One of Australia’s largest miners is buying a majority interest in a B.C. mine from Imperial Metals Corp. for US$806-million, providing a cash injection for the struggling Vancouver company that is backed by billionaire executive Murray Edwards.
Melbourne-based Newcrest Mining Corp. struck a deal on the weekend for 70 per cent of Imperial’s Red Chris property, a mine that opened three years ago and last year produced 12,000 ounces of gold.
Imperial’s board has been conducting in a strategic review of the business as it tries to get out of financial trouble. In 2014, a catastrophic tailings dam failure forced Imperial to suspend operations at its Mount Polley copper-gold mine in British Columbia for almost a year. Imperial has also dealt with operating problems at Red Chris since it started production in 2015.
The company has one of the lowest credit ratings given by Moody’s Investors Service, and last week announced it had received a temporary extension from creditors on three of its loans. For shareholders, it has been a painful ride: The shares traded for nearly $17 shortly before the Mount Polley disaster, but closed last week at $1.98 on the Toronto Stock Exchange. Mr. Edwards owns about 41 per cent of Imperial, according to Refinitiv data, and has been a large investor in the company since the 1990s.
Newcrest is the world’s third biggest gold company, after Barrick Gold Corp. and Newmont Mining Corp., with a market value of US$13.2-billion. Newcrest operates mines in Australia, Papua New Guinea and Indonesia. The company also holds a 27-per-cent stake in Vancouver-based Lundin Gold Inc., which is building a gold mine in Ecuador.
The Newcrest-Imperial transaction is the latest in a flurry of deal activity in the gold sector over the past six months, which was kicked off by Barrick’s US$6-billion acquisition of Randgold Resources Ltd last fall. Newmont in January announced its intentions to buy Goldcorp Inc. for US$10-billion. Then, Barrick tabled a hostile US$17.8-billion offer for Newmont in an attempt to thwart the Goldcorp deal.
Newcrest has been playing a behind-the-scenes role in the continuing tussle between Barrick and Newmont. A few weeks ago, The Globe and Mail reported that Newcrest was mulling whether to buy up to US$5-billion in assets that Barrick was planning on selling as part of its efforts to acquire Colorado-based Newmont.
In an interview on Sunday, Newcrest chief executive Sandeep Biswas confirmed the company is potentially interested in buying Newmont assets that may come up for sale. He said the Imperial deal, which will be paid for entirely in cash, will have no impact on its ability to buy more mines if it makes sense.
“I don’t know where that [Newmont] process will end up, but if there are any assets of interest that come up ... we’ll take a look,” he said.
“One of the benefits of having such a strong balance sheet as we do, is that this doesn't exclude us from doing anything in the future,“ he said. “If we see real value, then we will do it. “
The Globe also reported that last year Newcrest came close to buying Goldcorp Inc. in a zero premium acquisition. Mr. Biswas declined to comment on whether Newcrest would be interested in bidding once again for Goldcorp if it remains a standalone company.
Red Chris is an open-pit mine producing copper and gold, but Newcrest plans to use its technical skills to eventually build an underground operation. According to a July, 2017, disclosure, Red Chris holds 2.7 million ounces of gold in proven and probable reserves. The mine holds an additional 11.6 million ounces in the less-economically-certain measured and indicated category.
Niall McGee