Newmont to issue $1.2B in equity for mine stake

Newmont Mining Corp., one of the world's largest gold producers, said Tuesday it will buy the remainder an Australian mine for about $1 billion and that this year's equity gold sales will match or exceed 2008.

The Denver-based company will issue $1.2 billion in stock and notes to pay for AngloGold Ashanti Ltd.'s 33.3 percent stake in the open-pit Boddington mine.

Newmont will pay $750 million in cash when the deal closes, an additional $240 million in cash or common stock by December, and a royalty of no more than $100 million over time.

Newmont has secured a $1 billion, 364-day bridge loan to pay for the deal, a move that President and Chief Executive Richard O'Brien called a safeguard.

"Anytime you go into an acquisition of this size, it's prudent to make sure you can pay for it," he said. "I have every belief the equity offering ... will be successful."

The company expects the acquisition, when it becomes operational in mid-2009, to boost its equity gold sales to 5.2 million to 5.5 million ounces of gold at costs between $400 and $440 an ounce.

For 2008 the company reported equity gold sales of 5.2 million ounces at a cost of $440 per ounce.

Located in western Australia, Boddington is the nation's largest gold mine and will increase Newmont's probable gold reserves by 6.6 million ounces to 20.1 million ounces, the company said.

The deal is expected to close in March 2009, pending approval from Australian and South African regulatory agencies and banks.

While the credit markets remain tight and the U.S. is in a recession, O'Brien said the deal made sense given the price of gold.

"This is actually a really good time for us to make this purchase," he said.

The mine has a probable life of 20 years, and should produce about 1 million ounces in its first full year of operation at a cost of $300 per ounce, he said.

On the New York Mercantile Exchange Tuesday, gold fell $12 to $899.2 an ounce.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are underwriting the offering.

Shares of Newmont fell $1.41, or 3.4 percent, to $40.30 in aftermarket trading. The stock has traded between $21.17 and $56.89 in the past 52 weeks.