Hedge funds slash bullish wagers on gold over Trump election win
Hedge funds and other large speculators boosted net-long positions by 11% to 197,362 as of Nov. 12, the lowest in 14 weeks.
Newmont Goldcorp Corp. is ready to sit tight on asset sales, even if that means not reaching a previously announced goal of as much as $1.5 billion in divestments.
That’s according to Tom Palmer, the company’s incoming chief executive officer. The world’s largest gold producer will be focusing on optimizing its current assets and is happy overall with its portfolio, other than a previously announced sale of Red Lake in Canada, he said.
Now companies are turning their focus to “managing their businesses”
“We’re in no rush to sell anything,” Palmer said in an interview Tuesday at the Denver Gold Forum. “There will be no fire sale in Newmont Goldcorp.”
That’s a change of tone. Outgoing CEO Gary Goldberg said earlier this month Newmont was still planning to divest up to $1.5 billion in assets following its $10 billion acquisition of rival Goldcorp in April, taking advantage of higher gold prices.
On Tuesday, Palmer said the company was forging ahead with its planned sale of Red Lake, a former Goldcorp asset, and has fielded interest from about a dozen parties. He also said any additional sales would only come after careful study, and Newmont was ready to do more work to understand what value can be “extracted” from the assets.
“There are assets that we are looking to optimize, and we’ll spend two to even three years to understand them,” he said. “There’s absolutely no pressure to sell assets to generate cash.”
Newmont’s seeming step back from divestments fits an overall cautious tone at the Denver conference. Even with gold prices trading above $1,500 an ounce and reaching a six-year high earlier this month, in presentations and interviews mining executives have expressed a desire to be disciplined when it comes to deal making. Many, including Palmer, also stressed they’re still working to ensure their businesses can be profitable based on the assumption of a $1,200 gold price.
In an interview with Bloomberg Television, Palmer said there hasn’t been much discussion of mergers and acquisitions at the Denver Gold Forum. That runs counter to what some analysts were expecting before the conference. Newmont’s mega-merger with Goldcorp along with Barrick Gold Corp.’s purchase of Randgold Resources Ltd. helped drive M&A in the sector to $18.2 billion in 2019, the highest level in eight years, according to data compiled by Bloomberg.
Now companies are turning their focus to “managing their businesses,” Palmer said.
Newmont would consider buying Barrick’s stake, and it would also be open to selling its half
Palmer said Newmont, which owns 50% of the Kalgoorlie Super Pit in Australia, wasn’t aware how much progress Barrick had made in its planned sale of its half of the mine.
“We support them in terms of we’ll provide information as we’re the manager of the operation, but we’re not privy to the process they’re running,” Palmer said of Barrick’s planned sale.
Newmont would consider buying Barrick’s stake, and it would also be open to selling its half, as Barrick CEO Mark Bristow has suggested might make sense.
“If we can get the other half at a right price, we’ll always be interested in buying,” Palmer said. “If someone comes to us with a compelling value, we’ll consider that,” he said of Kalgoorlie.
“But apart from that, we are focused on optimizing and realizing its value,” and the company is also “happy” to work with a new partner, as they’ve done with Barrick, he said.
Palmer will succeed Goldberg as CEO on Oct. 1. as part of a previously announced succession plan.
Palmer has played a central role in leading the Newmont-Goldcorp integration and the establishment of the joint venture with Barrick in Nevada, Newmont said in a statement last week. Palmer has a strong mining pedigree, but is less of a public figure than Barrick’s Bristow, whose colorful quotes have regularly established him as part of the news cycle. He and Bristow will need to cooperate as they implement a sweeping joint venture in Nevada.
In terms of his mandate as CEO, Palmer said his first priority is “safety of our people.”
“Second one for me, it’d be growing our margins, making sure we’re operating on our technical and financial discipline,” he said. “Third one is growing our reserves and resources through our exploration programs. Fourth, optimizing our project pipeline. The fifth one is to maintain our capital allocation discipline. If we are generating additional free cash because of gold prices, we may start paying down debts.”
(By Vinicy Chan and Millie Munshi)
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