Newmont Mining (NYSE: NEM) announced that they intend to acquire Canada’s leading gold miner, Goldcorp (TSE: G), in a transaction estimated at over $10 billion. If the deal goes through, the combined entity will become the world’s largest gold mining company.
The takeover announcement comes as large gold companies are trying to revive their appeal after being shunned by investors due to disappointing returns in the sector, seemingly excessive executive pay, large-scale frivolous spending, and other issues. At the same time, many industry experts think there are too many gold companies given the size of the sector, and that consolidations are much needed going forward.
“The industry is in full consolidation mode,” said Numis Securities analyst Jonathan Guy according to The Financial Times. “The big question is, who is next?” The announcement from Newmont follows Barrick Gold’s previous announcement back in September of a $6 billion acquisition of Randgold Resources – a move that shocked the industry at the time. The upcoming Newmont/Goldcorp merger, however, would eclipse Barrick/Randgold as the owner of the largest gold reserves on the planet by a margin of 50 percent.
“This combination creates the world’s premier gold company. In addition to the depth and quality of Newmont Goldcorp’s operations, projects, exploration properties and Reserves, the combined company’s assets will be centered in the world’s most favorable and prospective mining jurisdictions and gold districts,” said Goldcorp President and CEO David Garofalo. “The strategic rationale for combining Goldcorp with Newmont is powerfully compelling on many levels, and both teams are fully committed to delivering on the transaction’s value proposition for all of our stakeholders. Newmont Goldcorp will be one of Canada’s largest gold producers and will have its North America regional office in Vancouver, and expects to oversee more than three million ounces of the combined company’s total annual gold production.”
The combined entity will be 60 percent owned by Newmont shareholders and plans to divest almost $1.5 billion worth of assets over the next two years as the company sets its annual production targets of 6 to 7 million ounces.
Newmont shares dropped 8.9 percent today in light of the news, while Goldcorp’s short up 7.5 percent.
Newmont Mining Company Profile
Newmont is a leading gold and copper producer. The Company’s operations are primarily in the United States, Australia, Ghana, Peru and Suriname. Newmont is the only gold producer listed in the S&P 500 Index and was named the mining industry leader by the Dow Jones Sustainability World Index in 2015, 2016, 2017 and 2018. The Company is an industry leader in value creation, supported by its leading technical, environmental, social and safety performance. Newmont was founded in 1921 and has been publicly traded since 1925. – Newmont
Goldcorp Company Profile
Goldcorp Inc. operates as a gold producer that engages in the acquisition, exploration, development, operation, and reclamation of precious metal properties in Canada, the United States, Mexico, and Central and South America. The company sells gold, silver, zinc, copper and lead. The company’s principal product is gold ore with the refined gold bullion sold primarily in the London spot market. In addition to gold, the company produces silver, copper, lead and zinc primarily from concentrate produced at the Peñasquito Mine and Alumbrera Mine, which is sold to third-party smelters and refineries. – Bloomberg