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Newcrest Mining flags openness to more asset acquisitions after Red Chris deal

Newcrest Mining Ltd. CEO Sandeep Biswas has flagged an openness to further acquisitions after being drawn to the upside opportunity of Imperial Metals Corp.'s Red Chris copper-gold mine in British Columbia of which it just acquired 70%, though the miner ideally would have liked to snare all of it.

Biswas said in response to a question from S&P Global Market Intelligence during a March 11 media call that Newcrest would have loved to acquire 100% of Red Chris, but only 70% of it was available.

He also said Newcrest had been eyeing the ore body for "several years," but when asked about any further merger and acquisition plans, Biswas said the miner still has a strong balance sheet even after the US$806.5 million Red Chris deal, having generated US$3.5 billion in free cash over the last four years.

"The capacity is certainly there, should the right opportunity come along, but we're not going to chase acquisitions just to increase ounces," he said.

While Newcrest is already well-known in North America with most of its shareholders based there, Biswas said Red Chris, its first operating asset in that time zone, would lift the company's profile there and broaden its investor base in the Americas.

He said the move also grows its exposure to the Americas which is a focus of its growth strategy, with many exploration projects there and having invested in the likes of SolGold PLC in Ecuador.

Biswas said the "scale of the opportunity" was the main driver for the deal, citing Red Chris' mineral endowment of up to 20 million ounces of gold and 13 billion pounds of copper which, "if you can get it economically, drives a multi-decade mine at low cost."

Unlocking value

Newcrest plans to add value to the operating mine through a two-stage process, starting by applying its performance improvement program which has improved operations across its portfolio over the last five years to the existing open pit and plant.

In this way, Newcrest believes it can accelerate cash maximization by, among other things, optimizing process plants via debottlenecking, boosting recovery rates and concentrate quality, and with process control.

The mine can also be optimized by improving the ore body knowledge, through its fleet management system, by mine planning and grade control, and by reducing costs through the supply chain.

Newcrest will immediately start extensional drilling during that first stage to define the ore body's upside, and Biswas said the company is also looking further afield across the lease to see what other porphyry deposits may be there.

The current open pit mine has an existing 11 million-tonne-per-annum processing plant and associated infrastructure which allows brownfield expansion options in the future.

Having demonstrated the recovery benefits of coarse ore flotation at Cadia East in New South Wales, Australia, Newcrest said it would now look to apply that technology to Red Chris.

Newcrest also said positive results from mass sensing and sorting trials underway at Telfer in Western Australia may make that technology attractive enough to be deployed at Red Chris.

The company believes the ore body can become a high-margin bulk underground block cave, and as part of the "second stage," it will start studying that option and review Red Chris' ore reserve to allow for JORC reporting.

Biswas said block caving is the most efficient way to access the high-grade ore earlier as the grade increases with depth. It also results in very low operating costs in terms of per tonne mined, he said, which is why Newcrest believes it has a competitive advantage to extract the asset's full potential.

Block caving involves undercutting the ore body to make it collapse under its own weight into a series of chambers from which the ore is extracted, in order to extend the life of large deposits previously mined by open pits.

Biswas said Newcrest is the only company among the major gold miners to apply block caving, having done it at Ridgeway in New South Wales and now Cadia East, the world's deepest and biggest block cave operation.

Chief Development Officer Michael Nossal also said on the news call that block caving should bring forward the operation's transition from open pit to underground, so the footprint will be less, which the First Nations people with which the company is engaging would view positively.