Earlier this week, Newmont Mining (NEM) rocked the gold world when it announced its $10 billion purchase of Goldcorp (GG).
The all share deal will give each Goldcorp shareholder nearly a 1/3 share of Newmont.
Not having much to cheer about, Goldcorp shareholders (I didn’t own any) will be happy to take the 17% premium. But it’s a better deal for shareholders than the rumored Newcrest Mining deal. It was offered to the board of Goldcorp at no premium just before Christmas.
When this deal is complete, Newmont/Goldcorp will be the largest producing gold company in the world. It will pump out between 6 and 7 million ounces of gold every single year for at least a decade.
Newmont will also strengthen its balance sheet through operational efficiencies which could add up to $100 million and noncore dispositions that will occur post merger (shares in juniors, non-core assets, etc).
Newmont is Preparing for the Next Bull Market in Gold
This isn’t a short sighted move by the aptly named Gary Goldberg, CEO of Newmont.
Newmont recognizes the core value of Goldcorp’s flagship assets. No question Goldcorp made some missteps and there will be a lot cut from the combined entity in the next 24 months. But when the gold price rises in the next gold bull market, this could look like a genius purchase.
Shares of Goldcorp got slaughtered since 2011. Take a look at this multi decade low in late 2018…