Newcrest Joins M&A Gold Rush With $2.8 Billion Pretium Buy
Comment of the Day

November 10 2021

Commentary by Eoin Treacy

Newcrest Joins M&A Gold Rush With $2.8 Billion Pretium Buy

This article from Bloomberg may be of interest to subscribers. Here is a section:

Newcrest Mining Ltd. agreed to buy Pretium Resources Inc. in a cash and shares deal valuing the Canadian gold producer at about $2.8 billion, adding to a wave of consolidation in the sector.

Melbourne-based Newcrest will offer Pretium holders C$18.50 ($14.87) a share, a 23% premium to the target’s closing price Monday in Toronto. Pretium’s board has unanimously recommended the transaction, although it still requires the approval of two-thirds of the company’s shareholders.   

“Our strategy is to specialize in low-cost, long-life and large-scale gold mines, and this is certainly that,” Sandeep Biswas, Newcrest’s managing director and chief executive officer, said on a media call. Adding Pretium, which owns the Brucejack operation close to Newcrest’s Red Chris mine in British Columbia, would immediately add more than 300,000 ounces a year of gold output, the company said, taking annual production to more than 2 million ounces. 

Eoin Treacy's view

Exploration and development is risky, expensive and time consuming. M&A by contrast is quick, the reserves are relatively well understood but the upfront cost tends to be headline grabbing. That’s why timing of purchases is so important. Miners have a long dismal history of paying record prices at market peaks. At least on this occasion Newcrest is buying Pretium after a good-sized shakeout.

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