AFR Article28 May 2024 15:31
Courtesy of Paddygall
Mega mining M&A deals are never for the faint-hearted – remember that the next time BHP Group talks about its “disciplined approach” to a $74 billion bid for rival Anglo American.
Even the most strategic and logical mining M&A deals – the ones mooted for years with huge synergies and supportive shareholders – can hit hurdles. Just ask Newmont Corporation.
Newmont CEO Tom Palmer. David Rowe
Fresh from picking up Australia’s Newcrest Mining – a former spin-off – Newmont set out to quickly tidy up its new Australian portfolio and offload assets that were not tier one enough for what is now a $US50 billion ($75 billion) company.
One of the first assets up for grabs was supposed to be Telfer, a gold/copper mine, and its nearby Havieron development in Western Australia’s Pilbara region.
Newmont executives marketed it up and down Perth’s St George’s Terrace last spring, warming up mid-sized miners ahead of an auction.
Now, it should be a good time to sell a gold/copper project. Commodity prices for both are through the roof, miners have a spring in their step, and investors are interested. Even the Australian dollar is pretty enticing for any offshore miners thinking about a crack.
And, for Newmont, it’s a small bite.
But it hasn’t been easy going. Telfer’s new-but-not-for-long owner has been hit with two prohibition notices by WA’s WorkSafe in recent weeks because of a failing tailings dam. That’s bad news.
Newmont has had to suspend milling activities and promise to fix the tailings problem as soon as possible, which is likely to take months.
If there is one thing Telfer’s potential buyers don’t want, it is someone’s potentially expensive problem, such as Newmont has picked up from Newcrest.
So, Telfer’s sale has been parked until the problems are fixed and suitors were told to keep their powder dry until later this year. Analysts reckon it is worth about $1 billion.
While Newmont will be fine – Telfer’s a reasonably small headache in the scheme of things – it shows you never quite know what you’re buying in mining; problems just seem to pop up, even at a small asset slated for a quick flip. Due diligence does not reveal all the quirks, and things happen.
It comes as BHP’s Australian shareholders wait for the miner to confirm whether its “increased and final offer ratio” $74 billion bid has gained traction with Anglo American. BHP and Anglo are talking, and BHP needs Anglo’s help if those talks are to stretch beyond this week.
BHP’s third offer was considerably more than its first or second, but is not without risks. It involves a couple of spin-offs, regulatory approvals and a big scrip-based acquisition, and will make BHP more complex, and introduce a level of distraction the company has avoided for several years.
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