Newmont-Newcrest: Gold Standard

The Newmont Corporation struck gold down under in 2023 with the acquisition of longtime target Newcrest, Australia’s largest gold mining company.  

Newcrest was the world’s eighth largest gold producer in 2022 (and the largest in Australia) with 2,163 koz of gold in 2022, up 15% compared to 2021. According to the buyer, the combined operation will produce eight million ounces of gold per year and generate annual pre-tax synergies of $500 million within the first 24 months. With the Newcrest acquisition, Newmont added 6,000 new staff, taking its total workforce across the globe to 21,000.  

Founded in New York in 1921, Newmont is a major producer of gold, copper, zinc, lead and silver, with mining interests in Africa, Australia, Latin America, the Caribbean, North America, and Papua New Guinea.

Newmont had been vying with Canadian rival Barrick Gold Corporation for the title of the world’s biggest gold producer in recent years, and the Newcrest deal sees it take the crown. The newly merged outfit also has significant capacity to produce copper, a commodity vital to the electric vehicle industry, and for which demand is expected to increase in the coming years.

The price of gold has remained high post-pandemic

According to Newmont, the combined group will have a portfolio comprising more than half of the world’s “tier-one” gold mines. Melbourne-based Newcrest owns gold and copper mines in Australia, Canada and Papua New Guinea and holds equity interests in gold assets in Ecuador.

Solid gold
Gold has long been viewed as the most bankable of assets, one investors habitually turn to in times of economic and political strife. On January 7th 2020, just prior to the onset the coronavirus pandemic, the price of gold stood at $1,567 per ounce. Seven months later it had crossed the $2,000 per ounce threshold. The price of gold has remained high post-pandemic. It hasn’t dipped below $1,800 in 2023, and hit a peak of $2,066 per ounce on December 4th. 

In an interview with Bloomberg on November 7th, Tom Palmer, the Australian-born president of Newmont, said that thanks to the Newcrest acquisition, “we now have half of the world’s top-tier goldmines in our portfolio. The combination of our operating portfolio and our project pipeline means that Newmont can produce and grow gold and copper for decades to come,” adding that given sustained high prices and declining interests rates, the outlook for gold was very positive.

Palmer also spared a word for the added copper-producing capacity the acquisition of Newcrest had given Newmont. “Copper is an essential metal for the energy transition. There is going to be a demand/supply shortfall and we very much look forward to enjoying the benefits of the inevitable run up in copper prices as we move through the latter part of this decade and into the next.”

The deal comes at a time when the gold mining industry is coming under increased scrutiny for the environmental impact of its activities and is facing pressure to ensure more environmentally sound production methods are employed. Last summer, in response to the threat of its mining licence being revoked, Newcrest was forced to slash production at its Cadia mine in New South Wales after the local environmental protection agency found it was not complying with clean air standards.