Australia’s Newcrest Mining (TSX: NCM; ASX: NCM) has entered into an agreement to acquire all of the outstanding common shares of Canada’s Pretium Resources (TSX: PVG, NYSE: PVG) it does not already own in a deal that values the Canadian miner at $3.5 billion.
Pretium is the owner of the Brucejack underground gold mine in the highly prospective Golden Triangle region of northwestern British Columbia. The mine is about 140 km from Newcrest’s majority-owned and operated Red Chris mine, located on Tahltan territory.
Newcrest will become the operator and 100% owner of Brucejack following completion of the transaction, which is currently targeted for the first quarter of calendar 2022.
Pretium’s board of directors has unanimously recommended shareholders vote in favour of the transaction and have entered into voting support agreements with respect to all of the Pretium shares that they control.
Under the deal, Pretium shareholders will have the option to receive $18.50 per Pretium share in cash or 0.8084 Newcrest shares per Pretium share. For those who do not elect cash or Newcrest shares, the default consideration will be $9.25 per Pretium share in cash and 0.4042 Newcrest shares per Pretium share. The transaction price represents a premium of 23% and 29% to the closing price and the 20-day volume weighted average price (VWAP), respectively, of Pretium’s shares on the TSX as of November 8.
Last month, Pretium made a new high-grade gold discovery at the Golden Marmot zone on the Brucejack property, located roughly 3.5 km north of its Valley of the Kings deposit.
The company said it had received assays for the first nine drill holes, eight of which intersected gold with a highlight of 53.5 metres grading 72.5 grams gold per tonne including 50 cm grading 6,700 grams gold per tonne and 3,990 grams silver per tonne.
Brucejack began commercial production in July 2017 and is one of the highest-grade gold mines in the world.
According to a technical report in March 2020, the mine will produce about 311,000 oz. of gold a year at an all-in sustaining cost of US$743 per oz. over a 13-year mine life.
Brucejack and surrounding tenements are within the traditional territories of the Tsetsaut Skii km Lax Ha (TSKLH) and Tahltan Nation, and in the Nass Area of Nisga’a Nation as defined in the Nisga’a final agreement.
“We are delighted to be expanding our presence in this highly prospective region in British Columbia. Brucejack is a Tier 1 mine in a Tier 1 jurisdiction and will deliver immediate production, free cash flow and earnings diversification to Newcrest and will fit seamlessly into our long-life, low-cost portfolio,” Newcrest CEO Sandeep Biswas said in a media release.
“The combination of Newcrest and Pretivm will create the leading gold miner in British Columbia’s Golden Triangle, operating both the Brucejack and Red Chris mines,” Biswas said.
Currently, Newcrest has about a 4.8% stake in Pretium.
Kevin MacKenzie of Canaccord Genuity said he does not expect a competing bid for Pretium. “We note that there may be some speculation that Barrick Gold would be interested based on ongoing commentary related to acquiring a Canadian asset,” the mining analyst commented in a research note. “That said, we find this to be a difficult prospect given that Pretium’s Brucejack mine is not a Tier 1 asset per Barrick’s definition, nor would we expect to see Barrick bid up a premium given its focus on at-market deals for operating assets.”
He also noted that his outlook on the transaction was largely neutral. “We have long since said that Pretium’s single asset, Brucejack mine, would be better housed within a senior producer where (1) the portfolio effect would buffer quarter-to-quarter noise related to the deposit’s nuggety nature, and (2) the opportunity would exist to recapitalize/scope the project from the foundation up,” he wrote. “That said, some investors may have been looking for the recently appointed management team (early mid-2020) to reposition/optimize the asset prior to selling. To this end, we note that the new management team did a good job in stabilizing operations and achieving guidance, but had yet to further optimize the asset given the ongoing focus on underground development and expanding the stope inventory.”
MacKenzie noted that the deal, “along with other recent transactions, further underscores British Columbia as a preferred M&A jurisdiction.”
Newcrest mining company is getting Pretium Gold way to cheap.The long term share holders are being taken for a ride.The resources that Pretium has (Operating Mill, Cash in the Bank and little to no Debt ) is worth a lot more then $18.50 per share.I think the Directors have sold us out.