Newcrest (NCM) is rallying today. Why?
Stock
Newcrest (NCM) $25.16 as at 11/03/2019
Event
Newcrest is rallying today after announcing plans to buy a 70% stake in a Canadian gold & copper mine held by Imperial Metals for $US 806.5m, funded in full from cash and bank facilities – prior to the deal, NCM had $3b available to it.
Imperial Metals had a very stretched balance sheet with $1.2b debt vs asset values of around $1.2b, while the company is still loss making.
The Red Chris mine currently has an expected resource of 20m ounces of gold, and 13b lbs of copper with a mine life out to 2043 and exploration of the area ongoing. The opportunity for NCM here is to employ their technical expertise to optimise the resource as they have done in previous projects. Newcrest is considered a market leader in this respect.
The mine is still in Stage 1 development and will require more capital injections to get it up to full scale production, however it adds geographical & commodity diversification to Newcrest’s portfolio. The company hopes this will become its 5th tier 1 gold asset in the portfolio.
Newcrest (NCM) Chart
Market Matters Take/Outlook
