Photo: Lihir Gold Mine. Photo Credit: Newcrest Mining Limited Website
The recently announced acquisition deal between Newmont (NYSE: NEM, TSX NGT) and Newcrest Mining Limited (ASX, TSX, PNGX: NCM) on May 14, 2023, is set to have a significant impact on Papua New Guinea (PNG). The deal involves Newmont acquiring 100% of the issued shares in Newcrest by way of an Australian Scheme of Arrangement. Newcrest shareholders will receive 0.400 Newmont shares for each Newcrest share and a special dividend of up to $1.10 per share paid by Newcrest. This represents a 30.4% premium. The deal is worth A$ 28.8 billion creating the largest-ever gold M&A transaction and solidifying Newmont as the largest global gold producer. Newcrest initially rejected a A$19bn offer from Newmont in February 2023. What does this mean for Newcrest's assets in Papua New Guinea (PNG)?
Strengthening the Mining Sector: Newcrest's assets in PNG have a long-standing presence, with established mining operations and infrastructure in place. Their experience in operating in the country provides them with a deep understanding of the local business environment, regulatory frameworks, and cultural dynamics. This familiarity can be a significant advantage in ensuring smooth operations and stakeholder engagement. The acquisition of Newcrest by Newmont reinforces the position of both companies as leading gold producers and consolidates their presence in PNG. The combined portfolio of assets offers substantial opportunities for optimisation, paving the way for enhanced operational efficiency and increased production.
Lihir Gold Mine: Located on Lihir Island in the New Ireland Province, the Lihir Gold Mine is one of the largest gold mines in the world. It began production in 1997 and has since yielded significant gold reserves. The mine utilizes both open-pit and underground mining methods, and it has substantial processing facilities on-site, including a large-scale autoclave for processing refractory ore. Newcrest creates economic value for PNG and local communities including direct revenues from operations, investments in public infrastructure and services, support of local suppliers and a range of indirect economic benefits. It employs approximately 4,500 people of which around 90% are Papua New Guineans.
Wafi-Golpu Project: The Wafi-Golpu Project is a significant joint venture between Newcrest Mining (50%) and Harmony Gold (50%) in the highly prospective Morobe Province through the Wafi-Golpu Joint Venture (WGJV). It encompasses the exploration and development of a world-class gold-copper deposit. Deep drilling has identified a world-class copper-gold porphyry deposit at Wafi-Golpu (the Golpu deposit) suited to bulk underground mining techniques, similar to Newcrest’s Cadia operations in Australia.
Photo: The Wafi-Golpu Joint Venture (WGJV) hosts one of the highest-grade porphyry copper systems in Southeast Asia.
Economic Growth and Employment Opportunities: Through the acquisition, Newcrest can leverage its existing assets and expand its operations to tap into additional mineral deposits since it now has a bigger market capitalisation. This could lead to increased production, improved economies of scale, and a more diversified portfolio of mining projects thus bringing an economic boost for PNG. Optimised operations, coupled with the expansion of mining activities, can lead to increased job opportunities, both directly and indirectly. This infusion of employment opportunities has the potential to contribute to poverty reduction and overall economic growth in the country.
Synergies and Cost Efficiencies: The consolidation of operations between Newmont and Newcrest creates synergies and cost efficiencies. It is estimated that the deal could generate annual pre-tax synergies of $500 million within the first 24 months. These cost savings can be reinvested into further development, exploration, and sustainable mining practices, benefiting the companies and the local communities.
Sustainability and Environmental Practices: Both Newcrest’s and Newmont's track record as a leader in sustainability and responsible mining practices can bring positive changes to Newcrest's assets in PNG.
Social and Community Development: Both the companies’ expertise and experience in community engagement and social development initiatives will further the development of the community.
The acquisition of Newcrest by Newmont holds promising prospects for PNG's mining industry and economy. The deal's potential to drive economic growth, create employment opportunities, enhance sustainability practices, and optimise operations brings an economic boost to the country's mining sector. However, it is important for all parties involved to navigate the regulatory and stakeholder considerations diligently to ensure a successful and mutually beneficial outcome.
References:
Newcrest Mining Limited. (2023). Wafi-Golpu. Retrieved from https://www.newcrest.com/our-assets/wafi-golpu. Retrieved on 19 May 2023.
Newcrest Mining Limited. (2023). Lihir. Retrieved from https://www.newcrest.com/our-assets/lihir. Retrieved on 19 May 2023.
Newmont Corporation. (2023). Newmont Enters into Definitive Agreement to Acquire Newcrest. Retrieved from [https://www.newmont.com/investors/news-release/news-details/2023/Newmont-Enters-into-Definitive-Agreement-to-Acquire-Newcrest/default.aspx]. Retrieved on 19 May 2023.
