Newcrest on Monday said the board and its financial and legal advisers were considering the indicative proposal from Newmont, which remained subject to conditions and approvals from shareholders and regulators.
Simon Mawhinney, chief investment officer at institutional investor Allan Gray Australia, which owns about 8 per cent of Newcrest shares, said it was not clear to him yet whether signing a deal with Newmont would be the best option for the company.
“We believe a combination of Newmont and Newcrest presents a powerful value proposition to our respective shareholders, workforce and the communities in which we operate.”
Newmont president Tom Palmer
“Newcrest could quite happily mine the reserves that it has, generate the free cash flow we expect it to and distribute it to shareholders,” he said. “Just because there is a deal out there, it doesn’t mean a deal needs to be done.”
Mawhinney said a “litmus test” for a good takeover deal was one in which the buyer and seller “both felt aggrieved” – the seller feeling it is being sold too cheaply, and the buying believing it is paying too much.
“In this deal, I don’t think we are there yet,” he said.
Analysts said Newmont’s approach would put pressure on the board to consider “all options” to encourage the market to ascribe greater value to Newcrest.
“In our view, options worthy of consideration include asset sales followed by a buyback and/or a de-merger of Lihir,” Barrenjoey mining analyst Daniel Morgan said.
Gold is widely seen as a “safe haven” commodity where investors often store wealth during times of political and economic uncertainty.
The price of gold set a new peak in 2020, hitting $US2075 an ounce, as investors rushed to the metal to hedge against the volatility of the coronavirus pandemic and fears of inflation caused by world governments unleashing trillions of dollars of stimulus.
While the gold price began to ease as economies gradually recovered from the depths of COVID-19, prices have rebounded and are now closing in on $US1900 an ounce again amid deepening concerns about soaring consumer prices and the economic volatility unleashed by the Russia-Ukraine crisis.
Betashares, which provides exposure to gold producers through its $61 million Global Gold Miners exchange-traded fund, said gold miners were increasingly seeking out assets in stable jurisdictions with lower sovereign risk, making countries like Australia and Canada “particularly attractive”.
“If Newmont’s bid for Newcrest proceeds, it would likely mark a significant shift in the Australian gold industry and will see many of our largest gold mines being held by overseas listed companies,” Betashares senior investment strategist Cameron Gleeson said.
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