Does the Newcrest Newmont deal shine a new light on copper?

In acquiring Newcrest's shares, the US gold giant will also take over significant copper assets.

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Key points

  • Newcrest shares have significant exposure to copper
  • Copper demand is expected to grow as the world moves towards electrification
  • Newmont’s CEO is keen to increase the miner’s copper assets

Newcrest Mining Ltd (ASX: NCM) shares are in the spotlight this week amid the takeover deal with United States gold miner Newmont Corporation (NYSE: NEM).

Yesterday, Newmont's acquisition of all of Newcrest's shares in exchange for 0.4 Newmont shares took a huge step forward with the Newcrest board unanimously recommending shareholders vote in favour of the latest offer.

Under the deal, Newcrest will be allowed to pay a fully franked special dividend of up to US$1.10 per share. Along with the 0.4 Newmont shares, that represents an implied Newcrest share price of $29.27.

And that implies an enterprise value for the S&P/ASX 200 Index (ASX: XJO) gold stock of $28.8 billion.

As you'd expect, that saw an uptick in the miner's stock yesterday, with shares finishing the day 1.5% higher.

But there's more afoot here than gold.

Newmont is also keen on Newcrest's copper assets.

Why copper is important to Newmont

The copper price has come down from the all-time highs reached in early 2022. But the red metal is still trading for US$8,272 per tonne, well above its five-year average.

And copper demand is expected to grow over the decade ahead. Pliable, non-corrosive, and conductive, the metal is widely used in the construction industry. It's also playing a vital role in the global shift to electrification, from EVs to wind turbines and more.

And Newcrest shares have significant exposure to copper.

On announcing the pending deal with Newmont, Newcrest chair Peter Tomsett said, "The combined group will set a new benchmark in gold production while benefitting from a material and growing exposure to copper…"

Indeed, Newcrest has a number of significant copper assets, like its New South Wales Cadia mine and the Wafi-Golpu mine located in Papua New Guinea.

The copper exposure that comes with the Newcrest acquisition certainly hasn't been lost on Newmont CEO Tom Palmer.

"If we've got an opportunity to get further exposure to copper – we've got a pretty healthy portfolio of copper today in terms of projects and operating size – but a growing exposure for copper is important to us," Palmer said (courtesy of The Australian).

As for Newcrest shares, Palmer said:

One of the really exciting things about the new Newcrest pipeline is that it's got gold, a lot of gold, but a good exposure to copper in it as well – which is going to be, as we all know, a very, very important metal for the world going forward.

That's something that will be part of our considerations as we think about the organic project pipeline that this combined portfolio is going to have.

How have Newcrest shares been tracking?

Newcrest shares have strongly outperformed the benchmark in 2023.

The gold miner has gained 38% year to date, compared to a 5% gain posted by the ASX 200.

Motley Fool contributor Bernd Struben 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 Scott Phillips.

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