South African producer
The two companies locked horns in mid-November 2001, when Newmont proposed friendly mergers with Normandy and
AngloGold countered with legal challenges and a bidding war, but on Jan. 18, when its offer expired, the company had won just 7.1% of Normandy — well below the exemption level of Australian compulsory acquisition rules.
“We are clearly disappointed at not being able to do this transaction,” states Chairman Bobby Godsell in a prepared release. “We gave the bid our very best effort, [but] the competing bidder has seen more value in the Normandy assets than we were able to identify reliably.”
AngloGold has since sold the block of shares for A$310 million, or A$262 million more than what it paid, excluding the exchangeable shares. Funds are earmarked for debt repayment.
Triumphantly, the all-but-assured victors are accelerating the integration of their management teams in anticipation of the mergers. Wayne Murdy, currently Newmont’s president, is to assume dual roles as chairman and chief executive officer of the new company, while Pierre Lassonde takes the helm as president.
The board of directors will comprise 17 members, including Lassonde, Seymour Schulich (Franco-Nevada’s current chairman) and Robert Champion de Crespigny (Normandy’s current chairman).
Newmont is offering A50 and 0.0385 of a share for every Normandy share and 0.8 of a share per Franco-Nevada share. The latter offer is conditional on a 50.1% acceptance level by Normandy shareholders, about half of which is assured by pledges from Franco-Nevada and Normandy’s board of directors.
Newmont has scheduled Feb. 13 for a shareholder vote and will close the offers two days later. Franco shareholders will have decided their fate two weeks prior to that date.
The Normandy offer is open to North American shareholders, whose shares are equivalent to 10 common shares. More than 90% of the company’s shares must be tendered in order for a complete takeover to be enforced.
At the end of the day, Newmont’s current shareholders will own 50% of the new Newmont, Franco-Nevada shareholders, 32%, and Normandy shareholders, 18%. A corporate headquarters and listing will be maintained in Australia, and the exchangeable Newmont shares will inherit Franco-Nevada’s listing on the Toronto board.
Post-merger, Newmont will produce more than 8 million oz. annually at a cash cost of about US$175 per oz. Next to
In terms of reserves, Newmont will have the most — 97 million oz. spread across 30 mines. Its property portfolio will also be the largest, roughly equivalent in size to the United Kingdom.
Newmont’s market capitalization will be in the neighbourhood of US$8 billion, rivalling that of Barrick, which became the industry leader after taking over Homestake Mining in mid-December 2001. Net debt-to-market capitalization rings in at 23%, largely reflecting the consolidation of Franco-Nevada’s cash-heavy balance sheet, compared with a ratio of 20% for Barrick.
Meanwhile, Normandy set a 6-month production record in the first half of fiscal 2002, cranking out 1.25 million attributable ounces. Just under half were produced in the three three months ended Dec. 31. Total cash costs between the quarters remained unchanged at A$310 per oz., whereas total production costs slipped a buck in the more recent period to A$424. Normandy realized A$584 per oz. for its recent quarterly output, or A$36 more than the average spot price.
Operational highlights include:
– a 21% increase in quarterly production at the half-owned Kalgoorlie Super Pit in Western Australia;
– a 36% increase in production and 17% decrease in total cash costs at the Ovacik mine in Turkey; and
– startup of Groundrush at the 87.45%-owned Tanami operations, in Northern Territory — ahead of schedule and below budget.
The most notable blemish was a 12% dip in production at the Jundee operation in Western Australia.
“Overall, we were very pleased with the gold operation performance,” says Champion de Crespigny. “The addition of new projects to our production profile is anticipated to more than compensate for the scheduled orderly depletions from operations such as Mount Leyshon, Boddington and Mount Charlotte.”
Boddington and Mount Charlotte, which is part of the Kalgoorlie joint venture with Barrick, became the focus of the takeover battle in late December 2001, when AngloGold offered the major a participating stake in a proposed underground mine at Boddington and full managerial control at Kalgoorlie. AngloGold owns a 33.33% interest in Boddington.
Primary resources at Boddington, in which Normandy owns 44.44%, stand at 726 million tonnes grading 0.84 gram gold per tonne. The resource may support an annual prodution rate of 500,000 oz., plus copper credits.
Permitting continues.
Normandy’s metals division exceeded expectations: Golden Grove, in Western Australia, cranked out 5.1% more copper-zinc concentrate in the recent quarter as Kasese, in Uganda, set a new, 6-month cobalt production record of 340 tonnes Normandy owns Golden Grove outright and has a 54.18% stake in Kasese.
On the development front, Normandy is proceeding with a feasibility study at the Martabe gold property on the Indonesian island of Sumatra. The investigation is focusing on the Purnama deposit, which is expected to yield 150,000 oz. per year.
The proposed heap- or dump-leach operation would cost US$30 million to develop and US$105 for each ounce produced thereafter.
In New Zealand, drilling at the high-grade Favona discovery continues to support its inclusion in the adjoining Waihi gold operation. Five new mineralized veins were recently intersected.
Drilling, metallurgical testing and permitting continues.
Normandy spent A$13.53 million exploring its various projects worldwide. The expenditures led to the extention of existing mineralization and the discovery of new targets.
Normandy has repurchased 1.3 million oz. in forward sales contracts to leave 45% of its operating mine reserves hedged. Newmont plans to continue unwinding the book as part of an anti-hedging philosophy.
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