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Johannesburg - Newmont Mining, the largest US gold producer, agreed to buy the Cripple Creek & Victor mine in Colorado from AngloGold Ashanti [JSE:ANG] for $820m.
Newmont will also pay a 2.5% royalty for gold production from potential future underground ore, the Greenwood Village, Colorado-based company said in a statement. Newmont will issue 29 million shares to help pay for the mine, which is undergoing an expansion.
The deal “represents a value-accretive opportunity for Newmont to improve mine life and costs in a favourable jurisdiction,” Chief Executive Officer Gary Goldberg said in the statement. “Consistent with what we’ve achieved elsewhere, we believe we can lower direct mining costs by up to 10%.”
Newmont, the world’s third-largest gold mining company by output, is focused on lowering its mining costs as gold trades about 39% less than its 2011 peak. Newmont began building a new, lower-cost operation in Suriname last year and in April approved construction of the first phase of another Nevada mine.
The sale represents a significant step forward in Johannesburg-based AngloGold’s drive to strengthen its balance sheet by cutting debt, CEO Srinivasan Venkatakrishnan said June 8 in a phone interview. In addition to the proceeds from the deal, AngloGold will save $200m from mine expansion spending it will no longer incur, he said.
“It gives us upside on the assets and, importantly, it fixes the balance sheet in one go,” Venkatakrishnan said.
Newmont fell 1.6% to $25.43 at 18:40 in New York, after regular trading had closed. The shares have gained 37% this year.
Barrick Gold and Zijin Mining Group are the largest gold producers by output.
