Newmont Agrees to Sell Its Interests in KCGM to Northern Star for $800 million
Transaction increases proceeds from 2019 asset sale agreements to $1.4 billion
DENVER--(BUSINESS WIRE)-- Newmont (NYSE: NEM, TSX: NGT) (Newmont or the Company) has agreed to sell its 50 percent stake in Kalgoorlie Consolidated Gold Mines (KCGM) to Australia’s Northern Star Resources Limited (ASX: NST) (Northern Star).
Under terms of the agreement, Newmont will receive $800 million in cash for its interests in KCGM, inclusive of a $25 million payment that gives Northern Star specified exploration tenements, transitional services support and an option to negotiate exclusively for 120 days the purchase of Newmont’s Kalgoorlie power business for fair market value. The $25 million payment will be credited against the purchase price for the power business or returned to Northern Star if the power business is sold to a third party. The transaction is expected to close in early January following receipt of ministerial consent required under KCGM’s crown leases.
“This transaction generates exceptional value and further strengthens our financial position by increasing proceeds from our 2019 asset sale agreements to more than $1.4 billion,” said Tom Palmer, President and Chief Executive Officer. “Australia remains a core operating region for Newmont, and the sale of KCGM allows us to focus on investing in profitable growth and long-term value creation at our top-tier Tanami and Boddington complexes, in addition to our active exploration campaigns across the region. Northern Star is a well-established, Australian-based gold producer with a core competency in exploration, a commitment to community development, responsible environmental stewardship and, most importantly, excellence in safety.”
Combined with the previously announced agreements to sell Red Lake in Canada for $375 million and Newmont’s stake in Continental Gold for $260 million, the Company has meaningfully exceeded market expectations, with more than $1.4 billion in fair value cash transactions announced over the past month. Building on Newmont’s recently announced $1 billion share repurchase program,i Northern Star’s all-cash offer supports Newmont’s disciplined approach to capital allocation, which includes strategically reinvesting in the business, strengthening the Company’s investment-grade balance sheet and returning capital to shareholders. The sale of KCGM also further streamlines Newmont’s portfolio, with 12 top-tier assets located on four continents in the world’s most favorable gold mining jurisdictions.
Newmont expects to provide an update to its previously announced 2020 guidance and longer-term outlook in early 2020. In early December, Newmont provided the following 2020 outlookii for its 50 percent interest in KCGM:
- Attributable gold production: 285,000 ounces
- Gold costs applicable to sales (CAS): $915 per ounce
- Gold all-in sustaining costs (AISC): $1,035 per ounceiii
- Total capital expenditures: $25 million
Newmont has the strongest and most sustainable portfolio of operations, projects and exploration prospects in the gold sector. These assets allow the Company to sequence profitable projects in its unmatched pipeline to sustain stable gold production over a decades-long time horizon in top-tier jurisdictions around the globe.
Newmont is the world’s leading gold company and a producer of copper, silver, zinc and lead. The Company’s world-class portfolio of assets, prospects and talent is anchored in favorable mining jurisdictions in North America, South America, Australia and Africa. Newmont is the only gold producer listed in the S&P 500 Index and is widely recognized for its principled environmental, social and governance practices. The Company is an industry leader in value creation, supported by robust safety standards, superior execution and technical proficiency. Newmont was founded in 1921 and has been publicly traded since 1925.
Cautionary Statement Regarding Forward-Looking Statements
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors provided for under such sections. Forward-looking statements used herein may include, without limitation, estimates and expectations regarding the completion and receipt of proceeds from the sale of the Company’s 50 percent stake in Kalgoorlie Consolidated Gold Mines (KCGM) to Australia’s Northern Star Resources Limited (NST), closing and receipt of proceeds from the sale of the Company’s interests in Continental, closing and receipt of proceeds from the sale of Red Lake, future return of capital to shareholders and investment in projects, future balance sheet strength, and the Company’s 2020 outook, including, without limitation, 2020 production and long-term production, CAS, AISC and capital expenditure. Where the Company expresses an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the “forward-looking statements.” The sale of the Company’s interest in KCGM to NST remains conditional on approval from the Western Australian Minister for Finance, Aboriginal Affairs and Lands. If the govenmental approval is not satisfied or obtained on or before 29 February 2020, the Company or NST can terminate the agreement. The completion payment is subject to customary adjustments for working capital and other matters. The purchase of the Kalgoorlie power business and retention of the USD$25 million fee (Option Fee) remains subject to uncertainty. The option terms provide for (i) an exclusive option period of not more than 120 days (Option Period) and a right for NST to undertake due diligence of the power business during the Option Period. Additionally, the parties must negotiate in good faith to agree on the fair market value of the power business and to enter into a binding agreement before expiry of the Option Period. If the parties enter into a binding agreement during Option Period, the Option Fee will be deemed to form part of the purchase price. However if, after the expiry of the Option Period, Newmont sells the Kalgoorlie power business to a bona fide third party, then Newmont must refund the Option Fee, less USD$2.5 million in recognition of the value of the exploration tenements transferred and the cost of providing transitional services. The Continental transaction also remains subject to receipt of certain shareholder and regulatory approvals and other closing conditions. The closing of the Red Lake transaction remains contingent on the receipt of regulatory approvals and satisfaction of conditions precedent. As such, no guarantees can be made with respect to the closing of the transactions or receipt of related proceeds. Estimates or expectations of future events are based upon certain assumptions, which may prove to be incorrect. See endnotes below for assumptions related to outook. For a more detailed discussion of risks and other factors that might impact future looking statements, see the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 under the heading “Risk Factors”, filed with the U.S. Securities and Exchange Commission (the “SEC”) and available on the SEC website or www.newmontgoldcorp.com, as well as the Company’s other SEC filings, including the most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. The Company does not undertake any obligation to release publicly revisions to any “forward-looking statement,” including, without limitation, outlook, to reflect events or circumstances after the date of this news release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Investors should not assume that any lack of update to a previously issued “forward-looking statement” constitutes a reaffirmation of that statement. Continued reliance on “forward-looking statements” is at investors' own risk.
i Investors are reminded that the extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including trading volume, market conditions, legal requirements, business conditions and other factors. The repurchase program may be discontinued at any time, and the program does not obligate the Company to acquire any specific number of shares of its common stock. As such, no guarantees can be made with respect to the impact of the program.
ii 2020 outlook projections used in this news release are considered forward-looking statements and represent management’s good faith estimates or expectations of future production results as of December 2, 2019. Outlook is based upon certain assumptions, including, but not limited to, metal prices, oil prices, certain exchange rates and other assumptions. For example, 2020 Outlook assumes $1,200/oz Au, $16/oz Ag, $2.75/lb Cu, $1.20/lb Zn, $0.95/lb Pb, $0.75 USD/AUD exchange rate, $0.77 USD/CAD exchange rate and $60/barrel WTI; AISC and CAS estimates do not include inflation, for the remainder of the year. Assumptions used for purposes of Outlook may prove to be incorrect and actual results may differ from those anticipated, including variation beyond a +/-5% range. Outlook cannot be guaranteed. As such, investors are cautioned not to place undue reliance upon Outlook and forward-looking statements as there can be no assurance that the plans, assumptions or expectations upon which they are placed will occur.
iii AISC or All-in sustaining cost is a non-GAAP metric. AISC as used in the Company’s outlook is a forward-looking statement and is therefore subject to uncertainties. AISC is defined as the sum of cost applicable to sales (including all direct and indirect costs related to current gold production incurred to execute on the current mine plan), remediation costs (including operating accretion and amortization of asset retirement costs), G&A, exploration expense, advanced projects and R&D, treatment and refining costs, other expense, net of one-time adjustments, sustaining capital and finance lease payments. See the Company’s guidance release for a reconciliation of 2020 Gold AISC outlook to 2020 Gold CAS outlook for illustrative purposes. A reconciliation has not been provided on an individual site or project basis in reliance on Item 10(e)(1)(i)(B) of Regulation S-K because such reconciliation is not available without unreasonable efforts.