Tom Palmer Interview9 Oct 2023 13:18
Speaking in Barcelona, where the mining industry has gathered for the annual Bank of America talk-fest, Palmer explains how Newmont’s intention was to find a dance partner that could make it better, not bigger.
Better operating mines. A better pipeline of projects. More assets located in the world’s best (and least risky) place. And better exposure to copper, the commodity that will underpin the energy transition.
“This is very much about value over volume,” Palmer says. “This is not about bigger for bigger’s sake.”
There were three key reasons Newcrest came to the very top of Newmont’s M&A hit-list.
First, owning large, long-life assets has always been vital for big miners, and Newmont is no different.
“We reckon we can run these tier one assets better than anyone else,” Palmer says, arguing Newcrest adds significant assets to Newmont’s portfolio.
In gold and most other commodities, mining is getting harder and more expensive. Exploration spending is depressed, getting approvals for new mines is increasingly difficult, and miners are being forced to go further underground and/or move more waste to get to the valuable stuff. More tier one assets should logically make for a more efficient and profitable miner.
But Palmer also says the mining industry’s net zero commitments also add to the value of long-life assets, given the long lead times to decarbonisation investments.
“That is going to be a driver of consolidation in the gold industry, more than any other commodity.”
The second reason for Palmer’s pursuit of Newcrest was the location of its assets.
In a world of rising geopolitical tensions, miners want those tier one assets in tier one jurisdictions. The Newcrest deal consolidates Newmont around two key gold regions – Australia and Canada’s golden triangle – that are relatively mining friendly.
The third key to this deal was exposure to copper, which is often found alongside gold but, thanks to demand from the energy transition, has shifted from being a byproduct to an increasingly valuable source of diversification.
Palmer emphasises that Newmont is and always will be a gold miner. But in Newcrest, which increased revenue from copper to about 25 per cent under former chief executive Sandeep Biswas, Palmer gets more copper at exactly the right time.
The combined business would be immediately supported by Newmont’s scalable, integrated operating model with a deep bench of experienced leaders.
Building on the experience gained following the acquisition of Goldcorp, Newmont has identified the opportunity for substantial synergies:
The veteran miner, who spent more than 19 years at Rio Tinto before joining Newmont, has few immediate concerns about integration.
It will take a little longer with the promised optimisation of the combined entity’s portfolio of operating assets and potential projects. Palmer has promised to generate $US2 billion in cash proceeds from this process, but he s
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