Newmont Corp. is offering US$17 billion to acquire Australia’s Newcrest Mining Ltd. and create a global precious metal behemoth as miners look to boost reserves.

The U.S. miner’s stock-only proposal would be the largest takeover deal globally so far this year. It follows a US$4.8-billion takeover of Yamana Gold Inc. by Pan American Silver Corp. and Agnico Eagle Mines Ltd. that’s expected to close by the end of March and comes as gold prices have experienced a sustained period of strength since 2020. Top mining executives have predicted more consolidation in the industry as producers struggle with declining output and higher input costs, and increasingly harder-to-mine deposits.

Newmont has been working on its pursuit of Newcrest for a few months before making initial bids and is seeking a friendly deal, said a person with knowledge of the transaction who didn’t want to be named because the details aren’t public.

Denver-based Newmont confirmed it made the offer in a statement late Sunday, saying the deal “presents a powerful value proposition” to both businesses. The company didn’t immediately comment on when it started working on the deal.

Newcrest shares closed up 9.3 per cent at A$24.53 in Sydney, while Newmont shares fell as much as 5.8 in New York.

While the bid for Newcrest could trigger rival producers to consider the merits of a counter move amid consolidation in the precious metal sector, the head of Barrick Gold Corp., the world’s No. 2 bullion producer, said he doesn’t plan to make a rival bid.

“There is a difference between value merger acquisitions and getting bigger for the sake of getting bigger,” Chief Executive Officer Mark Bristow said in a Monday interview.

Already the world’s biggest gold miners with a market value of nearly US$40 billion, Newmont made an earlier lower bid for Newcrest that its board rejected. The US miner is effectively offering to buy back its old spinoff, as Newcrest was originally set up as its Australian subsidiary in the 1960s.

In 1990, Newmont Australia Limited acquired Australmin Holdings Ltd, subsequently merged with BHP Gold Limited and changed its name to Newcrest Mining Limited. The takeover, if completed, would also be one of the biggest in Australian history, according to data compiled by Bloomberg.

“The strong Australian dollar, gold prices and declining global reserves suggest more acquisitions are likely, particularly for businesses like Newcrest, which has significant copper exposure,” Bloomberg Intelligence industry analyst Mohsen Crofts said in a note on Monday.

The deal would also increase Newmont’s footprint in copper, which is becoming more sought after due to its use in renewable energy and electric vehicles as economies de-carbonize.

Newcrest derives the majority of its revenue from gold, and the rest from silver and copper, with mines in Australia, Canada and Papua New Guinea. The company plans to ramp up the copper component to take advantage of the expected surge in demand, Sherry Duhe, acting chief executive officer, said in an interview in November.

GROWING APPRECIATION OF COPPER

Under the proposed deal, shareholders would receive 0.38 Newmont shares for each Newcrest share held, equivalent to A$27.16 a share or a 21 per cent premium to Friday’s close, the Melbourne-based miner said in a regulatory filing Monday. The board is considering the proposal, which is conditional on Newmont being granted exclusive due diligence, Newcrest said.

The approach comes in the middle of Newcrest’s search for a new chief executive officer following the resignation of Sandeep Biswas in December. Duhe, the former chief financial officer of oil and gas producer Woodside Energy Group Ltd., is acting CEO until a permanent replacement is found.

The Australian miner will be getting roughly a quarter of its revenue from copper over the next decade, and there’s a growing appreciation for long-term stable supply of the metal, RBC Capital Markets said in a note. Newcrest shareholders may see the offer as either opportunistic or an answer to management uncertainty, it said.

The Australian miner has engaged JP Morgan Chase & Co. and Gresham Advisory Partners Ltd. as its financial advisers and Herbert Smith Freehills as its legal adviser. 

Newmont said it was using BofA Securities, Centerview Partners LLC and Lazard Ltd. as financial advisers, and King & Wood Mallesons and White & Case LLP as legal advisers.