Due diligence in full swing, says Newmont

NEWMONT Corporation CEO Tom Palmer says the company is working “diligently” through the due diligence process on Newcrest Mining and will make a judgement on whether to proceed at the end of the four-week period.
Due diligence in full swing, says Newmont Due diligence in full swing, says Newmont Due diligence in full swing, says Newmont Due diligence in full swing, says Newmont Due diligence in full swing, says Newmont

Tom Palmer

Staff Reporters

Following two rejections from Newcrest, Newmont returned earlier this month with a "best and final" takeover proposal which values Newcrest at A$29.4 billion, a 46% premium to its share price prior to the initial proposal in February.
Newcrest has granted Newmont access to exclusive due diligence until May 11.
Speaking on a conference call, Palmer said Newmont's operating and technical teams were its greatest strength and the company was "applying the full force of the Newmont organisation on this due diligence exercise".
He confirmed site visits were part of Newmont's due diligence on Newcrest.
Newmont's "best and final" proposal followed a face-to-face meeting with Newcrest management.
If successful, Palmer said it would be a "transformational transaction" for Newmont.
"We think Newcrest-Newmont proposal is likely to proceed, completion may take some time (six to eight months) due the size of Newcrest's portfolio stretching across multiple jurisdictions," Morgans analyst Sharad Bhat said.
Palmer said the deal would require approvals from Australia, Canada, the US and Papua New Guinea but it could be completed before mid-2024, which was the timeline one analyst suggested.
He said the key strengths of the deal is that Newmont already had a strong operating model and infrastructure in Australia and Canada.
Palmer noted Australian vice president Mia Gous currently only oversaw two operations (Boddington and Tanami) but the company had owned other operations in Australia in the past and its Australian division was scalable.
Palmer said he couldn't discuss potential divestments of Newcrest assets.
"But we certainly look back at our playbook and our experience with Goldcorp, where we divested KCGM, Red Lake, Continental Gold within the first 12 months [for] $1.5 billion in proceeds," he said.
"So as we work through our due diligence on this live transaction, and we think about portfolio rationalisation value over volume and synergies, we've got four years of experience and muscle memory capability within our team that we draw upon."
Q1 earnings
Newmont has reported net earnings of US$363 million for the March quarter on revenues of $2.7 billion, a 23% fall year-on-year.
The timing of concentrate sales at the Peñasquito mine in Mexico impacted sales.
The company produced 1.27Moz of gold and 288,000oz of co-product gold equivalent from copper, silver, lead and zinc. Gold production was 22% quarer-on-quarter and 25% down YoY.
All-in sustaining costs jumped 13% QoQ and 19% YoY to $1376/oz due to lower production volumes and continued cost pressures. Newmont said it expected costs to decrease throughout the year.
"Since transforming Newmont's business four years ago, we continue to lead the gold sector in sustainability, profitable gold production and shareholder returns due to the strength of our team and the quality of our world-class portfolio," Newmont chief executive Tom Palmer said.
Newmont said it is on track to achieve full-year guidance of 5.7 and 6.3Moz of attributable gold production with AISC of $1150-1250/oz.
Newmont ended the quarter with $2.7 billion in cash, $797 million in time deposits and $5.6 billion in debt. The company announced a 40c per share dividend for the quarter.
The company continues to advance capital projects with some $600 million invested in the quarter, including at the Tanami Expansion, Ahafo North, Pamour and Cerro Negro expansion.
The $1.2-1.3 billion Tanami Expansion in Australia aims to extend the mine life beyond 2040 through the addition of a 1460m hoisting shaft and supporting infrastructure to process 3.3Mtpa. The expansion is expected to increase average annual gold production by 150,000oz to 200,000ozpa for the first five years and reduce operating costs by 10%, with commercial production expected in the second half of 2025.
The $950 million-$1.1 billion Ahafo North project in Ghana is expected to add 275,000 and 325,000ozpa for at least 13 years.
The Pamour project in Ontario, Canada, aims to extend Porcupine's life and maintain production beyond 2024, with an investment decision expected later this year.
The $350-450 million Cerro Negro expansion in Argentina includes the simultaneous development of the Marianas and Eastern districts to extend the mine life beyond 2030. The project is expected to improve production to above 350,000ozzpa from 2024.