Newmont to buy Goldcorp in all-stock deal valued at US$10B


U.S. gold giant Newmont Mining (NYSE:NEM) took a page out of Barrick's book by announcing that is buying Canada's Goldcorp (TSX:G) (NYSE:GG) in a $10 billion-deal that would create the world's largest producer by output, challenging Barrick's recently cemented supremacy.

The two massive gold transactions have the potential to boost investor interest in an industry that has fallen out of favour after years of weak metal prices, dubious investments and failed deals.

Goldcorp shares surged in US pre-market trading, climbing 11% to $10.71 as of 7:29 NY.

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Newmont and Goldcorp were "clearly not willing to sit back and let Barrick take the limelight", said Kieron Hodgson, a natural resources analyst at Panmure Gordon in London.

The deal will create a company that runs mines in the Americas, Australia, and Ghana and exceeds Barrick-Randgold in scale, producing about 7.9 million ounces of gold a year. Newmont shares slipped 3 per cent.

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The companies announced Monday that Newmont will exchange 0.328 of a share and two cents in cash for each of Goldcorp's outstanding common shares. In 2017, Newmont produced 5.3 million ounces of gold, while Goldcorp mined 2.6 million ounces. That deal had a final value of about $9.9 billion when it closed in 2006, according to data compiled by Bloomberg.

As part of the transaction, Newmont has committed to sell between $1 billion to $1.5 billion worth of assets over the next two years. Newmont also promised initial cost savings from the merger of US$100 million a year.

The promise of unloading assets, something Barrick is also expected to do, will have repercussions for the industry as a host of mines are likely to be put up for sale.

"I can see a new wave of mid-tier producers being spawned from assets deemed sub-economic by the two 'giants, '" said Hodgson.

The new gold miner will be led by Newmont's Chief Executive Officer Gary Goldberg, who is retiring by the end of the year.

Newmont has retained BMO Capital Markets, Citigroup Inc. and Goldman Sachs Group financial advisers, while Goldcorp has TD Securities and Bank of America Merrill Lynch.