Newmont to buy AngloGold's Colorado gold mine for $820 mn

The world's second-biggest gold miner US-based Newmont Mining Corp has agreed to buy South African rival AngloGold Ashanti Ltd's Colorado gold mine for approximately $820 million in cash.

Newmont will acquire AngloGold's Cripple Creek & Victor (CC&V) mine in central Colorado about 160km south-west of Denver. The terms include an additional 2.5 percent net smelter return royalty for gold production from potential future underground ore.

News about a potential deal between the two gold mining giants surfaced last week. (See: Newmont Mining in exclusive talks to buy AngloGold Ashanti's gold mine in Colorado).

Historically, the CC&V district produced gold using underground mining method till 1960s. The current surface mining operation began in 1995.

Johannesburg-based AngloGold is the world's third-biggest gold miner with diverse portfolio of assets across the world. AngloGold acquired majority stake in CC&V in 1999 and gained full control of the operation in 2008.

The company, which had a gross debt burden of $3.6 billion at the end of March 2015 said in April that it was looking for a partner or buyer for the CC&V mine to reduce its debt.

The CC&V mine is under expansion with the mill commissioning and ramp up of production expected to continue through 2015, and a new leach facility is expected to be commissioned in the second half of next year.

Newmont's president and chief executive officer Gary Goldberg said, "CC&V represents a value-accretive opportunity for Newmont to improve mine life and costs in a favorable jurisdiction.''

''Consistent with what we've achieved elsewhere, we believe we can lower direct mining costs by up to ten percent through improved productivity and optimisation,'' he added.

The acquisition is expected to add 350,000-400,000 ounces of gold per year in 2016 and 2017 to Newmont's gold production at all-in sustaining costs of $825-$875 per ounce, in addition to strengthening of the company's reserve base.

Newmont plans to fund the acquisition with issue of equity shares and cash in hand.

Over the past two years, AngloGold has been striving to simplify its portfolio, improve cash flow and reduce debt.

Through the sale of CC&V AngloGold expects to improve its cash flow from the $820 million in sale proceeds and save $200 million required to complete the expansion.

AngloGold Ashanti CEO Srinivasan Venkatakrishnan said, ''This deal significantly de-risks the balance sheet without diluting our shareholders, and places us in a much stronger position.''

''Our core cash-generating mines continue to perform well and we're getting a strong tailwind from lower oil prices and weaker currencies – all while keeping our long-term options intact,'' he said.

The transaction is expected to close in the third quarter of 2015, subject to regulatory approvals and other closing conditions.

Colorado-based Newmont is a leading gold and copper producer with operations in the US, Australia, New Zealand, Ghana, Peru, Suriname and Indonesia. The company has around 28,000 employees and its 2014 revenue was $7.3 billion.

Citi and Goldman Sachs acted as lead financial advisors to Newmont on the deal.