There’s A Major Mining Deal On The Table

There’s A Major Mining Deal On The Table
Daniel Johnston

7 months ago2 mins

What’s going on here?

Gold titan Newmont has struck a deal to acquire its rival Newcrest, signaling a major shakeup in the industry.

What does this mean?

It’s not exactly gold miners’ golden era right now: firms are grappling with stagnating production, thanks to hard-to-mine deposits and rising costs – and even titans like Newmont have felt the pinch. Those pressures saw the company make a bid for its Australian rival Newcrest back in February. And when that proposition fell on deaf ears, Newmont made a more enticing offer, capturing Newcrest’s attention with a deal worth nearly $20 billion – a 30% premium on Newcrest’s value before this all started. If the move gets regulators’ green light, it's set to become the biggest deal ever in the gold sector, meaning Newmont – already the world's biggest gold digger – will produce almost double the shiny stuff its closest rival can.

Newmont stock

Why should I care?

The bigger picture: Copper-bottomed deal.

Mind you, this isn’t just about gold. The deal also gives Newmont access to more copper, meaning the firm’s getting its hands on one of the key ingredients in the green energy transition. Rivals Rio Tinto and BHP have made similar moves lately – and this mega-deal could spur even more dealmaking in the mining sector. See, Newmont will need to get leaner and more efficient to make good on its $500 million annual synergy promise – and that could mean auctioning off mines that are too old or small to scale up.

Zooming out: Golden opportunity.

With all the recession fears and banking tremors, it’s no wonder that gold – a key safe-haven asset – is trading at near record highs right now. That luster’s only brightening these days too, thanks to worries about the US debt ceiling. And while the country’s unlikely to actually default on its loans, gold’s well positioned to benefit from the kerfuffle in the short term.

Gold prices near all-time highs


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