Colorado-based Newmont Mining Corp. has agreed to buy Colorado State’s largest gold mine for $820 million.
Newmont announced Monday that it would sell 29 million shares of stock to raise money for the deal to buy Cripple Creek & Victor Gold Mining Company from South Africa’s Anglo Gold Ashanti Ltd. The sale must still be approved by regulators in both countries.
Below is an article written by Wayne Heilman and published in The Gazette newspaper of Colorado Springs. The article reports that the company plans to keep the mine’s 570 workers and continue a $500 million mine expansion that’s already underway.
Greenwood Village-based mining giant Newmont Mining Corp. made it official Monday: The Company announced it has agreed to buy the Cripple Creek & Victor gold mine for $820 million from South African mining giant AngloGold Ashanti Ltd.
The deal, expected to be completed in this third quarter, also includes a 2.5-percent royalty on gold production from underground mining that is expected to start next year, Newmont said.
The transaction must be approved by U.S. antitrust regulators as well as the South African Reserve Bank as well as other regulators.
Recent reports, citing unnamed sources, presaged the Newmont purchase, which comes as AngloGold is nearing completion of a $500 million expansion of the Cripple Creek & Victor – the state’s largest gold mine. The expansion is expected to boost the mine’s work force from 570 to 600 by year’s end, and Newmont plans to retain the employees and continue with the expansion, company spokesman Omar Jabara said.
Mine employees were notified of the pending sale during a Monday afternoon meeting with Lowe Billingsley, the mine’s vice president and general manager. He told employees he planned to stay with the mine and was “excited for the new opportunity for the company and employees.”
Many of the mine’s employees have been through sales before, so such transactions “aren’t any big deal.”
“We will continue to do our jobs. There are a lot of questions to be answered, however,” said Jane Mannon, a spokeswoman for the mine.
Newmont said it will pay for the acquisition by selling 29 million shares, supplemented with cash on hand. The company reported it had $2.6 billion in cash as of March 31.
The offering would raise nearly $750 million before commissions, based on Monday’s $25.84 closing price of Newmont’s stock. Underwriters Citigroup Global Markets Inc., J.P. Morgan and HSBC Securities (USA) Inc. also have a 30-day option to buy another 4.35 million shares, which would raise an additional $112 million, based on Newmont’s current stock price.
The Cripple Creek & Victor mine “represents a value-accretive opportunity for Newmont to improve mine life and costs in a favorable jurisdiction,” Newmont President and CEO Gary Goldberg said Monday in a news release. “Consistent with what we’ve achieved elsewhere, we believe we can lower direct mining costs by up to 10 percent through improved productivity and optimization.”
Newmont said the deal fits with its strategy to “lead the gold sector in value creation” by offering strong earnings and cash flow, with additional opportunities to create value. Newmont anticipates adding 350,000 to 400,000 ounces of gold production per year in 2016 and 2017 at a cost of $825 to $875 an ounce, adding to its reserves.
AngloGold, which lost $39 million last year on $5.4 billion in revenue, confirmed in March that it planned to sell the mine or find a partner. The company, which has nearly 27,000 employees at gold mining operations in 10 countries, announced plans nearly two years ago to cut its $3.1 billion in debt by $1 billion to cope with gold prices that have declined more than 25 percent in the past two years.
The deal with Newmont will save AngloGold the $200 million cost of completing the mine expansion, which will further improve its cash flow position.
“This deal significantly de-risks the balance sheet without diluting our shareholders, and places us in a much stronger position – it puts $820 million into our bank account, saves $200 million in capital expenditure, and gives us continued exposure to the asset through an uncapped royalty on future underground production,” AngloGold CEO Srinivasan Venkatakrishnan said in a news release Monday.
AngloGold bought a majority interest and began operating the Teller County mine in 1999, and bought out another partner in 2008. The mine produced 211,000 ounces of gold last year, generating $266 million in revenue and profits of $48 million, AngloGold said in the release.
The company spent $169 million in 2014 on capital expenditures, including $145 million for the expansion project, which includes the addition of a leach field, recovery center and mining facility to boost production this year to 350,000 ounces of gold, according to the release. The mine has ore reserves totaling nearly 4 million ounces of gold.
Newmont is the world’s second-largest gold producer, and generated $548 million, or $1.10 a share, in profits, from $7.3 billion in revenue last year. The company has about 28,000 employees worldwide.