The largest producer by output in the world would be created following the acquisition by Newmont Mining of its smaller rival Goldcorp. Newmont announced that the deal would be valued at $10 billion.
This is the second large reorganization in the mining industry in recent times, following the announcement of the acquisition of Randgold Resources Ltd by Barrick Gold in September of 2018. That deal was aimed at reducing costs and increasing production.
There has been intense criticism by a section of investors about the global gold mining industry in recent months as the mining companies have been accused of inefficient management of its assets and capital resulting in loss of share value and a consequent loss to shareholders. Mining companies in the business have therefore been forced to seek out new and better routes to reduce costs of operations as they have also been imposed additional pressures from a drop in the global prices of gold and higher costs of extraction of the precious metal.
Goldcorp Chief Executive Officer David Garofalo said in a statement: “the strategic rationale for combining Goldcorp with Newmont is powerfully compelling on many levels.”
It is expected that the over the next 10 years, the new entity following the merger would be able to produce between 6 million to 7 million ounces of gold every year. While Goldcorp mined 2.6 million ounces of gold in 2017, Newmont churned out 5.3 million ounces of gold in the same period.
0.3280 of its share and $0.02 for each Goldcorp share would be offered by Newmont. That translates to $11.46 per share, where the value is based on Newmont’s Friday close, which is a premium of about 18 percent to Goldcorp’s Friday close on the New York Stock Exchange.
The companies said that following the merger, the new entity would possess the largest reserves and resources globally in the gold mining sector and that their operations would be located in the favorable mining jurisdictions and areas in the Americas, Australia, and Ghana.
There was a 13 per cent rise in the shares of Goldcorp’s U.S.-listed shares on Monday before the bell while a 2.6 per cent fall in the share prices of Newmont Mining was recorded after the announcement of the deal.
(Adapted from FT.com)