Newcrest, Australia's last big gold gun a takeover target?
The rumour machine cranked up in the holiday lull today to claim that Newcrest, the only surviving Australian-controlled gold producer of size, was in the gunsights of one or all of the three big international producers already operating in the country.Author: Ross Louthean (Mineweb)
Posted: Wednesday , 02 Jan 2008
Australian listed gold companies generally appreciated today on thin post New Years Day share trading and a buoyant start to the gold price. Newcrest Mining (ASX: NCM) was no exception starting the day at $A33.10/share ($US29.13) and, after a significant rise, finished at an easing $A33.80 ($US28,74) - with added rocket fuel from speculation about it being a takeover target.
Takeover talk is not new but it had some unlikely armour plate when the international gold miners were picking up big miners like Normandy Mining (Newmont Mining Corp) Acacia Resources (AngloGold Ashanti), and Plutonic Resources (Homestake then taken over by Barrick Gold, which also picked up big Australian-Canadian miner Placer Dome.
That armour plate at the time of these takeovers was a toxic hedge book for more than a decade, which Newcrest has now disposed of after a massive capital raising last year that allowed it to close out 2.3 million ounces of hedging and gold loan contracts, as well as $A-denominated gold bullion sales for 507,000 oz at an average $A824/oz ($US725.12/oz). Remaining hedge positions of 1.15 M oz will be closed over this year.
Newcrest was seen as the survivor of the great Australian gold industry takeover by internationals because they saw Australian assets as undervalued, largely because of the lower price/earning ratios on the Australian, as compared to the North American and London bourses.
If Newcrest does fall in 2008, as the News Ltd daily The Australian suggested today was possible, then that would leave Australian owned gold production in the 15% range, taking into account some other Australian listed companies moving into production this year.
The Australian named as potential predators Barrick Gold, Newmont and AngloGold Ashanti.
Newcrest also listed in New York as American Depository Receipts (NCMGY), currently has a market capitalisation of over $A14 billion ($US12.32 B), has six operating mines that are either long life, low to medium cost producers or high grade operations where relatively short lives have already been extended.
Gold reserves total 33.2 M oz while copper reserves at the Cadia gold, New South Wales operations and Telfer gold operations in Western Australia's Pilbara hinterland total about 2.7 Mt contained.
Production in 2006/-07 was 1.62 M oz gold and 88.9 kt of copper and the forecast output for 2007/08 has been put at between 1.81-1.89 M oz gold and 86.6-90 kt of copper.
The company mines gold and gold-copper in Australia and gold in Indonesia and had an aggressive exploration budget of $A85 M ($US74.8 M), exploring on 25 Australian properties, eight in the American State of Nevada, four in Peru, and one in each of Chile and Indonesia.
Big mine developments or expansions were the Ridgeway Deeps development in the Cadia Valley, advancing a pre-feasibility on the next big Cadia open cut, the Cadia East project, and a pre-feasibility on the new 82.5% owned Kencana K2 epithermal gold project on Gosowong in the Indonesian Halmahera island group.