Australia’s largest gold miner, Newcrest Mining [ASX:NCM] has announced its biggest annual dividend before it is likely to be acquired by US gold heavyweight Newmont for $26.2 billion.
Newcrest will pay a final full-franked dividend of 20 US cents per share, taking its total dividends for the FY23 to 55 US cents per share, up 16% from last year and its largest ever.
The dividend payout could be its last as an independent company and should be enough to sweeten shareholders into overlooking the year’s lacklustre performance.
Shares of the company were down by 0.71%, trading at $25.76 per share after the report — signalling many are set to hold for the shareholder vote set sometime between September and October this year for the proposed bid.
Newcrest has seen its share price rise by 33.29% this year on the back of the news of the proposed buyout by Newmont.
Source: TradingView
Newcrest’s earnings results
Gold giant Newcrest Mining reported a fall in annual profits this morning, hurt by lower prices of copper and increased operating and finance costs.
Newcrest produced 2.1 million ounces of gold in the year, up 8% from last year, and sold it at an average price of US$ 1,797 an ounce.
This gave the company a 5% boost in revenue to US$4.5 billion.
However, Newcrest posted a full-year statutory profit of US$778 million, down 10.8% from last year, as its all-in-sustaining costs (ASIC) rose 5% to US$1,093 an ounce.
Analysts, on average, estimated a profit of US$689.7 million for the company, but many considered that conservative and had hoped the higher production would have provided more.
Market analyst Farhan Badami said investors would have mixed feelings about Newcrest’s results. He said:
‘On the one hand, the company has paid a record dividend,
On the other hand, profit has declined and costs have risen. This is likely to be due to rising inflation, which has driven up depreciation expenses and operating costs.’
Newcrest interim chief executive Sherry Duhe said the company was proud of its financial performance in the year. She said:
‘We have made significant progress on our expansion projects at Cadia, Lihir and Red Chris,
‘We are also incredibly proud of the successful business our people have created.’
Newcrest’s annual dividends will total a record 55 US cents per share.
Newcrest also expects to pay a franked special pre-completion dividend of US$1.10 per Newcrest share if shareholders support the takeover bid.
The acquisition of Newcrest by Newmont is still subject to shareholder approval, but if it goes through, it will create the world’s largest gold miner that will trade on the ASX via a secondary listing.
Outlook for Newcrest and the merger
The acquisition is a sign of the consolidation that is taking place in the global gold mining industry.
In most mining industries, the top 10 producers usually account for around 50% of global production — for gold, its top miners produce less than 30%.
As gold prices remain relatively high, miners are looking to expand their operations and reduce costs.
The combination of Newcrest and Newmont will create the world’s biggest gold miner with a significant portfolio of assets and a robust financial position.
The two mega miners hold substantial holdings in Canada’s ‘golden triangle’, several WA projects, and other international projects.
Source: The Deep Dive
These two companies have a combined 161 million ounces of gold in reserves, and Newmont claims the merger is expected to generate $2 billion through portfolio optimisation.
With the board’s approval, the acquisition is expected to be completed in the first half of 2024, provided shareholders accept the deal in a vote expected to occur later this year.
It seems likely that the deal will be accepted. However, it still has regulatory hurdles to jump.
The merger will give the company a wider geographic reach to mitigate risks in production and consolidate operations to reduce costs, especially in Canada, where the two share closer operations.
Overall, things look pretty golden for the future.
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