be more than 25 years.
The potential to unlock value from the asset could be sizeable, in Morgan Stanley’s opinion. Equal-weight rating. Target is $23. Industry view is Attractive.
Target price is $23.00.Current Price is $25.07. Difference: ($2.07) – (brackets indicate current price is over target). If NCM meets the Morgan Stanley target it will return approximately -9% (excluding dividends, fees and charges – negative figures indicate an expected loss).