Newcrest to raise $655 million for Fruta del Norte mine gold royalty stream

Australia’s Newcrest Mining plans to increase its exposure to rising gold prices by raising US$655 million to acquire financing facilities for Lundin Gold’s Fruta del Norte gold mine in Ecuador.

Australia’s biggest listed gold producer announced the institutional placement at the same time as it reported a 16.7% slump in quarterly gold output, missing analyst expectations.

Newcrest said it planned to issue about 39.1 million new shares and use the funds to buy financial instruments worth 34% of free cash flow from the part-owned Fruta Del Norte mine over the next five years.

The raise would also be used for growth options at its Red Chris operations in Canada and Haverion project in Western Australia.

Chief executive Sandeep Biswas on Thursday said the ASX-listed company was ‘entering a growth phase’ with a healthy balance sheet and a strong porfolio of assets. Acquiring the royalty stream at Fruta del Norte would give Newcrest exposure to an additional 400,000 ounces of gold, he added.

“With gold prices at the levels we see today, Newcrest expects to receive significant cash flows,” said Biswas.

Gold prices rose by 3.6% in the March quarter amid a rush for the safe haven metal following the COVID-19 outbreak. Gold ETFs also saw the highest quarterly inflows in four years amid the global uncertainty, according to the World Gold Council’s latest demand trends report.