According to Thomson Reuters, of the 16 analysts covering Newmont Mining (NEM), 56.0% have given it “buy” recommendations, 31.0% have given it “holds,” and 13.0% have given it “sells.” Its target price implies a potential upside of 26.0% based on its current price of $31.
Newmont Mining (NEM) and Goldcorp (GG) announced their merger on January 14. As we discussed in Could the Newmont-Goldcorp Merger Form ‘The Go-To Gold Equity’? Newmont agreed to pay a 17% premium to acquire stock from Goldcorp (GG), which has been struggling to meet market expectations for over a year. Therefore, investors and analysts view this deal as better for Goldcorp than Newmont. Newmont stock fell 11.3% in the two trading days after the announcement of the merger. Goldcorp stock, on the other hand, rose 5.4% in the same period.
According to BNN Bloomberg, Maison Placements Canada analyst John Ing said, “Newmont has some difficult times ahead with drastic surgery needed at Goldcorp,” adding, “In the short term and medium term, the deal is not good for Newmont.”
Not all analysts are pessimistic, though. VanEck International Investors portfolio manager Joseph Foster told Bloomberg that although the premium paid by Newmont overvalues Goldcorp’s assets, NEM could recover if the company “shows it can manage those assets over time.”
A lot of the future price action in the stock will depend on NEM’s post-merger project execution. Newmont will also need to assure markets that it can turn Goldcorp’s weaker assets around or sell them for a reasonable price.