(Reuters) – Australia’s Newcrest Mining Ltd said on Thursday it planned to raise A$1 billion ($655 million) in a share issue to fund growth at the Fruta del Norte mine in Ecuador and other projects, increasing its exposure to rising gold prices.
Australia’s biggest listed gold producer announced the rights issue, which would also fund development at its Red Chris operations in Canada and Haverion project in Western Australia, as it reported a 17% slump in third-quarter gold output, missing an analyst projection.
“Newcrest its entering a growth phase … going into that phase with good projects and with strong balance sheet … is prudent,” Chief Executive Sandeep Biswas said on a results call.
“We are in a cyclical industry. Gold prices aren’t going to stay high forever.”
Prices for gold struck the highest in more than seven years just shy of $1,750 an ounce in mid-April before easing to around $1,709 on Thursday amid a rush for the safe-haven metal due to the global coronavirus pandemic.
In its share placement, Newcrest said it planned to issue about 39.1 million new shares at A$25.60 apiece, representing a 7% discount to Wednesday’s closing price of A$27.54. Shares were suspended from trading on the Australian stock exchange on Thursday.
Some of the funds would be used to cover the cost of taking on financing arrangements that include gold pre-pay and stream facilities of Canada-based gold miner Lundin Gold’s Fruta del Norte mine, in which Newcrest already holds a 32% stake.
The deal was a “very interesting and very savvy”, said analyst Peter O’Conner at Shaw and Partners, speaking during the Newcrest earnings call.
Newcrest reported total gold production fell to 518,770 ounces in the three months ended March 31, from 623,124 ounces a year earlier, missing a UBS estimate of 562,000 ounces of gold output.
Lower production at its Cadia and Telfer mines and the divestment of its Gosowong mine in Indonesia offset an improvement in output from its Lihir mine.
Newcrest last month cut its fiscal 2020 gold production forecast to between 2.1 million ounces and 2.2 million ounces.
It said on Thursday it expects gold production in the June quarter to be higher than March quarter, due to fewer planned shutdowns and forecast favourable gold prices.
($1 = 1.5263 Australian dollars)
(Reporting by Sameer Manekar in Bengaluru and Melanie Burton in Melbourne; Editing by Shounak Dasgupta and Kenneth Maxwell)