Small toy figure and imitation gold are seen in front of the Newcrest logo in this illustration
A small toy figure and imitation gold are seen in front of the Newcrest logo in this illustration taken November 19, 2021. Reuters

Australia's No. 1 gold miner Newcrest Mining Ltd said it was considering a $16.9 billion takeover offer from U.S. giant Newmont Corp after it had rejected a previous bid, in a deal that would leverage both miners' operations in Australia and Canada.

The all-share offer comes as Newcrest seeks a new boss, with previous chief executive Sandeep Biswas having stepped down in December, and as global interest rates are expected to peak this year and turn down, improving gold price expectations.

The indicative offer price implies a premium of about 21% to Newcrest's last closing value of A$22.45, with Newcrest shareholders receiving 0.380 Newmont shares for every Newcrest share. It is a 4.7% improvement from a previous 0.363 per share offer that Newcrest rejected, the miner disclosed on Monday.

Newcrest shares surged as much as 14.4% to the highest level since May 2022.

"The Newcrest board, together with its financial and legal advisers, is considering the indicative proposal," the Australian gold miner said in a filling that was a response to media speculation over the weekend.

The previous bid had been rejected because it did not provide enough value to shareholders, Newcrest said.

Newmont did not respond immediately to a request for comment.

The deal would be attractive for Newmont considering Newcrest's top class Cadia asset in Australia and its expanding footprint in North America, said Andy Forster, senior investment officer at Argo Investments in Sydney, which owns Newcrest shares.

"It's probably pretty good timing. Newcrest is a bit vulnerable at the minute with its leadership transition," he added.

Newcrest has been expected to announce a new chief executive this year after Biswas announced his retirement after eight years.

Sherry Duhe, formerly chief financial officer, who joined Newcrest in February last year, is interim chief executive while a global internal and external search for a replacement is underway.

Newcrest has been viewed as a target in recent years given its middling performance, but only a handful of buyers are big it enough to take it out, said an investment banker who was not authorised to speak publicly about the matter.

Newmont, with a market value of $39.6 billion, is already the world's biggest gold producer by market capitalisation and by ounces produced. Its last major deal was the $10 billion purchase of Goldcorp Inc in 2019.

The all-share nature of the offer meant the timing is more likely to be linked to Newcrest's leadership vulnerability than a big call on the gold price, but it probably also reflects a constructive view on the precious metal, the banker added.

Risks are growing for gold to break higher, Morgan Stanley in a note on Jan. 16, noting that its macroeconomists were now forecasting lower rates and a weaker U.S. dollar, in tailwinds for the metal.

Morgan Stanley is looking towards a bull case of spot gold reaching $2,160 in the fourth quarter, up from $1,866 an ounce.