Newcrest (ASX:NCM) share price dips despite acquisition approval

Newcrest passed a major hurdle in its quest to acquire Pretium Resources.

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Key Points

  • Pretium shareholders vote in favour of the Newcrest acquisition
  • Approval still needed from Supreme Court and Investment Canada Act
  • If green-lit, the acquisition bolsters Newcrest’s gold mine portfolio

The Newcrest Mining Ltd (ASX: NCM) share price is backtracking on Friday.

This comes regardless of the company receiving approval for the purchase of the infamous Brucejack mine.

At the time of writing, the gold miner’s shares are swapping hands for $25.29 apiece, down 1.02%.

Newcrest set to increase gold mine portfolio

In today’s release, Newcrest advised it’s set to acquire the remaining stake in Canadian metals and mining company, Pretium Resources.

The Australian gold miner currently holds a 4.8% stake in its Canadian counterpart.

In the meeting held today, Pretium Resources shareholders and option holders voted overwhelmingly in favour of the transaction. In total, 95.48% of the votes cast approved the special resolution.

Under the agreement, Pretium shareholders electing to receive maximum cash consideration will receive approximately C$10.81 (A$12.00) in cash and 0.3357 Newcrest shares per Pretium share.

Pretium shareholders who elected to receive the maximum share consideration will be allocated 0.8084 Newcrest shares per Pretium share.

Pretium shareholders that did not elect cash or Newcrest shares will receive the default consideration of 50% cash and 50% Newcrest shares. This will be C$9.25 (A$10.26) in cash and 0.4042 Newcrest shares per Pretium share.

It is worth noting that the transaction will need to be authorised by the Supreme Court of British Columbia. A hearing is scheduled for next week on 25 January.

In addition, a clearance is needed from the Investment Canada Act which is expected to occur in the March quarter.

Newcrest managing director and CEO, Sandeep Biswas commented:

It’s pleasing to see the overwhelmingly positive support for the Transaction from Pretium shareholders. This acquisition positions Newcrest as the leading gold miner in British Columbia’s Golden Triangle, operating both the Brucejack and Red Chris mines.

This is an exciting time for Newcrest and we look forward to building on Pretium’s success to unlock further value in and around the Brucejack operation.

Quick take on Pretium

Pretium is the owner of the Brucejack gold mine which is one of the highest-grade operating gold mines in the world. It has an estimated gold production of 311koz (thousand ounces) per annum at an all-in sustaining cost (AISC) of $743 per ounce. The projected mine life is around 13 years.

Furthermore, Brucejack is conveniently located about 140 kilometres from Newcrest’s majority-owned and operated Red Chris mine. This allows the company to strengthen the region by having close access to critical infrastructure.

Newcrest share price summary

Over the past 12 months, the Newcrest share price has been on a rollercoaster ride, posting a loss of 7%. Year-to-date, however, its shares are up around 3% for investors.

The company holds the title of owning and operating some of Australia’s largest gold and copper mines. While the company appears solid on paper, its shares have not been immune to weakened market conditions.

Based on today’s price, Newcrest commands a market capitalisation of roughly $20.68 billion, with approximately 817.96 million shares outstanding.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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