Newmont has come and gone after snatching Newcrest
(ASX:NCM), Genesis may have saved its Leonora marriage with struggling bride St Barbara and, while there are a few other smaller bids and deals, the outlook for gold mergers and acquisitions in Australia will be small beer from now on as life as a pure gold miner starts to look at bit passé in an increasingly renewable world.
While Australian business media and market analysts gushed over Newmont and its stalking of Newcrest, it wasn’t a gold play as some claimed, it was a gold and copper deal with the emphasis on the red metal as Newmont belatedly realised that gold no longer does it for a growing group of investors worried about the renewable future, how to get there and what will be needed.
Copper is the metal of choice, as well as nickel, oh, and lithium, rare earths, aluminium even, cobalt, 2E metals, manganese, tungsten, graphite, palladium and platinum. In other words, there are a lot of options and more of those are being found in Australia. Gold and silver are old hat.
Newmont’s takeover of Newcrest for its copper production and reserves (and yes, its gold) should have reinforced the increasing importance of renewable minerals and metals in a mining company’s portfolio.
Now the Australian mining sector is waiting to see what Newmont keeps and what it sells to raise cash (portfolio rationalisation). Newmont has already nominated Lihir and Cadia as being ‘core’.
That leaves Telfer and Havieron in Australia, the Goswing proposal in PNG, the Fruta del Norta income sharing deal in South America and the Red Chris and Brucejack mines in British Columbia – both of which could be easily sold to other Canadian companies.
Cadia in central western NSW is the prize with its big copper reserves and gives Newmont what it was looking for. Telfer and the nearby Havieron prospect in the eastern Pilbara of WA have copper as well as gold and you wonder if Newmont might change its mind.
Newcrest and its partner, UK-based Greatland Gold have spent hundreds of millions of dollars proving up what looks like a very large gold-copper (and deep) underground mine at Havieron.
Greatland Gold has 30% of Havieron and if that’s a normal JV, could have some sort of first right over Newcrest’s 70% stake.
Greatland revealed in early May that it is looking at a listing on the ASX, in addition to its base listing in London. That could give it access to capital and possible partners in a deal for both mines from a market where small and medium miners get more attention.
With Andrew Forrest’s Fortescue Metals Group finally talking about looking to buy renewable assets instead of looking fruitlessly in areas where others wouldn’t look, could Newmont find a willing big buyer for one of its non-core assets, so long as it is in WA?
Chalice also comes to mind, and so does Galileo Mining which is proving up a prospect at Norseman similar to Gonneville with high readings of palladium, platinum and gold (3E and associated values of copper and nickel).
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In compiling a list of possible candidates for mergers and acquisition activity after the Newmont-Newcrest dance, look at those companies with renewable metals in their resource base.
For that reason, Evolution’s $1 billion grab for all of Ernest Henry in North Queensland a couple of years ago has changed its profile, especially with more news of a potentially larger mineral resource at the mine – even though it will be deeper.
Its larger rival Northern Star is a pure gold play and that is going to be an increasingly hard play to sustain, even if global economic and financial conditions remain volatile for a while yet. The idea of gold as a safe haven is not something you can build a successful long-term company on these days.
And the all-paper offer from Newmont gives another clue – even though it is the biggest gold miner in the world, it doesn’t have the financial clout the big three have – BHP, Rio Tinto and Glencore (which doesn’t want to put up cash in its ham-fisted attempts to grab Canada’s Teck).
BHP paid $A9.6 billion for OZ Minerals and its gold, copper and now nickel in West Musgrave in eastern WA which is the largest nickel prospect in the country, followed (at this stage) by Chalice’s Gonneville in WA.
BHP also has Oak Dam in South Australia, a mini-me version of the huge Olympic Dam deposit which is now settling down for a long life after a big refit. (BHP also has a major copper prospect in Arizona).
BHP is already the world’s biggest copper miner and the OZ Minerals mines and West Musgrave mine in particular offer hundreds of thousands of extras tonnes down the track of the red metal and thousands of tonnes of nickel.
BHP talks about iron ore, copper, nickel and potash – gold doesn’t get a mention. it used to own Telfer through BHP Gold which became Newcrest.
Rio Tinto had the huge low grade Winu copper, gold and silver prospect in the Paterson region of the eastern Pilbara, near Telfer and the Havieron prospect of Newcrest (soon Newmont).
It also has a stake in Escondida in Chile (which is controlled by BHP) and major copper interests -mine and prospects in the US state of Arizona.
These global giants chase scale in their investments, not small to medium prospects with little chance of being expanded.
You can bet that if Newmont doesn’t find Telfer and Havieron ‘core’ than someone like Rio Tinto will be all over it – the prospect of having a major processing centre like Telfer would improve the economics of Winu.
So then, who could be on the takeover trail?
Silver Lake Resources, which tried to elbow Genesis aside and grab St Barbara’s Leonora gold assets, is an obvious predator, but its roughly $1 billion valuation limits its ambitions, as we saw with the attempt to get the St Barbara assets via a $658 million cash and share offer that looked like a big strain.
But could Silver Lake have another day – a shareholder in St Barbara wants the company to look seriously at Silver Lake’s offer. Li Capital, which owns 9% of St Barbara want St Barbara directors to reverse their decision to refuse to entertain Silver Lake’s offer for the Gwalia mine and other assets.
St Barbara directors have done so out of concern they would breach the “no talk” provisions of their agreement to sell the assets to Genesis Minerals for $631 million.
Gold Road, which has half the Gruyere mine in WA with Gold Fields, could be on the menu for its South African partner, especially with the near 20% stake in De Grey Mining and its high-grade Mallina/Hemi gold discoveries in the WA Pilbara.
In NSW, Evolution’s Cowal mine is in the same area of the copper gold province in the central west of the state as Cadia, but there’s also Alkane with its Tomingley gold mine but enormously prospective copper gold discoveries nearby called Boda, 1, 2, and 3 and kaiser, and Magmatic Resources, also nearby which looks like it’s in the early stage of a similar find.
Chalice Mining will be a gold producer, but more importantly also a producer of nickel platinum, copper, nickel, palladium and cobalt. It will eventually come into someone’s sights but there is up to four more years work to get a mine started on its rich Gonneville deposit.
Chalice has renewable materials that are the envy of global miners. All it is missing is lithium!
