An Indonesian investor group consisting of oil and gas tycoon Arifin Panigoro and banker Agus Projosasmito will spend $2.6bn to buy 82.2% of Newmont Nusa Tenggara (NNT), which operates Indonesia’s second-biggest copper and gold mine.
The deal, announced on Thursday, highlights how a slump in commodity prices due to oversupply and slowing demand in China has made asset valuations more attractive, spurring merger and acquisition activities.
The Indonesian group, under Amman Mineral Internasional, is buying 56% of NNT from US miner Newmont Mining Corp and Japan’s Sumitomo Corp and its partners.
It will buy the remaining 26.2% from local companies.
Newmont will get $920mn when the deal closes and $403mn triggered by higher copper prices and mine developments. Sumitomo will receive ¥36bn ($350mn) at closing and an additional ¥21bn if conditions are met.
The deal is expected to be finalised in the third quarter.
Newmont, the world’s second-biggest gold miner by market value, said the transaction will help it reduce risk and debt, while funding projects that it forecasts will add up to 1mn ounces of gold production in the next two years.
“After deal close, about three-quarters of our production and reserves will be located in the United States and Australia,” CEO Gary Goldberg said on a conference call.
RBC analyst Stephen Walker said the sale is positive for Newmont partly due to its future capital commitments.
Multi Daerah Bersaing, owned by Indonesia’s Bumi Resources Minerals and local governments, holds 24% of NNT.
Pukuafu Indah holds 17.8% and Indonesia Masbaga Investama owns 2.2%. Multi Daerah Bersaing has signed a conditional agreement to sell its entire stake.
Panigoro, who founded oil and gas firm Medco Energi, has said his group has President Joko Widodo’s blessing to buy NNT as it is in the “national interest”. Energy Minister Sudirman Said told reporters yesterday that the NNT deal is a business-to-business transaction, but it is “a good development especially because the one taking over is a national company.”
The NNT acquisition is supported by state-controlled lenders Bank Mandiri, Bank Negara Indonesia and Bank Rakyat Indonesia, Medco said.
However, the Indonesian group’s ambition to fully own NNT may be hampered by a lawsuit surrounding Pukuafu.
Earlier this year, Indonesian businessman Gustaaf Merukh asked a Jakarta court to freeze Pukuafu’s 17.8% stake. Newmont shares rose 3.8% after the deal was announced.
In early yesterday trade, Medco surged 20%, Bumi Resources Minerals jumped 8% and Sumitomo gained 0.7%.