Newmont CEO expects acquisition of Newcrest to deliver $500 million in annual synergies
Speaking at the 2023 Gold Forum America conference, Newmont president and CEO Tom Palmer said the acquisition of Newcrest Mining will help Newmont retain its leadership position into the future through the delivery of an estimated $500 million of annual synergies with a target of $2 billion in cash from portfolio optimization.
Palmer, just the 10th CEO in the Newmont’s 102-year history, spoke about lessons learned from previous acquisitions, notably, Newmont’s acquisition of Goldcorp four years earlier.
“When we acquired Goldcorp just over four years ago, we committed to delivering annual synergies of $165 million dollars through our Full Potential program,” Palmer said. “At Peñasquito in Mexico, we have blown that target out of the water … delivering more than $700 million dollars in annual synergies, with over 80 percent of this value coming from mining and processing improvements.”
Newmont has received a number of needed permissions from regulators including those in Australia and Japan and that it plans to close on the $19.2 billion purchase of Newcrest soon.
“Our decision to approach Newcrest earlier this year, with the idea of a potential combination, was grounded in these three key elements of our strategy,” Palmer said. “First, it presented an opportunity to assemble the best possible collection of Tier 1 gold and copper assets in the industry… under one umbrella, benefiting from Newmont's existing portfolio, operating model, sustainability practices, and disciplined capital allocation process. Second, the addition of the Newcrest assets to the Newmont portfolio allows us to consolidate in two world-class gold and copper mining districts – Australia and Canada… unlocking compelling strategic, operational and sustainability driven synergies, that are unique to this transaction. And finally, the combination complements Newmont's existing copper production and project pipeline with world-class growth optionality.”
Palmer said that upon completion, the acquisition will create the industry’s strongest portfolio of world-class assets with 10 Tier 1 operations and a Tier 1 district in the highly prospective golden triangle in British Columbia.
“On top of the $100 million dollars we expect to realize from the general and administrative synergies of this combination, we estimate approximately $200 million dollars in value from supply chain optimization.
This will come from applying best in class pricing and our existing strong relationships with key suppliers, smelters and equipment manufacturers to realize the benefits from our increased economies of scale.
We also expect to realize at least $200 million dollars through the disciplined application of our Full Potential program,” said Palmer.
Palmer said the biggest value drivers are expected to come from Newcrest’s two Tier 1 operations, Cadia and Lihir.
“At Cadia, we see the potential to increase average mill throughput from 33 Mt to 35 Mt (36 million to 38.5 million st) by optimizing maintenance schedules and working to debottleneck the processing circuit,” said Palmer. “At Lihir, we see the opportunity to take what is currently a short-term mine design and bring forward a more comprehensive and long-term mine plan to improve productivity. Through this approach, Lihir would be able to improve mining rates and reduce the time spent rehandling material … ultimately leading to higher production and lower costs.”
Photo: Newcrest’s Cadia Mine.