What the Newmont/Newcrest deal means for Greatland?

[DipSard]

Some folk are obviously annoyed at the constant speculation on various chat platforms so thought a thread on the forum on GGPChat can serve as a place for those who want to discuss might work well:

Here's my current thinking on how things might play out and what's going on:

- There is a working model on all the data held by NCM and now GGP too since the team was expanded and they've built their own data model which is kept updated too
- Newmont will soon have full ownership of everything Newcrest have so have full access to their software, data sets blab blah blah if not already
- Both companies can accurately define Havieron in varying extents using the drill data they have so deeper down is more assumptive for now but certainly areas with enough drill density can be estimated to various categories dependent on how much data gathered and how consistent or not the mineralisation is in each area
- So each of the 3 parties has a very very good idea of Havieron value/size to date and future potential as Shaun been happy in public to state Hav probably around 20moz in 'basic volumetric' calculations i.e NOT provable to JORC categories etc. but very clearly GGP feel confident it's in that range from all data to hand so far
- Underground drilling over the years will define the size while the SLOS mine is already operating but the industry as a whole agree's this is a large ore body with future bulk mining or mining of some nature on other zonations
- A lot of DD data and valuations are never public in M&A, such as Valmin Valuations not commonly shared publicly from when I was reading up on the process
- Issuing an MRE with your company badge on it does give a public point in time valuation you have committed to in any negotiation but NCM did not update any of their assets in last FY Financial Results perhaps indicating this is a wider corporate strategy than around one pipeline asset in their portfolio
- However, for a multitude of reason GGP may decide it is worth releasing one to help the SP by end of 2023 even if a deal is ongoing for Telfer/Hav as that may not be locked in until 2024
- So perhaps in the short term releasing an MRE to accompany the ASX listing is more important to drive the ASX listing success and help strengthen the GGP SP as a low SP does leave us vulnerable the longer it goes on
- The price agreed by NCM/NEM was at a certain point in time and both parties felt was justified at the time so in essence until Newmont takes the reins, resource updates are perhaps no longer essential and we've seen no complaints from major shareholders in either company since the FY results came out that I am aware of
- Basically there are so many assumptions in all of our theories with little visibility of everything going on in background we need to be open-minded and have no choice but to wait to see how stuff plays out to confirm them
- This is a mammoth transaction for Newmont and Newcrest, unlikely they have the bandwidth to be selling off assets before completion IMO but not ruling it out either
- Could Shaun surprise up with an unrelated M&A opportunity to accompany an ASX listing, again can't rule that out completely although I feel that we perhaps need to focus on Havieron for now and get on our feet as such, but the capability in terms of skills and funding capability exists...

Anything goes for me at the moment

[GoGreen1]

Dip I agree with nearly all of what you say, very neatly put.
Personally I don’t think GGP will pop up with another M&A opportunity in the current circumstances, with so much at stake and so much potential call on the funding available for a prospective purchase of 70% Hav and maybe Telfer.
There seems to be widespread view that Telfer and Hav will be sold. It’s conjecture but I wouldn’t be at all surprised if talks are already underway about a purchase from NEM. As you say all 3 parties should have the data on Hav so why hang around, giant companies like NEM surely have the capacity to take that transaction on? GGP is a special interest purchaser, already owning 30% of Hav.
Like everyone else I don’t know the timelines we will see play out, but it is feasible to see a transaction in the next few months imo, with the ASX listing being used to help fund it alongside more dosh from Wyloo and the banks, whose support SD has previously said was scaleable. An MRE in advance of that would surely help to encourage ASX interest and the sp, as you say.

All speculation, but it’s a fascinating and v important subject to us shareholders, and helps to pass the time as we wait!
Fingers crossed!

[ManFromUruguay]

Great post Dip.
One thing that has bemused me is this notion that not producing an MRE update will somehow keep the price down of any buy out of Hav either way.
As you rightly state any interested parties would have ALL drill results and from this can scale out current known resource and future resource potential uplifted

My main concern as a shareholder is Telfer. Without anything else in the region that is "ore ready" why would anyone take on Telfer when there is the possibility of significant decommissioning costs ? And yet without Telfer, Hav's value is somewhat diminished as would need a new plant built costing time and money?

This is where I feel SD and his BOD may well come in to their own. That knowledge and experience that us SH's don't have will be so important

My hope is that we can either continue "safely" alongside NEM as junior partner or strike a deal to take a higher share that would be accretive and the return on that investment compelling enough to take the extra risk

Hope the above makes sense!

[Rotherby]

( This is a previous post, reworked as things have changed slightly)

I could not agree more whatever Newmont decide we are in the right position.

If they want to hold on to Telfer and Havieron, then we go mining.

Telfer is a liability unless there is ore to process, and even then has a reinstatement cost attached if for sale, that cost will increase with time.

If they want to dispose, we have the last refusal on Havieron, so GGP can buy the 70% back, we know the value of the 70% better than anyone, if anyone is willing to overpay then 'let them', but I would think that knowing GGP's position no one will over bid for Havieron. We do not have to buy Telfer.

Telfer has a negative value with or without Havieron, so to GGP we have Havieron as a plus, and Telfer as a negative, they have to make in interesting enough for us to take Telfer with its liabilities off their hands

However if Telfer ends up different ownership to Havieron what stops GGP using Telfer for the first 8 years it takes to mine the crescent, and then developing their own facility 'on site' for the remainder of the life Havieron.

I am sure Shaun and the team have all these and more options costed out to get the best deal they can which ever way the 'toast' lands.

The result is we go mining, win win.

[Bamps21]

Hi Rotherby
Just one point you say Havieron doesn’t need Telfer but it does need its tailings for the paste backfill. Havieron will not be able to supply enough and maybe at the right moisture consistency to use. If it produces its own it will need a drying plant of some description.
These can be bought by Havieron but at a cost, the transport costs will be a lot higher.
Sending trucks empty to Telfer to pick up the tailings when it could be taking ore to Telfer.

Separating the 2 entities doesn’t look feasible

[Rotherby]

Hi Bamps

We agree separating the two makes very little sense.

But you can never say what situation we would be put in if Newmont decide to divest of the two that they would not be separated (however unlikely).

I that situation anyone buying Telfer would I assume be buying on the cheap, maybe with a contribution to the decommissioning costs, hence negative value, hoping for more discoveries in the area, and to be able to process Havieron ore not something that Newmont could guarantee.

We then have the value of the 70% of Havieron - with no (guaranteed) processing plant) and unless stated no rights to Newcrest technology on which the mining plan(s) have been based (I assume the right to use the technology would be included in the sale).

This is all looking into a crystal ball, but does illustrate that these options seem infeasible as it reduces both values.

Even offered together as GGP's has a right to buy separately the 70% so has to be valued so we can accept or refuse to purchase.

The only sensible option if they are to divest of them is to offer the two together, again given that Havieron in its present form only has a limited life I think there could be a contribution to the decommissioning costs for Telfer in the calculations of the overall value.

Our BOD will know all this and use it to there (our) advantage.
GLA

[Conwy]

The elephant in the room is the exact wording and legal strength of the joint venture agreement. If Newmont succeeds in purchasing Newcrest then they will inherit the JV terms and conditions .
The toll processing of Havieron ore at Telfor part of the agreement is it an intention that is legally binding ( don’t know the answer to that one) ?
So if someone else purchases Telfor will they then be bound by the JV agreement?
As usual there are more questions than answers and I cant wait to find out what will happen

[Jiffy]

Life would be so much simpler, if we all had sight of a copy of the actual NCM/GGP JV agreement in full!

Why has this document never been made available to NCM/GGP shareholders?

Some will say it's for commercial confidentiality reasons?,.Personally I don't agree with this view as such, since they NCM/GGP, have released some pertinent details except for a situation we now find ourselves in.

What we do know, is a right of first refusal, a sunset clause re the DTM I think that is Apr24? according to SD in a not too recent interview.

Was there ever a clause relating to the issue of an MRE on a more regular basis?

However, question in my head right now is , could there be a clause for whereby NCM can legitmately forego any such commitments when faced with a takeover situation?

I sincerely hope not, maybe a question for Shaun at the next earliest opportunity.

[strudel]

Any takeover of any entity is of all assets and liabilities. "Novate" may be the business jargon - or I may have got that wrong - where all legal documents are changed to replace the target's name to the buyer's.

The buyer cannot just rip up any legal agreements or contracts that the target entity has in place, that the buyer doesn't like.

If Telfer is to process HAV ore, charge 10% to do so and it is written in the JV, then any new owner of Telfer would have to honour that.

[DipSard]

My understanding too that Newmont would inherit all rights and obligations of Newcrest's agreements unless something specifically written into agreements saying otherwise and I'm sure that both parties in any legal agreement Newcrest have made would have ensured they had this stitched down much like the 'first right of last refusal' GGP has to match any other bidders for Newcrest's 70% in Havieron.

It would be amateur hour indeed if both GGP/NCM hadn't considered a change of ownership at Telfer or indeed GGP being taken over in the small print.

Shaun stated in an email reply at one point that things remain as they are if Newcrest get bought out, only if someone bids specifically for the remainder of Havieron does the last right of refusal come to the fore vs a complete takeover.

Below is some info. I'd looked at to try and define what this meant:

https://legalvision.com.au/right-of-las ... ansactions

Excerpt:
Right of Last Refusal
A right of last refusal is a preemptive right to receive a particular benefit in preference to any other party. A right of last refusal is embedded into earlier contracts between parties, and gives one party the right to match an offer made by a third party when considering any future transactions.

For example, imagine that you are a manufacturer of car parts. Imagine also that you have previously entered into an agreement with XYZ Motors to manufacture and supply them with 100 units of an exhaust at $1.50 per unit. Your agreement with XYZ Motors contains a right of last refusal for any future orders relating to that same exhaust. XYZ Motors are now in the market for another 150 units of the same exhaust, and have received an offer from ABC Manufacturers to manufacture the exhaust for $1.30 per unit. As you have the right of last refusal granted to you as a continuing obligation from your previous contract, XYZ Motors must present the offer from ABC Manufacturers to you. By doing so, XYZ Motors effectively gives you the opportunity to match that offer and they must refuse the offer from ABC Manufacturers. As a result, XYZ Motors must instead contract with you for the supply of these additional units. Indeed, only if you refuse to match the offer received from ABC Manufacturers can XYZ Motors enter into a contract with them.

How Does This Differ From a Right of First Refusal?
In contrast, a right of first refusal requires that the party receiving the benefit of the right be given the first option to enter into a particular transaction. Only if this party chooses not to exercise their right can the other party then go to market and seek additional offers. You will more likely see a right of first refusal in commercial contracts in comparison to a right of last refusal.
Following on from our previous example, imagine that the contract between you and XYZ Motors contained a right of first refusal. In this case, XYZ Motors would have been obligated to allow you to make an offer first, before seeking offers from third parties.
You may also see a right of last refusal in shareholders agreements. A shareholder wishing to sell their shares must first offer those shares to the other shareholders in the business. If those other shareholders choose not to exercise their option to purchase these shares, only then can the original shareholder look for other offers.

[Jiffy]

Dip/Strudel,

I too have always thought that NEM would naturally import the existing NCM/GGP Hav JV terms and conditions simply by default in their takeover of NCM, and why not one might have reasonably thought? It's not always as simple as that.

I found this paper after some digging about ,AMPLA. https://au.linkedin.com/company/ampla-- ... ssociation.

Definition of Novation
Reduced to its simplest form, a novation is merely a contract between three parties, (NEM,NCM,& GGP) the obligee, the original obligor and the substituted obligor, the effect of which contract is that in consideration of the obligee releasing the original obligor from his obligation, the substitute obligor promises the obligee that he will assume responsibility for the performance of the obligation”.

Page 4: https://www.austlii.edu.au/au/journals/ ... 005/10.pdf



Perhaps Bamp's can ask his Barrister relation? for his opinion, in relation too for example ,GGP's ability for re-negotiation of the JV if so desired ?

[Jiffy]

Updated 2007 version.

https://www.austlii.edu.au/au/journals/ ... 007/24.pdf