Take physic, pomp

NEM/NCM and mis dos centavitos

After a couple of days of thinking about things and listening to the great and the good at Mining Indaba, here’s a mail I just sent as a reply to a pro-investor subber on Newmont’s proposed takeover of Newcrest. Most of my personal opinion isn’t new, (e.g. Sean Boyd of Agnico made the point about the relative value of buying production at the moment), but I haven’t seen anyone mention the elephant in the room re. Barrick. Not yet, anyway.

Metals are leading the miners. If we grunts out here know that, NEM and its board of beancounters knows it 5X. So NEM sees value in increased production and, if it’s a value proposition to buy production instead of growing it organically, then why not? But in order for the strategy to work, NEM needs a target big enough to move the needle (e.g. B2Gold isn’t big enough) and those targets are few and far between. Cue NCM, which has the size and offers juuust about enough synergy to justify the move logically, all “that Australia angle”. Finally, Bristow’s disparaging comments at Mining Indaba are not without self-interest, as a NEM/NCM hook up makes NewNEM big enough to make a real takeover move on Barrick, instead of the lost decade of fannying about and getting nowhere with the merger of equals. If, two years down the line, NewNEM can swallow ABX and create a true sector behemoth it becomes the BHP of precious metals and an entity that Top Table funds can no longer ignore.

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