Newcrest is raising $1-1.1bn in equity with the placement issue price at a -7.0% discount to the last traded price. Proceeds of $704m will be used to acquire the gold streaming and financing of Fruta del Norte, the Ecuadorian gold mine in which the company has 32% equity share.
The remainder of the proceeds will be used for corporate business. Credit Suisse questions the strategic rationale in raising dilutive capital to fund the non-core gold financing/streaming arrangement. Nevertheless, from a pure financial standpoint acknowledges it makes sense.
Credit Suisse retains a Neutral rating and raises the target to $26.25 from $25.25.
Target price is $26.25.Current Price is $27.54. Difference: ($1.29) – (brackets indicate current price is over target). If NCM meets the Credit Suisse target it will return approximately -5% (excluding dividends, fees and charges – negative figures indicate an expected loss).