Newcrest Mining Ltd., the third-biggest gold producer by market value, agreed a US$806.5 million deal to add an Imperial Metals Corp. mine in Canada, extending the spree of deal-making in the sector.
Melbourne-based Newcrest, which is currently focused on mines in Australia, Indonesia and Papua New Guinea, will acquire a 70 per cent 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.
The mine, 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 development opportunities, the company said.
“We believe we can bring our unique technical capabilities to unlock the full value potential of this orebody in one of the premier gold districts in the world,” Newcrest’s Chief Executive Officer Sandeep Biswas said in the statement. “We have identified a clear pathway to potentially turn this orebody into a Tier 1 operation.”
A study of the 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.
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’s move 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.Barrick Gold Corp. (ABX.TO) 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 US$10 billion, while Barrick last year struck a US$5.4 billion acquisition of Randgold Resources Ltd.
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 US$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.
Newcrest will fund the acquisition from cash and undrawn bank facilities, which amounted to more then US$3 billion at the end of 2018, the producer said. The Red Chris deal is expected to close in the third quarter, Newcrest 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.
Biswas has 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. The producer is also scanning the market as is seeks to add between two and four so-called tier-two assets over the course of the next decade, Biswas said in a Bloomberg Television interview last month.
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