Economic Boost on the Horizon: Examining the Newmont-Newcrest Deal's Impact on Papua New Guinea
by Edison Mating - May 24, 2023
Photo: Lihir Gold Mine. Photo Credit: Newcrest Mining Limited Website
The recently announced acquisition deal between Newmont (NYSE: NEM, TSX NGT) and Newcrest Mining Limited (ASX, TSX, PNGX: NCM) on May 14, 2023, is set to have a significant impact on Papua New Guinea (PNG). The deal involves Newmont acquiring 100% of the issued shares in Newcrest by way of an Australian Scheme of Arrangement. Newcrest shareholders will receive 0.400 Newmont shares for each Newcrest share and a special dividend of up to $1.10 per share paid by Newcrest. This represents a 30.4% premium. The deal is worth A$ 28.8 billion creating the largest-ever gold M&A transaction and solidifying Newmont as the largest global gold producer. Newcrest initially rejected a A$19bn offer from Newmont in February 2023. What does this mean for Newcrest's assets in Papua New Guinea (PNG)?
Strengthening the Mining Sector: Newcrest's assets in PNG have a long-standing presence, with established mining operations and infrastructure in place. Their experience in operating in the country provides them with a deep understanding of the local business environment, regulatory frameworks, and cultural dynamics. This familiarity can be a significant advantage in ensuring smooth operations and stakeholder engagement. The acquisition of Newcrest by Newmont reinforces the position of both companies as leading gold producers and consolidates their presence in PNG. The combined portfolio of assets offers substantial opportunities for optimisation, paving the way for enhanced operational efficiency and increased production.
Lihir Gold Mine: Located on Lihir Island in the New Ireland Province, the Lihir Gold Mine is one of the largest gold mines in the world. It began production in 1997 and has since yielded significant gold reserves. The mine utilizes both open-pit and underground mining methods, and it has substantial processing facilities on-site, including a large-scale autoclave for processing refractory ore. Newcrest creates economic value for PNG and local communities including direct revenues from operations, investments in public infrastructure and services, support of local suppliers and a range of indirect economic benefits. It employs approximately 4,500 people of which around 90% are Papua New Guineans.
Wafi-Golpu Project: The Wafi-Golpu Project is a significant joint venture between Newcrest Mining (50%) and Harmony Gold (50%) in the highly prospective Morobe Province through the Wafi-Golpu Joint Venture (WGJV). It encompasses the exploration and development of a world-class gold-copper deposit. Deep drilling has identified a world-class copper-gold porphyry deposit at Wafi-Golpu (the Golpu deposit) suited to bulk underground mining techniques, similar to Newcrest’s Cadia operations in Australia.
Photo: The Wafi-Golpu Joint Venture (WGJV) hosts one of the highest-grade porphyry copper systems in Southeast Asia.
Economic Growth and Employment Opportunities: Through the acquisition, Newcrest can leverage its existing assets and expand its operations to tap into additional mineral deposits since it now has a bigger market capitalisation. This could lead to increased production, improved economies of scale, and a more diversified portfolio of mining projects thus bringing an economic boost for PNG. Optimised operations, coupled with the expansion of mining activities, can lead to increased job opportunities, both directly and indirectly. This infusion of employment opportunities has the potential to contribute to poverty reduction and overall economic growth in the country.
Synergies and Cost Efficiencies: The consolidation of operations between Newmont and Newcrest creates synergies and cost efficiencies. It is estimated that the deal could generate annual pre-tax synergies of $500 million within the first 24 months. These cost savings can be reinvested into further development, exploration, and sustainable mining practices, benefiting the companies and the local communities.
Sustainability and Environmental Practices: Both Newcrest’s and Newmont's track record as a leader in sustainability and responsible mining practices can bring positive changes to Newcrest's assets in PNG.
Social and Community Development: Both the companies’ expertise and experience in community engagement and social development initiatives will further the development of the community.
The acquisition of Newcrest by Newmont holds promising prospects for PNG's mining industry and economy. The deal's potential to drive economic growth, create employment opportunities, enhance sustainability practices, and optimise operations brings an economic boost to the country's mining sector. However, it is important for all parties involved to navigate the regulatory and stakeholder considerations diligently to ensure a successful and mutually beneficial outcome.
Newcrest Mining Limited. (2023). Wafi-Golpu. Retrieved from https://www.newcrest.com/our-assets/wafi-golpu. Retrieved on 19 May 2023.
Newcrest Mining Limited. (2023). Lihir. Retrieved from https://www.newcrest.com/our-assets/lihir. Retrieved on 19 May 2023.
Newmont Corporation. (2023). Newmont Enters into Definitive Agreement to Acquire Newcrest. Retrieved from [https://www.newmont.com/investors/news-release/news-details/2023/Newmont-Enters-into-Definitive-Agreement-to-Acquire-Newcrest/default.aspx]. Retrieved on 19 May 2023.
PNG Business News - October 11, 2021
Newcrest Profits US$1.2 billion
In the financial year 2021, Newcrest Mining Limited made a statutory and underlying profit of US$1.2 billion. In the 2021 annual report, Managing Director and Chief Executive Officer Sandeep Biswas stated, "It has been more than 18 months since the onset of the COVID-19 epidemic, and we are still experiencing its catastrophic effects throughout the world." Newcrest's operations were able to continue operating without any major disruptions, according to Biswas, because of the devotion and personal sacrifice of its employees. “I extend my personal gratitude to those who have endured extended periods away from their families to ensure that our business was able to continue without material disruption,” he said. As a result, Biswas said that the firm produced 2.1 million ounces of gold at an All-In Sustaining Cost (AISC) of $911 per ounce in FY21, resulting in another outstanding operational and financial performance. “Our strong operating performance, combined with the benefit of higher gold and copper prices, underpinned a record free cash flow of $1.1 billion and a record statutory and underlying profit of $1.2 billion, 80 per cent and 55 per cent higher than the prior-year respectively. We expect that the contribution of copper will continue to increase, with the relative proportion of copper to Cadia’s revenue expected to increase over the coming years in line with the estimated grade profile of gold and copper,” he said. “We also have significant copper potential at Red Chris, Havieron, Wafi-Golpu and Namosi. I have always seen copper as an excellent complement to our gold portfolio as it provides us with good earnings diversification and makes us more resilient and profitable in the longer term. Both gold and copper are metals of the future, with copper, in particular, being key to a low carbon world. It is a very exciting time at Newcrest as we progress our multitude of organic growth options.” Reference: Post-Courier (6 October 2021). “Newcrest Records K351b Profit”.
PNG Business News - February 28, 2022
Newcrest Mining Limited reaffirms commitment to PNG
Newcrest Mining, whose interests in PNG include the Lihir Gold mine and a 50% share in the proposed WafiGolpu project with Harmony Gold Mining Company Limited, has a long-standing partnership with PNG. Newcrest MD and CEO, Sandeep Biswas, travelled to Port Moresby this week and met with Prime Minister James Marape, during which he reaffirmed the company’s deep commitment to PNG through its operations. “Newcrest is pleased that it has been able to continue to make a significant contribution to the PNG economy throughout the challenges of the global pandemic. To date, we have had no material disruptions to production, and I would like to take this opportunity to thank the PNG Government for its support throughout a very challenging time”, said Mr Biswas following his meeting. “I would also like to thank our employees, contractors and business partners for their resilience and flexibility, with extended rosters and time away from their families to support our Lihir operations’. Newcrest employs approximately 4,500 people at its Lihir operations, with about 90% of those being from Papua New Guinea. Newcrest’s investment in PNG continued despite COVID19 challenges. In the last financial year, K180 million was added to operational costs to mitigate the impact of the pandemic on our Lihir operations and employees. In addition, over K1bn was spent with PNG suppliers, with more than K400m going to Lihirian vendors alone. Newcrest also contributed K284m in taxes, K99m in royalties and contributed USD450 million to the national account through the acquisition of K1.574bn in foreign exchange. Newcrest established our Community Support Fund in April 2020, to support the Government and communities’ preparedness and response to COVID-19 across the jurisdictions we work in. Since it's inception, 22 projects in PNG have been approved to the value of over K17m, and have been implemented primarily in response the priorities of the communities we work in, focusing on delivery of health care supplies and equipment. We have worked provincially in partnership with the New Ireland, East New Britain, Morobe and NCD PHAs, and nationally in partnership with donors such as UNICEF. “Most recently we have turned our attention to supporting the roll-out of the COVID-19 vaccine in New Ireland. Our implementation partner Australian Doctors International are working very closely with the Provincial Health Authority to overcome vaccine hesitancy and give the people of New Ireland the opportunity to understand the benefits of getting vaccinated”, said Mr Biswas. Mr Biswas thanked the PM for his ongoing support for Lihir and commitment to progressing the discussions on the permitting of the Wafi-Golpu project. “Newcrest looks forward to a long partnership with Papua New Guinea, which will deliver benefits to both the people and the Government of this country for many years to come,” he said. Lihir Gold Limited is very well positioned for the future, with an aspiration of a million ounces a year in the coming years.
PNG Business News - September 06, 2021
Newcrest Posts K4.07B Profit
Newcrest Mining, Papua New Guinea's largest gold miner, has posted a profit of K4.07 billion (US$1.164 billion) for the 12 months ending 30 June, a new high. Due to greater gold and copper prices as well as decreased operating costs, this is 55 per cent higher than the previous financial year. Newcrest's gold revenue increased by 9% despite somewhat lower gold production, while its copper revenue increased by 46% and its silver revenue increased by 63%. However, its operating costs decreased by 11%. “Newcrest has delivered a strong operational and financial performance for the 2021 financial year, producing 2.1 million ounces of gold at an AISC [All-In Sustaining Cost] of US$911 per ounce. “Together with the benefit of higher gold and copper prices, this translated into a record statutory and underlying profit of US$1.2 billion and a record free cash flow of US$1.1 billion,’ said Newcrest’s Managing Director and Chief Executive Officer, Sandeep Biswas. The company's shareholders will benefit from the windfall, with a payout per share of US$0.40 (K1.40) — a 129 per cent increase over last year's dividend. During this time, Newcrest's gold mine on Lihir Island in New Ireland Province produced 737,000 ounces of gold and 38,000 ounces of silver, accounting for about 35% of the PNGX and ASX-listed company's global production for the year. The mine brought in US$1.425 billion (K5.02 billion) in sales, accounting for around 31% of the company's total revenue for the year. While the firm claims incidences of COVID-19 on Lihir Island are at "low levels," it is maintaining "extensive contact tracing and isolation protocols," and charter flights to the island are limited. Reference: Pacific Mining Watch (31 August 2021). “Newcrest Records K4.07 Billion in Profit”.
PNG Business News - June 05, 2023
PNG PM Marape Participates in PIF Leaders Breakfast Caucas
Photo: PNG PM Marape Participates in PIF Leaders Breakfast Caucas Prior to the Korean-Pacific Islands Leaders (Kor-Pic) Meeting, Papua New Guinea Prime Minister Marape joined other PIC Leaders for a breakfast caucus Chaired by Cook Islands Prime Minister and current Pacific Islands Forum Chair Mark Brown, to discuss the agenda and a common position on shared development issues. Prime Minister Marape said climate variation, being the perennial issue including sourcing appropriate development assistance from the Korean Government was high on the agenda. He said the encouragement during the caucus was for all PIC Leaders to discuss their developmental challenges and put forward their ideas on how Korean Development assistance could complement the 2050 Blue Pacific Strategy. Following this caucus, Prime Minister Marape, met with Australian Deputy Prime Minister Richard Marles. Their discussions were centered around progress of the proposed Bilateral Security Treaty (BST), the recently concluded Defense Cooperation Agreement with the US, Visa issues and the PNG NRL Bid. On the BST, Prime Minister Marape mentioned that it was work in progress and required the PNG side to consult our domestic processes and sovereign laws in relation to certain wordings and provisions. He also conveyed his apologies to Prime Minister Anthony Albanese for the delay in formalising this proposed Treaty with Australia. For the DCA with the US, Prime Minister Marape informed that it was centered around improving the PNGDF's capabilities and interoperability including protecting our frontiers and sovereignty. He said it was non-discriminatory and PNG was open to entering into similar arrangements with its bilateral partners. “In fact, the DCA would also complement domestic law enforcement,” Prime Minister Marape said. “The Ship Rider Agreement on the other hand was also vital in combating illegal fishing and transnational crimes.” For Visa issues, Deputy Prime Minister Marles informed that the current Australian Government was fully aware of the situation and following the Ministerial Forum in February this year in Canberra, had established a Joint Ministerial Team to work on bringing the Australian visa processing facility back on shore to PNG. Prime Minister Marape in his response said that all processes from both sides had to be attended to in order for smooth facilitation and for citizens and businesses to continue without much hindrance now and heading into 2050 when PNG celebrates 50 years of nationhood. On Papua New Guinea’s NRL Bid, Prime Minister Marape explained that PNG was still very keen as rugby league was a major unifying factor, bringing our 800 tribes together as one people. In closing Prime Minister Marape assured Deputy Prime Minister Marles that PNG in no way would compromise its excellent existing bilateral relations with Australia and further stressed that PNG was capable of managing its sovereign affairs on its terms, systems and processes.
PNG Business News - June 05, 2023
ADB Helps Launch Vocational Education Project in PNG
The Asian Development Bank (ADB) and the governments of Australia and Papua New Guinea (PNG) today launched a cofinanced project to improve the country’s technical and vocational education and training (TVET) program. PNG's Deputy Prime Minister John Rosso delivered a keynote address at the launch event at Port Moresby Technical College. PNG’s Minister of Higher Education, Research, Science and Technology, and Sports Don Polye, ADB Country Director for Papua New Guinea David Hill, and Australian High Commission Minister Counsellor Paul Lehmann all spoke at the event. The Improved Technical and Vocational Education and Training for Employment Project financed by ADB and the governments of Australia and PNG will strengthen the country’s TVET program and help prepare students to be more competitive and responsive to employment and industry demands. “We hope this project will become a model for all vocational education and skills training in TVET colleges in the country,” said Mr. Rosso. “The beneficiaries of this project—young, skilled workers, including women and men—represent PNG’s future, and through this project, the future of vocational education in PNG looks bright.” This project aims to boost the numbers of skilled workers in the construction and agriculture sectors where demand is high. “We will work with our partners to help advance reforms in the vocational education and skills training space in PNG,” said Mr.Hill. “These sought-after skills in priority sectors will help grow PNG’s economy.” The TVET sector of PNG’s education system comprises public, religious, or private institutions, including technical and business colleges offering postsecondary courses and vocational training. “The Australian government is pleased to be supporting the Government of Papua New Guinea to achieve its reform goals in technical and vocational education and training to increase the number and quality of skilled workers,” said Australian High Commission Minister Counsellor Paul Lehmann. “My vision for the TVET for Employment Project is that it will perform as an innovation and technology business incubator across PNG,” said Mr. Polye. “The project is the embodiment of a new approach—building a culture of quality education and innovation in a renewed and revitalized TVET sector.” The Improved Technical and Vocational Education and Training for Employment Project is funded through a $50 million concessional loan from ADB and a $10.6 million grant from Australia. The Government of PNG is also contributing $5.7 million. ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.
PNG Business News - June 05, 2023
PNG Forges an Innovation-fueled Partnership with South Korea in Digital Transformation
Papua New Guinea was amongst seven other Pacific Island countries to sign a partnership statement of intent with the Republic of Korea to further cooperation and partnership in digital transformation. Information and Communications Technology Minister Timothy Masiu, who also was appointed co- chair of the just concluded Korea -Pacific Islands Digital Ministerial Conference in Seoul, South Korea, signed the statement together with the meeting chairman Korean Minister for Science and ICT Dr Lee Jong-Ho. The others who signed the partnership intent are Tonga, Nauru, Samoa, Palau, Cook Islands and Kiribati. Australia and the World Bank also attended the meeting as supporting partners. The Statement of Intent states; The partnership recognize digitalization has transformed not only daily lives but also shapes innovation in all sectors including politics, economy, society, culture and environment. Recognize and note that digital technology offers great potential to address various social economic challenges that come with rapid transformation of society. Agree on continued partnership in digital transformation inclusive of sustainable development will be the key to future prosperity of the people of Korea and the pacific. Agree on sharing digital vision of policies will pave way for strong partnership to digital co-prosperity. Mr Masiu expressed deep satisfaction that Korea , the global leading innovation country, has agreed to partner with Pacific countries including Papua New Guinea in digital transformation that will greatly enhance communication in a vast area like the Pacific and more so, strengthen supporting technology to better access to health, education and business. He told the conference that Papua New Guinea has begun the digital transformation with Parliament passing the Digital Government Act 2022 and relevant policies, and welcomed the partnership with the Republic of Korea, which he says, will go a long way in progressing the digital transformation agenda for PNG and the region. Mr Masiu had bilateral meeting with his South Korean counterpart, further seeking a stronger country to country relations in digital transformation and support to the National Broadcasting Corporation proposing a partnership between the NBC and the Korean Broadcasting Services. The Minister has formally invited the Korean Minister for Science and ICT to visit Papua New Guinea for the Pacific ICT meeting in August 2023 or to accompany the South Korean President who has been invited by Prime Minister James Marape to visit PNG. Mr Marape was in Seoul also this week for the Korea- Pacific Islands Forum Leaders meeting. Minister Dr Lee Jong-Ho acknowledges the leadership of Papua New Guinea in digital transformation and reaffirmed its support to PNG and the other Pacific Island countries.