Newcrest Mining Ltd (ASX: NCM) shares have been on fire this week.
Since the start of the week, the gold miner's shares have risen a sizeable 13%.
This follows news that the company has received a non-binding takeover proposal from US gold giant Newmont.
As we covered here, Newmont tabled an all-scrip offer that valued Newcrest at $27.40 per share.
This offer was made following the swift rejection of a first proposal that equated to an offer of $26.15 per share.
As things stand, Newcrest has not accepted nor rejected the second offer. It advised that it is currently considering the indicative proposal along with its financial and legal advisers.
Newcrest shares are worth more
Analysts at Citi don't believe the Newcrest board should accept this offer. They are saying that Newcrest shares are worth more than what Newmont has offered.
This is due to its growth options, copper exposure, and deep mining expertise. The broker commented:
NCM has received a non-binding all-scrip offer from the largest gold producer by market cap and volume Newmont. The revised offer is a 21% premium to last close. We don't think the offer adequately values NCM's growth options (Red Chris, Wafi), copper exposure (+140ktpa Cu) and deep-mining (block caving) expertise – all three of which are differentiated vs peers. NCM trades on ~1.0x P/NAV vs NEM on ~1.3x P/NAV.
And while Citi is doubtful that a counteroffer from a rival will be made, it isn't ruling it out. Nor is it ruling out an improved $30 per share offer from Newmont. It explained:
Holders shouldn't rule out a possible counteroffer from Barrick but we view this as unlikely given stated aversion to merger premiums and challenges operating in PNG. We think either the offer gets bumped or NCM continues on its capex-intensive but rewarding growth path alone. Our TP lifts $4.70/sh to A$27.2/sh as we assign a 60% probability of a revised ~A$30/sh offer. We remain at Neutral but open a positive catalyst watch as we expect the stock could close the implied offer gap.
