Australia's Newcrest buys Canadian mine for $807 million, open to more deals
(Reuters) - Australian gold miner Newcrest Mining Ltd has the capacity for more acquisitions, its chief executive said, after the company announced a deal to buy a copper and gold mine in Canada for $806.5 million.
Newcrest said on Monday it would buy a 70 percent joint-venture interest in, and operatorship of, the Red Chris mine and surrounding tenements in British Columbia from Toronto-listed Imperial Metals Corp.
“If you look at the balance sheet metrics we are still well within our financial metrics,” Newcrest chief executive Sandeep Biswas told Reuters. “If something were to come up that is of interest then we certainly don’t see ourselves as restricted.”
The Red Chris buy comes amid a shakeup in the gold industry after Barrick Gold Corp’s offer for Newmont Mining in an $18 billion deal that would make a global gold monolith and trigger a string of divestments. Newcrest has been touted as a potential buyer of Newmont’s Australian assets.
Newcrest said it would fund the Red Chris acquisition through a mix of cash and undrawn bank facilities.
“We think it’s a good move,” said analyst David Lennox of equity research firm Fat Prophets based in Sydney.
“You are looking at a very significant resource. From that perspective, they have not paid through the nose and the gold price is significantly lower than where it has been for the past few years.”
Imperial acquired the Red Chris project in 2007 and spent $662 million to build the mine, with first production in 2015.
The purchase would allow Newcrest to leverage its block cave mining expertise and offered plenty of exploration potential, Biswas said.
“The bulk of the resource is underground, and that’s where the grade increases at depth. So what we do with block caving is we go right down to the bottom and start mining from the bottom up. So that is one of the key reasons we think we can unlock this ore body and make it a tier one operating mine,” he said.
Red Chris is a copper and gold porphyry deposit with an operating open-pit mine and mineral resources of 20 million ounces of gold and 13 billion pounds of copper. The property comprises 23,142 hectares (57,200 acres) of land with 77 mineral tenures, Newcrest said.
“It’s also in Canada, it’s a great mining jurisdiction, low risk. There’s 23,000 hectares that come with this property, which is highly prospective,” Biswas said.
Last month, Biswas said Newcrest would pursue a potential acquisition only if it were the right value for investors, adding that he would prefer to buy assets rather than whole companies.
Reporting by Melanie Burton in Melbourne; additional reporting by Ambar Warrick in Bengaluru; Editing by Peter Cooney and Richard Pullin