Gold shines, at least for Australian shareholders: The American gold miner Newmont Corp has significantly increased its offer for the takeover of its Australian counterpart Newcrest Mining to 16.9 billion dollars. Its stock price then jumped by a good 14 percent. Still, they underperformed the bid by almost 2 Australian dollars; Speculators are now hoping for a second improvement by the Americans. Analysts also supported Monday’s view that the final bid has not yet been reached given the quality of Newcrest’s deposits. They recommended a takeover price of AU$31 instead of the AU$27.16 now offered.
However, the Australians are currently on shaky ground: they have not had a regular CEO since the autumn of last year. Sandeep Biswas surprisingly left the company in December after a good economic period that raised questions about the working atmosphere. He was succeeded by Sherry Duhe, who was accepted as chief financial officer but has no experience in the gold sector. According to analysts on Monday, the potential vacuum at the top also tempted the Americans to attack.
Newmont is managed by Tom Palmer. His reputation is so high that in 2020 he was already listed as the successor to Jean-Sébastien Jacques at the head of the board of directors of arch giant Rio Tinto. The currently very different composition of the management levels probably also contributed to the development on the stock exchange: While the papers of the largest gold producer in the world, Newmont, made up 33 percent last year, those of the Australian Newcrest lost 12 percent of their value in the same period. This is another reason why the moment for the takeover must appear favorable to the Americans. In the next few days, the Australians will examine the offer. After all, it is 22 percent above the closing price of Newcrest shares in trading in Sydney last Friday. However, the owners won’t come to a reply before the Australians report their half-year results next week. Yamana Gold’s $4.6 billion takeover of America’s Pan American Silver and Agnico Eagle Mines is also a clue. The bid was 23 percent above the market value. Yamana’s Chairman of the Board, Peter Marrone, said several acquisitions are in the air in the industry.
The two companies that now have to negotiate are old friends: in 1966, Newcrest was initially the Australian subsidiary of the American company Newmont. The Australians then formed Australmin and later BHP Gold, a company regarded as one of the technology leaders in the gold industry. This is becoming more and more important, because lifting gold is also becoming more demanding and expensive. Permits to exploit new deposits are becoming increasingly difficult to obtain. But the Australians have permits in their home continent, Canada and Papua New Guinea. There are also smaller copper deposits in Australia and Canada. Last year, copper already accounted for a quarter of Newcrest’s sales, which is also of great interest to Newmont’s management.
However, the focus of both companies is gold. Its price has been rising again for many weeks. At the end of January, the spot price for a troy ounce was $1,927, the highest price in nine months. The opening of China after the corona epidemic has subsided gives further impetus to price fantasies. The attack on Ukraine and fears of recession are giving additional impetus. If inflation rises, additional investors could look to gold. All of these are reasons analysts say Palmer could make a second round of bids for Newcrest.