(Minews) - Newmont Mining Corp said on Wednesday it has tentatively agreed to sell its Waihi gold mining operation in New Zealand to OceanaGold Corp for about $106 million plus a 1 percent net smelter royalty on a recent discovery near the mine.
As part of the letter of intent, OceanaGold will acquire all of Waihi's open pit and underground mining assets and liabilities, including all social, environmental and employee obligations, Newmont, the biggest U.S. gold miner, said in a statement.
The deal is subject to board, regulatory and other approvals.
Hit by weaker precious and base metals prices, Newmont and its peers in the past two years have been selling off non-core operations in an attempt to cut debt and focus on their most profitable assets.
The $106 million price tag comprises $101 million in cash and a $5 million contingent payment.
The Waihi mine, about 150 km (94 miles) southeast of Auckland, produced about 132,000 ounces of gold in 2014, and will fit well with OceanaGold's other mines in New Zealand.
"The investment in Waihi really is an investment in what we see as a high-quality, low-cost, long-life asset," OceanaGold Chief Executive Mick Wilkes said on Thursday.
OceanaGold expects to reap savings by sharing expertise between Waihi and its Frasers mine in New Zealand as well as its Didipio mine in the Philippines.
"We see this as a good deal for Newmont as it rationalises another higher-cost, non-core asset at a value greater than our net asset valuation of $75 million for Waihi," Barclays analyst Farooq Hamed said in a note.
OceanaGold said it expected to pay for the acquisition using cash and debt.
It would continue chasing deals to fulfil its ambition of becoming a multi-billion dollar, mid-sized gold miner with low operating costs.
"We remain open to possibilities and still have the financial capacity to do further deals," Wilkes told reporters on a conference call.
He did not rule out a bid for Barrick Gold's Cowal mine which is up for sale in Australia.
"It's in the right part of the world and we're looking in Asia and the Pacific area and in the Americas," he said.
