Thursday, March 23, 2023
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Newcrest board knocks back bid, pays sweetener

Newcrest (ASX:NCM) might have rejected the all-paper takeover approach from Newmont yesterday, but it also failed to maintain dividend payout to its shareholders for the December half year, despite revealing a special one-off payment.

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Newcrest’s rejection of the approach issued with its December half year report also left the door open to see if the world’s biggest gold miner will sweeten its offer of 0.380% of one of its shares, for every Newcrest share.

Newcrest confirmed that it had agreed to open its books for Newmont to conduct due diligence and make a higher offer.

Newcrest said the board had considered the indicative offer but had unanimously determined to reject it as it “does not represent sufficient value for Newcrest shareholders”.

“In order to determine if Newmont can provide an improved proposal for consideration by the board that appropriately reflects the value of Newcrest, the board has indicated to Newmont that it is prepared to provide access to limited, non-public information on a non-exclusive basis,” it said.

The board said it considers “Newcrest to be uniquely positioned with a portfolio of long-life Tier 1 gold and copper assets, with increasing copper exposure and a high-quality development pipeline”.

And while it is happy to consider an improved proposal from Newmont Newcrest stressed there’s no certainty one will be forthcoming.

Newmont’s all paper offer was a 22% premium to Newcrest’s pre-announcement price and valued the company at nearly $US17 billion ($24.4 billion).

Newcrest shares fell more than 1.7% to $23.90 on Thursday – not because of the rejection, the lower dividend or weakish profit for the six months, but because of a sharp fall in world gold prices on Wednesday.

Newcrest will pay an interim dividend of 15 US cents per share and a special 20 US cents per share to shareholders, but that will still fall short of the 40 cents per share paid a year ago for the December, 2021 half.

The 20 US cents per share special payout will use the $US173 million prepayment from Lundin Gold covering a mine financing deal in South America.

Revenue jumped 24% to $US2.12 billion for the half year with a 25% lift in gold production to 1.04 million ounces, thanks mostly to the first output from the Brucejack mine in Canada while copper production jumped 32% to 67,023 tonnes.

Statutory and underlying profit were $US293 million, down 2% from a year ago but the company’s key cost measure, its All-In Sustaining Cost (AISC) of $US1,089 per ounce (down 8% from a year earlier), delivered an AISC margin of $US585/oz (up 17% from a year earlier).

EBITDA jumped 24% to $US919 million for the December half year from $US740 milion

Acting CEO Sherry Duhe said in Thursday’s announcement:

“We made significant progress on the execution of our growth strategy during the first half. We were very pleased to progress the Cadia PC1-2 and Lihir Phase 14A studies to execution, as well as completing the two-stage plant expansion at Cadia and further extending the mine life at Telfer.

“Our global gold and copper portfolio is well placed for the future, with our transformation program delivering excellent progress at Brucejack, activities underway to maximise the value of our Red Chris and Havieron projects, and ongoing exploration success highlighting the potential for significant resource growth across our key target areas.”

“We expect production to improve further in the second half of FY23 and remain on track to meet our Group guidance for FY23,” she said.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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