Ground Breakers: Let the feeding frenzy begin as Newmont puts for sale sign on Telfer and other gold scraps

Newmont has pulled the trigger on a long mooted sale of the Telfer and Havieron gold projects in Western Australia
They were acquired in its mega-merger with Newcrest along with ‘Tier-1’ assets like Cadia and Lihir
Arcadium Lithium announces pullback in spodumene production at marginal Mt Cattlin mine in latest sign of supply discipline in lithium

The world’s biggest gold miner has issued plans to sell six mines and their associated development assets in a bid to raise a targeted US$2 billion, with Newmont (ASX:NEM) confirming long-held suspicions its Telfer mine was on the block.

It comes after the Denver-based gold giant reviewed the integration of assets from its takeover of Australia’s largest gold producer Newcrest last year.

Newmont, led by Aussie mining executive Tom Palmer, will produce around 6.9Moz of gold and 144,000t of copper this year, but 1.3Moz will come from the mines it plans to hive off.

They come at a much smaller scale and higher cost base to the Tier-1 mines in Newmont’s global portfolio, which include the Lihir and Cadia operations acquired in the Newcrest deal, as well as its pre-existing Tanami and Boddington operations in Australia among others.

Newmont is also keeping hold of Newcrest’s Red Chris and Brucejack mines in British Columbia where it sees the potential for a Tier-1 district with capital and exploration investment, while it is also going to hold on to its 32% stake in Lundin Gold and its Fruta Del Norte mine.

The world’s largest gold stock produced 5.5Moz along with 891,000 gold equivalent ounces related to copper, silver, lead and zinc credits in 2023 at all in sustaining costs of US$1444/oz. It recorded a net loss of US$3.2b from continuing operations largely due to US$1.9b of impairments on mines it plans to sell and other non-cash charges as well as US$427m for the acquisition and integration of NCM.

With Newcrest’s low cost Cadia and Telfer mines added to its suite, NEM expects to produce 5.63Moz at AISC of US$1300/oz in 2024 from its Tier 1 mines. The non-core assets — comprising 1.3Moz of combined production — will cost US$1750/oz to operate.

After Newmont has completed a number of developments including a US$1.8-1.9b expansion of its Tanami mine, it expects to produce 6.7Mozpa from Tier-1 assets and 8.3Moz on a gold equivalent basis from 2028.

Newmont Corporation (ASX:NEM) share price today

Who’s in line for Telfer?

Nearly every gold boss in the country will be tapped on the shoulder and asked in the shady corridors of West Perth who wants to make an offer on Telfer and — the larger prize — its adjacent Havieron discovery in the Paterson Province of central WA.

The mine has been operating for decades but it’s the underground discovery of gold and copper and Havieron — expected to produce in the order of 160,000oz gold per year for nine years once in production — that has eyes turned to the asset.

Operated by Newmont in a 70-30 JV with London-listed and Andrew Forrest backed Greatland Gold, the obvious suitor is its junior JV partner.

Newmont’s latest resource update has given Haverion an inventory of 47.4Mt of indicated resources at 2.65g/t gold and 0.34% copper for 4Moz of gold and 161,000t copper.

Another 900,000oz of gold and 26,000t of copper is contained in inferred resources.

Greatland’s outlook is more bullish, with the junior reporting its own resources against the backdrop of a disagreement with Newcrest on the total value of Havieron amid bartering over an 5% stake from either side.

Greatland estimates Havieron contains 50Mt of indicated resources at 2.6g/t gold and 0.33% copper for 4.1Moz gold and 168,000t copper, with a further 2.9Moz of gold and 107,000t copper inferred.

In March 2022 it issued an ore reserve of 25Mt at 3g/t gold and 0.44% copper for 2.4Moz Au and 109,000t Cu.

While Evolution Mining (ASX:EVN) and Northern Star (ASX:NST) have been floated as potential acquirers of assets falling out of the Newmont stable, both were demure about the prospect of picking up Telfer when asked at Diggers last year.

Meanwhile, another big Aussie gold miner could loom as a logical buyer of NEM’s Akyem mine in Ghana, one of the assets on the chopping block.

500,000ozpa West African gold miner Perseus Mining (ASX:PRU) has indicated it is willing to part with much of its US$642m cash pile in a bid to pursue growth.

It lifted its after tax profit for the half year 21% to US$164.7m, with EBITDA up 18% to US$280.5m and revenue 10% higher to US$489m.

PRU also boasts US$300m in undrawn debt, with plans to produce 491,000-517,000oz in FY24 at competitive costs of US$1000-1100/oz. It will pay a 1.25c per share interim dividend, with much of MD Jeff Quartermaine’s investor update this morning focused on its inorganic growth intentions.

Perseus has of course entered a bidding war with TSX-listed Silvercorp Metals for the right to acquire OreCorp (ASX:ORR), lobbing a $258m (55c per share) cash offer to shareholders in the owner of the Nyanzaga gold project in Tanzania.

It also on Wednesday announced a deal to partner with a Saudi Kingdom backed company to fund early stage exploration in Saudi Arabia and partner on acquiring advanced development assets in North Africa.

PRU currently operates the Sissingue and Yaoure mines in Cote d’Ivoire as well as the Edikan mine in Ghana, and was on track to assess the development of the Meyas Sand project in northern Sudan before the outbreak of a civil war last year.

Asked whether Perseus would run the ruler over Akyem, Quartermaine indicated Perseus would look into whether a deal represented value for money.

“We have been aware that may have been a possibility for some time now. Akyem is in our backyard so to speak. We’ve been operating in Ghana now virtually since the beginning of this company, but certainly operating since 2012,” he said.

“So we certainly know our way around Ghana and have very strong relationships in country and have demonstrated our credibility as a respected partner of the communities and the Government.

“As a potential investor in that project, we’re really well positioned. We’re also positioned as you heard … with the cash on balance sheet and very strong cash flows. We are in a position where we could quite comfortably acquire that if the thing stacked up technically.

“Now, I might say we haven’t done any due diligence at all at this stage of the game and there is going to be a process running but we are broadly familiar with the asset and, as it turns out, a number of our employees were former employees of Newmont.”

Arcadium the lasted lithium player to tighten belt

And now to lithium where the last of Australia’s big four published its results overnight as the merged entity of Livent and Allkem — Arcadium Lithium (ASX:LTM) — delivered its first financials.

The big news is a decision to delay capital spending on its Sal de Vida brine project in Argentina and James Bay/Whabouchi projects in Quebec, where a review of combining the development of the two mines into one feeding a lithium hydroxide plant at Becancour from 2026 will put back project delivery by 6-9 months.

The other news was a decision to pull back production and mining at the marginal Mt Cattlin mine outside Ravensthorpe of WA’s South Coast, where shipments are expected to reduce from 204,000t in 2023 to around 130,000t in 2024.

It is the latest sign of supply discipline from major lithium producers after a 100,000t reduction in output at Greenbushes, with Mineral Resources (ASX:MIN) also announcing it would delay production from the recently commissioned third processing train at its Wodgina JV with Albemarle until spodumene prices improved.

In its final days under Allkem, the mine’s profitability collapsed. Despite raking in US$571m of revenue in 2023, just US$46m came in the December quarter, down 77%, as prices tumbled 71% to just US$763/t.

That represented a US$850/t SC6 price on the 60,008t of 5.3% Li2O concentrate shipped from the ageing Mt Cattlin mine, which only has around three years of life left unless a planned underground development stacks up financially.

The mine produced 239,312t of spodumene in calendar 2023, including 69,789t in the December term.

The Olaroz brine operation in Argentina meanwhile produced 17,758t of lithium, selling 17,789t in 2023 at an average cost of US$27,788/t, including 6991t at US$13,564/t in the December quarter. Around 31% of that output was battery grade lithium carbonate.

Livent generated US$883m in revenue and US$503m in adjusted EBITDA in 2023, turning over US$326m in cash (up 24% YoY).

With the integration of Allkem and Livent’s businesses and ramp up at Olaroz and the Fenix brine in Argentina, Arcadium still expects to increase lithium carbonate equivalent output by 40% to 50,000-54,000t in 2024 from brine sources, with a further 17,000t of LCE to come from Mt Cattlin’s spodumene.

At a US$15/kg average lithium carbonate price, LTM expects to deliver US$1.25b in revenue and US$420m in EBITDA at a 34% margin, rising to US$1.9b, US$1b and 53% if prices rebound to the US$25/kg range.

Arcadium boss Paul Graves said he would have expected to see more lower quality battery cell manufacturers drop out of the market in response to EV supply chain pressures, but noted there were indications of rising inquiries with the Chinese market an unknown until it’s truly returned from the quiet Lunar New Year period.

“So we’ll be looking out over the next month or two to see whether we do start to see some build up and I know there’s commentary from some Australian spodumene guys about maybe inquiry levels of going up and so maybe we’re going to start seeing a pick up again in demand,” he said. “We don’t see it today.”

Graves said Mt Cattlin remained cashflow positive at reduced operating rates, but noted it would be hard to find a buyer for the asset given its short mine life.