(Bloomberg) -- Newcrest Mining Ltd., the third-biggest gold producer by market value, agreed a $806.5 million deal to control an Imperial Metals Corp. mine in Canada, extending the spree of deal-making in the sector.
Melbourne-based Newcrest, with assets in Australia, Indonesia and Papua New Guinea, will acquire a 70 percent joint-venture interest in the Red Chris copper and gold mine in British Columbia and become the operator of the site, the producer said Monday in a statement.
Newcrest’s move into Canada comes amid a bout of consolidation in the gold industry, as the largest producers seek to increase the quality of their portfolios, boost reserves of the precious metal or win operational savings.
Australia’s top gold producer remains in a strong position to complete further deals and will continue to review opportunities, Chief Executive Officer Sandeep Biswas said in a phone interview.
Red Chris, on the northern edge of the Skeena Mountains, about 1,700 kilometers (1,056 miles) north of Vancouver, gives Newcrest a producing asset in North America and has significant underground development opportunities.
“It’s a modest operating asset at the moment -- the real attraction for us is the size of orebody,” Biswas said in the interview. “It’s a multi-decade life potential mine, so that plays right into our portfolio of multi-decade operations. It’s got the potential of significant size.”
Newcrest shares rose as much as 2.7 percent to A$25.17 in Sydney and traded at A$25.15 as of 10:11 a.m. They’ve gained 15 percent this year.
A study of the Red Chris site last year suggested the use of block cave mining -- an underground technique -- would offer access to deep lying copper and gold mineralization. Newcrest uses the technique at its Cadia operation in Australia and is regarded as the industry’s specialist in the method.
“That’s where our wheelhouse is -- this is tailor-made for Newcrest,” Biswas said. “That’s why we think we can add a tremendous amount of value to this opportunity and turn it into a tier-one orebody.”
Red Chris has estimated resources of 20 million ounces of gold and 13 billion pounds of copper, according to Newcrest. The producer has previously set a deadline for the end of 2020 to increase its exposure from four to five so-called tier-one assets -- the industry’s highest quality mines.
Barrick Gold Corp. said last week that it plans to proceed with a formal takeover offer for Newmont Mining Corp., undeterred by a rebuff from its largest rival. In January, Newmont agreed to buy Goldcorp Inc. in an all-stock deal valued at $10 billion, while Barrick last year struck a $5.4 billion acquisition of Randgold Resources Ltd.
Newcrest would be open to examining the proposed sales of assets in Australia if Barrick is successful in its hostile approach to acquire Newmont, Biswas said.
In the past year, Newcrest has also held conversations about transactions with Barrick, Goldcorp and Nevsun Resources Ltd. before those miners opted for other deals, people familiar with the matter said last month.
Vancouver-based Imperial Metals last year began a restructuring process and appointed a special committee to explore options including a sale, a recapitalization and a joint venture arrangement.
The copper and gold miner is facing $325 million of bonds coming due this month and investors had been waiting to see if Fairholme Capital Management, the company’s biggest bondholder, and Canadian oil billionaire Murray Edwards, the largest shareholder, would step in to rescue the company, two people with knowledge of the matter said last month.
Imperial Metals in January forecast 2019 production at Red Chris of between 36,000 ounces and 38,000 ounces of gold and 72 million to 76 million pounds of copper.
Newcrest will fund the acquisition -- expected to close in the third quarter -- from cash and undrawn bank facilities, which amounted to more than $3 billion at the end of 2018, the producer said. The producer will also continue to review a potential listing in North America, Biswas said in the interview.
(Adds CEO interview in fourth paragraph.)
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