Newcrest gets a 'beach-head' in the Americas in $1.1b Canada deal
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Newcrest gets a 'beach-head' in the Americas in $1.1b Canada deal

Newcrest Mining boss Sandeep Biswas says the $1.15 billion deal that will see the miner acquire a majority stake in a Canadian gold and copper operation is "a big milestone" giving the company its first operating mine in the Americas.

Mr Biswas said the key motivations behind its 70 per cent purchase of the Red Chris asset included its large mineral endowment, the significant "scale-up opportunity" that existed and the promising exploration potential of the mineral tenures.

The Red Chris gold mine in Canada.

The Red Chris gold mine in Canada.

Australia's biggest gold miner said getting an operation in North America, in a jurisdiction as stable as British Columbia, were also key considerations. It described Red Chris as a "multi-decade orebody" that would provide "immediate asset, geographic and earnings diversification".

The deal is the latest development in a flurry of activity in the gold sector that has seen tens of billions of dollars of mergers announced in recent months.

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Mr Biswas said Newcrest had had its eye on the area for several years but the opportunity to buy into Red Chris only arose recently.

Asked whether Newcrest might announce more acquistions in coming  months, Mr Biswas said Newcrest was focused on its own strategy, had a strong balance sheet and the business was cash-generative.

This is our first operating asset in that time zone, so it's a big milestone for us. We now have a beach-head and a footprint.

Sandeep Biswas, Newcrest CEO

"The capacity is certainly there should the right opportunity come along, but we're just not going to chase acquisitions just to increase ounces," he said.

"We focus on value. And the quality of the ounces outweighs the size of the ounces. For example, we're the third-largest gold company in the world by market cap, but we're about the sixth or seventh largest in terms of ounces," he said.

Aerial photograph of the Red Chris gold mine processing plant in Canada.

Aerial photograph of the Red Chris gold mine processing plant in Canada.Credit:Photo supplied

Newcrest likened the geology of Red Chris to orebodies at its Cadia gold mine in NSW. It said the similarities would allow it to employ its so-called "block cave" technology (mining under a large ore body to create a controlled, progressive collapse)  at Red Chris.

"We're well known in North America because the majority of our shareholders are from North America. But being an operator in North America certainly will lift our profile, and hopefully broaden our investor base in the Americas," Mr Biswas said.

"This is our first operating asset in that time zone, so it's a big milestone for us. We now have a beach-head and a footprint," he said.

Simon Mawhinney, analyst with fund manager Allan Gray which currently holds about 8.8 per cent of Newcrest, reacted cautiously to the billion-dollar deal.

"It's in line with their stated strategy, which I think is good, but whether or not this turns out to be the type of transaction that gives shareholders a decent return on that invested capital will take some time to judge," he said.

Shares in Newcrest jumped 3.8 per cent to close at $25.43.

Darren is the mining and agribusiness reporter for The Age and The Sydney Morning Herald.

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