(Minews) - Sharp swings in global currencies have prompted Newcrest Mining Ltd. to put one of Australia’s biggest gold mines up for sale.
A near-20% fall in the Australian dollar since the middle of last year has made Newcrest’s Telfer gold mine in Western Australia state more profitable—and attractive to potential bidders—at a time when the company needs money to bring its debt down.
A weakening local dollar means mining companies in Australia are earning more for each ounce of gold they produce, giving them an advantage over rival producers in nations such as China whose currencies fluctuate less wildly against the U.S. dollar due to narrow trading bands or fixed pegs.
Newcrest, Australia’s largest listed gold-mining company, spent heavily on expanding pits and buying new mines in countries including Papua New Guinea and Ivory Coast during a bull run for gold prices that lasted more than a decade.
But its aggressive expansion has left management and shareholders with a big hangover—from the suspension of dividends since 2013 to net debt rising to 4.29 billion Australian dollars (US$3.32 billion) at the end of last year.
Newcrest has long been wondering what to do about Telfer, which is on track to produce up to 560,000 troy ounces of gold and about 25,000 metric tons of copper in the year through June. Australia is the world’s biggest gold exporter, shipping about 9 million ounces annually.
Its management had considered expanding one of Telfer’s pits, but Chief Executive Sandeep Biswas said he is also now open to unloading the mine.
“I have always said if there are people out there who value our assets higher than us they should talk to us, and this is just opening that up as a possibility,” Mr. Biswas said.
The mining company hasn’t yet been approached by any prospective buyers. Mr. Biswas said he expects to decide by October whether to sell or invest further in Telfer, but is mindful that the company’s balance sheet remains stretched.
“It is an absolute focus to get the debt down and start paying dividends again,” he said.
Newcrest, which reported a A$200 million net profit for the six months through December, is one of the world’s biggest gold-mining companies, competing with Goldcorp Inc., Barrick Gold Corp. and Newmont Mining Corp.
Global mining deals have faced challenges amid a slowing resources boom, with potential buyers cautious of overpaying for assets after embarrassing write-downs by many of the world’s biggest mining companies.
Still, companies have shown interest in Australian gold assets. Two years ago, South African mining company Gold Fields acquired three mines from Barrick, and China Molybdenum Co. acquired the massive Northparkes copper-and-gold mine from Rio Tinto PLC.
Telfer, in the remote Great Sandy Desert of the east Pilbara region, was once Newcrest’s largest gold mine. It was recently overtaken by the Lihir mine in Papua New Guinea and Cadia, also in Australia.
Gold prices have tumbled in recent years after the U.S. Federal Reserve said it would cut back on the easy-money policies installed to steady the U.S. economy. Copper prices have also taken a knock on concerns of slowing growth elsewhere, particularly in China, the world’s biggest buyer of the industrial metal.
