Today Newcrest Mining Ltd (ASX: NCM) announced it entered into a US $806 million agreement with Imperial Metals Corporation (TSX: III) to acquire a 70% interest in the Red Chris mine and surrounding tenements in British Columbia, Canada.

The Red Chris mine is a copper-gold porphyry with an operating open-pit mine with:

  • 20 million ounces of gold (estimated)
  • 13 billion pounds of copper (estimated)
  • 23,142 hectares of land
  • 77 mineral tenures, five of which are mining leases.

Under the joint venture, Newcrest would be the operator with Imperials Metals Corporation retaining a 30% stake in the mine.

Newcrest said it would be funded through a mixture of cash and undrawn bank facilities.

Potential Tier 1

Newcrest believes the Red Chris mine to be similar to some of its current Australian operations with Managing Director and CEO, Sandeep Biswas, saying, “… following our due diligence, we believe we can bring our unique technical capabilities to unlock the full value potential of this orebody in one of the premier gold districts in the world. We have identified a clear pathway to potentially turn this orebody into a Tier 1 operation.”

“We are pleased to be establishing a joint venture with Imperial and look forward to building a collaborative relationship with the Tahltan Nation and the Government of British Columbia.”

Rask Perspective

Newcrest’s deal seems to be a smart acquisition with potential value to be unlocked that makes sense for Newcrest and investors agreed with shares up as much as 4.36% in early trading to a high of $25.57. Despite this, as Newcrest is a producer of commodities — and thus has relatively no pricing power — I won’t be adding it to my portfolio.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).