Newcrest Surged On ASX Post Announcement Of A JV With Imperial Metals To Host Red Chris Mine

Newcrest Mining Limited (ASX:NCM) announced on 11th March 2019 that the company has agreed to acquire Red Chris Mine, a Tier-1 copper-gold porphyry orebody located on the northern edge of the Skeena Mountains. The mine is approx. — 1,7000km north of Vancouver and 18KM southeast of the town of Iskut in British Columbia.

The company entered an agreement with Imperial Metals Corporation to acquire a 70% joint-venture (JV) interest and operatorship of the Red Chris and the surrounding tenements for U$806.5 million.

The mine hosts an operating open-pit mine and mineral resources of 20 million ounces of gold and 13 billion pounds of copper. The company will acquire property comprises of 23,142 hectares of land with 77 mineral tenures, five of which are mining leases, located in the traditional territory of the Tahltan Nation.

Transactions and commitments summary:

The agreement between both the parties is that Newcrest will acquire a 70% JV interest in Red Chris mine and its operations for a consideration of U$806.5 million, which will be subjected to customary adjustments including all required regulatory approvals and the assignment or transfer of material permits. The agreement is also subjective for certain assumed equipment loans and non-financial debt and is not subjected to any shareholder approval.

The closing of the agreement is expected by the company to occur in Q3CY19, with an outside date for closing by 15th August 2019.

As per the company, on the closing of the asset purchase, an unincorporated joint venture will be established between wholly-owned subsidiaries of both Newcrest and Imperial. However, Newcrest will be the operator of the JV, but each party will contribute to the capital required for exploration and development as per their participating interest of 70% and 30%.

The provision for dilution is also present in the agreement, and it will be applied if any party does not contribute to a program and budget as decided.

Newcrest Future Plans with the mine:

As per the company, the agreement provides a measured entry into North America and proffer a geographic diversification. The company is planning to move forward with two-stage planning to apply its edge transformation approach. The first stage includes a process plant and mine optimisation. To optimise the plant, Newcrest plans to debottleneck the process plant and uplifts the copper and gold recovery from its expertise by operating Lihir, Cadia, Telfer and all such mines.

The mine optimisation will target on improving orebody knowledge, and Grade Control with supply chain cost reduction and extensive drilling for resource exploration.

The stage two will apply the company’s industry-leading technology of Block Caving, as the company operates one of the deepest block caves in the world at Cadia East, which is at a depth of 1.4km, it has expertise over the block caving.

Other technology implication includes Coarse ore flotation, Mass sensing, and sorting Deep Underground brownfield and greenfield exploration.

The Company also presented an increase in gold production for the December quarter and with a new venture, might be positioning itself better to take a production leap and take advantage of the future price movement in the major commodity segments. The company recently announced its Half-year results and BMO report as well, which marked a significant presence of mineral resources within the company’s various projects.

During the time of writing this report, the shares of the company are trading at A$25.295 (as on 11th March 2019, 03:10 PM), up by 3.25% as compared to its previous close.

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