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Newcrest raises major cash for financing buy

30th April 2020

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Gold miner Newcrest Mining is undertaking a fully underwritten institutional placement with the aim of raising A$1-billion, along with a share purchase plan (SPP) to raise a further A$100-million.

The funds will be used to purchase the Fruta del Norte financing facilities, for $450-million and to fund future growth options such as the construction of declines at Havieron and Red Chris.

The institutional placement will compromise some 39.1-million new fully paid ordinary shares, that will be issued at a price of A$25.60 a share. The placement shares represent approximately 5.1% of Newcrest’s existing issued capital. The shares will be placed under the company’s existing placement capacity and will not require shareholder approval.

The offer price represented a 7% discount to Newcrest’s last closing price, and an 8.9% discount to the five-day volume weighted average share price.

In addition to the institutional placement, Newcrest will also offer eligible shareholders the chance to subscribe for up to A$30 000 of new shares under an SPP, with the offer price being the lower of either A$25.60 a share or a 2% discount on the five-day volume weighted average share price of Newcrest shares up to the closing date of the SPP, which is expected on May 27

The SPP will open on May 7.

Newcrest on Thursday announced that it had signed an acquisition agreement with funds affiliated with Orion Resources Partners and Blackstone Tactical Opportunities and completed the acquisition of the gold prepay and stream facilities, and an offtake agreement in respect of Lundin Gold Inc’s Fruta del Norte mine, in Ecuador, for $460-million.

The gold prepay credit agreement is a non-revolving credit facility with a face value of $150-million to be repaid in cash, based on the value of 218 500 oz of gold. The repayment will be made through 19 quarterly cash payments of 11 500 oz of gold, based on the spot price of gold starting from December this year and concluding in June 2025.

The stream credit facility agreement is a non-revolving credit facility with a face value of $150-million that will be repaid in cash based on precious metal production at the Fruta del Norte mine.

The offtake agreement allows Newcrest to acquire 50% of the refined gold production from Fruta del Norte up to 2.5-million ounces, at spot prices determined with reference to a quotational period.

The book value of the facilities, at the end of December, was approximately $552-million, Newcrest told shareholders.

“The purchase of these gold prepay and stream facilities and the offtake agreement increases our direct exposure to the cash flow generated by the Tier 1 Fruta del Norte mine, in line with our stated growth strategy,” said Newcrest MD and CEO Sandeep Biswas.

“The acquisition is expected to be earnings accretive with the gold prepay and stream facilities expected to provide Newcrest with economic exposure to approximately 400 000 oz of gold from the mine between 2020 and 2026. With gold prices at the levels we see today, Newcrest expects to receive significant cash flows which will rank ahead of Lundin Gold’s equity holders.”

Newcrest currently holds a 31.85% interest in Lundin, which in February achieved commercial production at the Fruta del Norte mine.

Meanwhile, Newcrest on Thursday reported that gold production during the March quarter had reached 518 770 oz, down from the 551 115 oz produced in the previous quarter, but in line with guidance.

Copper production for the quarter was reported at 34 958 t, down slightly from the 37 695 t produced in the previous quarter, while all-in sustaining costs fell from A$864/oz to A$827/oz.

“With the support of our host communities and governments in the jurisdictions in which we operate, and the safe practices of our people, we have been able to continue production,” Biswas said.

“In line with advice and guidance from medical experts, governments and the local First Nation communities, we have been able to implement precautionary measures and changes to our fly-in, fly-out rosters to reduce the risk of spreading the virus.”

Biswas noted that Newcrest’s gold production in the quarter was in line with expectations and reflected the impacts of the planned shuts at Cadia and Telfer, and the divestment of Gosowong in March.

Both concentrators at Cadia were shut during the quarter for planned maintenance, while lower-grade ore feed to the mill also affected production. Telfer, production was down 6% on the previous quarter owing to a reduction in underground ore mill feed associated with the planned reduction of mining at the SLC and Western Flanks, along with higher sulphur content ore feed, which adversely impacted mill throughput and recovery.

The miner told shareholders that gold production in the June quarter would be higher than that achieved in the March quarter, owing to a lower level of planned shutdown events across the portfolio.

Edited by Creamer Media Reporter

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