Iron Ore Billionaire Andrew Forrest Enters the Gold Rush: Greatland Gold Acquires Telfer Mine for $475 Million

The gold rush that has seen the price of gold surge by 25% since the start of the year has transitioned into a deal-making phase, attracting some of the world’s wealthiest individuals, including Australian iron ore magnate Andrew Forrest.

Greatland Gold, a London-listed explorer backed by Forrest, has struck a deal to purchase the Telfer mine in Western Australia from Newmont Corporation, a US-based mining giant, for $475 million. This acquisition, which had been in the works for several months, came just hours after AngloGold Ashanti announced its agreement to buy Centamin, another London-listed gold miner, for $2.5 billion.

This latest wave of consolidation in the gold sector began last year when Newmont acquired Australia’s Newcrest for a staggering $19 billion. This deal included the Telfer mine, once a prolific producer but now showing its age.

Newmont quickly identified Telfer as an excess asset, initiating a sale process that also included a 70% stake in the adjacent, yet undeveloped, Havieron project.

Given its ownership of the remaining 30% stake in Havieron, Greatland emerged as the natural buyer for Telfer. The mine boasts a substantial but underutilized ore processing system, which will be utilized to process remaining Telfer ore as well as new material sourced from Havieron.

The primary challenge for Greatland, a relatively small company, was always going to be the cost of acquiring Telfer. The $475 million price tag is roughly equivalent to Greatland’s current market valuation.

Forrest’s 8.5% stake in Greatland, coupled with board seats held by his close associates, serve as crucial elements in a major fundraising campaign currently underway to finance the Telfer purchase.

The addition of a gold mine to Forrest’s asset portfolio comes at a pivotal moment for the billionaire, who has been actively seeking to diversify his holdings beyond his near-total reliance on iron ore, a commodity experiencing a steep decline as Chinese demand weakens.

Forrest’s previous diversification efforts have focused on the energy sector, with investments in solar power and wind turbines. However, his attempts to commercialize green hydrogen produced using renewable electricity have yielded less successful results.

Greatland’s expansion through the Telfer acquisition occurs amidst a 37% surge in the gold price since this year last year, mirroring a 37% decline in the price of iron ore over the same period.

The slump in iron ore prices has led to a 45% decline in the value of Fortescue Metals Group, Forrest’s primary asset, since the beginning of the year.

Gold, particularly with plans to redevelop the Telfer project using ore from the Havieron deposit, could deliver a successful new business for Forrest, one that is not reliant on Chinese demand for iron ore, which is expected to remain subdued.

ING, a prominent Dutch bank, issued a warning earlier today, suggesting that the iron price could continue its downward trajectory, putting further pressure on the fortune of Forrest and his family, which has dwindled from $19 billion to $13.5 billion over the past 12 months.

The acquisition of a gold asset could potentially help stabilize Forrest’s declining wealth.

Newmont Corporation Divests Non-Core Assets, Focusing on Tier 1 Portfolio

Newmont Mining (ASX:NEM), the world’s leading gold producer, has taken a significant step in its strategy to divest non-core assets by agreeing to sell its Telfer mine and a 70% stake in the nearby Havieron project in Western Australia to Greatland Gold (LSE:GGP).

In exchange, Newmont will receive a total consideration of US$475 million. This comprises US$207.5 million in cash, US$167.5 million in Greatland shares, and a deferred cash payment of US$100 million contingent on future gold prices and production from the Havieron project. The transaction is slated for completion in the fourth quarter of this year.

This sale marks the first major transaction within Newmont’s asset divestiture program, which was unveiled in February. Other assets slated for sale include the Éléonore, Musselwhite, Porcupine, CC&V, and Akyem mines.

Newmont’s CEO, Tom Palmer, expressed confidence in the sale, stating, "I am pleased that Telfer and Havieron are being sold to Greatland, a company with a highly experienced management team and board of directors. I have full confidence that the Greatland team will be outstanding stewards of these assets."

Newmont’s shares surged 1.5% in Toronto on Tuesday, closing at $69.85, resulting in a market valuation of $58.9 billion. Over the past year, the shares have fluctuated between $39.96 and $72.65. In London, Greatland Gold’s stock was priced at 6.95 pence, giving it a market value of £353.8 million.

Greatland Gold’s discovery of the Havieron gold-copper project in 2018 has been followed by its ongoing development. Once operational, the mine will leverage infrastructure from the nearby Telfer mine. Earlier this year, Greatland indicated its strong position to consolidate ownership of Havieron.

Following the Telfer sale, Newmont has adjusted its production guidance for non-core assets, forecasting 1.12 million ounces of gold and 1,000 tonnes of copper. However, its guidance for production from its Tier 1 assets remains unchanged.

"Including the Telfer divestiture, we continue to expect to generate at least US$2 billion from the sale of our high-quality, non-core assets, enabling us to focus on our Tier 1 portfolio," Palmer added.

Among the assets drawing significant interest is Newmont’s Akyem mine in Ghana, which is reportedly being pursued by major Chinese miners Shandong Gold and Zijin Mining, along with Asante Gold, an existing operator in Ghana.

Newmont Corporation’s Asset Sale Strategy: A Closer Look

Newmont’s decision to divest non-core assets aligns with its broader strategic goal of raising at least $2 billion from these sales. The company intends to utilize the proceeds to:

• Focus on Tier 1 assets: Newmont aims to concentrate its resources on its most valuable and productive assets, those classified as Tier 1, which are expected to generate significant returns over the long term.
• Reduce debt: The sale of non-core assets will provide Newmont with the opportunity to reduce its debt burden, enhancing its financial flexibility and lowering its interest expenses.
• Return capital to shareholders: By freeing up capital through asset sales, Newmont can pursue a more generous dividend policy or initiate share buyback programs, returning value to its shareholders.

The sale of Telfer represents a significant step in Newmont’s strategic asset divestiture program, illustrating its commitment to a more streamlined and focused portfolio. The transaction is expected to close in the fourth quarter of 2024, subject to customary closing conditions.

Newmont Corporation’s Future Outlook

Newmont remains on track to achieve its 2024 targets. Despite the Telfer divestiture, which had been classified as held for sale in its financial statements, the company has made minor adjustments to its non-core gold and copper production guidance.

For 2024, Newmont anticipates attributable gold production from its Tier 1 portfolio to remain unchanged at 5.63 million ounces, with an additional 1.12 million ounces from non-core assets. This translates to a total gold production of 6.75 million ounces. Copper production is projected at 145,000 tons, with 144,000 tons from Tier 1 assets and 1,000 tons from non-core assets.

Newmont’s shares have demonstrated strong performance, gaining 32.1% in the past year, outpacing the industry’s 33.4% rise.

The sale of Telfer signals Newmont’s dedication to its strategic objectives of debt reduction, shareholder value maximization, and a sharpened focus on its core assets. With the transaction expected to close in the fourth quarter of 2024, the company remains poised to continue its growth trajectory and deliver value to its stakeholders in the coming years.