The world’s leading gold mining company Newmont is set to acquire Australia’s Newcrest Mining for $17.5 billion—marking Newmont’s largest-ever merger and acquisitions deal in the industry.
Key Details
- Newmont is predominantly a gold-mining company, but Newcrest has a significant investment in copper mining. Copper is often found near large gold deposits.
- While both companies invest in copper and gold mining, Newmont’s interest in acquiring a copper-mining operation shows how Newmont is looking to diversify its investment as the gold industry struggles to find new deposits, The Wall Street Journal reports.
- Newcrest’s copper deposits also represent a profitable investment as the electric vehicle (EV) industry requires large amounts of copper.
- On a global scale, the mining industry is experiencing a wave of M&A activity, especially compared to other markets that are relatively quiet.
Why it’s news
Mining industry leaders often seek new mines to replace aging operations, but some of the world’s largest corporations are joining the race for new acquisitions as new legislation and regulations give the EV industry a boost.
At more than $2,000 an ounce, gold prices are near a record high despite central bank moves to bring them back to historic levels. Commodity prices have remained high since Russia invaded Ukraine, leaving mining companies with more cash to make acquisitions, The Wall Street Journal reports.
Many of these companies are looking to increase their investments in copper, which is expected to become more valuable as the world moves to renewable energy options. EVs and wind farms require more copper than traditional vehicles or coal-fired power stations.
Newmont CEO Tom Palmer indicated that Newcrest’s copper investments were one of the main reasons his company looked to make the acquisition. Newcrest also owns sizable investments in other resources that can sustain mining operations for many years, several of which are in low-risk areas such as Canada and Australia.
“We will still be clearly known as a gold-mining company,” Palmer says. “But we’ll have a good exposure to copper and a growing exposure to copper, and certainly that rationale is landing with everyone that we engage with.”
As the industry demand for copper grows, some experts expect the mining industry will struggle to adjust to companies’ needs. Unlike other materials such as nickel and cobalt, finding a replacement for copper is difficult, The Wall Street Journal reports.
Paris climate targets will require more than $23 billion in spending on copper over the next 30 years, according to UK consulting firm Wood Mackenzie. Copper prices could jump as demand outpaces supply.
