Newmont shareholders OK Goldcorp deal

The Eleonore gold mine 320 km north of Matagami in the James Bay region of Quebec. Source: Goldcorp Inc.

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The Eleonore gold mine 320 km north of Matagami in the James Bay region of Quebec. Source: Goldcorp Inc.

Newmont Mining Corp. [NEM-NYSE] shareholders have approved the company’s $10 billion takeover of Goldcorp Inc. [G-TSX; GG-NYSE]. The combined company, called Newmont Goldcorp., will rank as the world’s biggest gold producer with assets across the Americas, Africa and Australia.

About 98% of votes cast at a special meeting were in support of Newmont’s proposal to issue new stock to fund its takeover of Goldcorp, the Denver-based company said in a statement. The same percentage of Goldcorp shareholders have already greenlighted the deal.

Under the terms of the agreement, Newmont will acquire each Goldcorp share for 0.3280 of a Newmont share and $0.02 cash for each Goldcorp share. Newmont and Goldcorp shareholders will own 65% and 35% of the combined company, respectively.  The deal is expected to close on April 18, 2019.

Once that happens, Newmont Goldcorp expects to begin delivering US$365 million in expected annual pre-tax synergies, supply chain efficiencies and full potential improvements, representing US$4.4 billion in net present value (pre-tax).

On Friday, Newmont shares rose 0.50% or US$0.18 to US$36.15 on volume of over 5.0 million. The 52-week range is US$29.06 and US$41.98. Newmont is currently the only gold producer listed in the S&P 500 Index. Newmont was founded in 1921 and has been publicly traded since 1925.

“This combination creates the world’s premier gold company,” said Goldcorp President and CEO David Garofalo.

By combining their operations, the duo are seeking steady profitable gold production and targeting between 6.0 million and 7.0 million ounces of steady gold production over a decades long time horizon.

The combined entity will also have the largest gold reserves and resources in the gold sector.

The merged entity is aiming for a sustainable annual dividend of $0.56 per share, the highest among senior gold producers.

Meanwhile, Newmont Goldcorp will seek to shed up to $1.5 billion worth of assets over the next two years, enabling it to function with a more reasonable size and stable production level. It will be looking to achieve up to $100 million in annual pre-tax synergies.

Newmont CEO Gary Goldberg will lead the combined company, while Newmont chief operating officer Tom Palmer is expected to hang onto that role.

The companies said Goldcorp’s Vancouver headquarters will become a regional office and a base for some of the combined entity’s global functions, including oversight of Indigenous community relations.

Newmont is merging with Goldcorp at the tail end of what has been a steep decline in the value of Goldcorp’s shares from $54 in 2011.

Back in October, 2018, Goldcorp lost almost one fifth of its market value in a single day after reporting weaker than expected production numbers, rising costs and declining reserves.

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