Newmont and Goldcorp Set to Form the World’s Largest Gold Company



Transaction highlights

Newmont Mining (NEM) and Goldcorp (GG) held a joint conference call on January 14 to brief investors and analysts about their merger, in which Newmont and Goldcorp shareholders are to own ~65% and ~35% of the combined entity, respectively. The transaction, expected to close in the second quarter of 2019, is set to combine Newmont’s 68.5 million ounces and Goldcorp’s 52.8 million ounces, forming the world’s largest asset base. After selling non-core assets, the new company is expected to maintain annual gold production of 6.0 million–7.0 million ounces.

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Largest reserve and resource base

The combined entity is set to have the world’s largest gold reserve and resource base and highest gold reserves per share. Additionally, the combined company’s assets are set to be located in the world’s most mining-friendly jurisdictions, giving it a competitive advantage.

Asset base in attractive jurisdictions

Among gold miners’ key long-term stock drivers is their assets’ location. Assets located in riskier jurisdictions increase the costs of doing business and vulnerability to local policy changes. Barrick Gold’s (GOLD) Tanzanian subsidiary, Acacia Mining, has been struggling with local tax laws for the last few months, resulting in it not being able to export gold out of the country. Moreover, Kinross Gold (KGC) suffered last year due to its presence in Russia and Africa, which can be riskier regions—growing nationalism increased threats to its business in Africa, and US (SPY) (VTI) sanctions on Russia (RSX) led to a sell-off in its stock.

The main motivation behind the Newmont-Goldcorp merger and others has been to increase shareholder returns. Next, we’ll see how the Newmont-Goldcorp entity plans to accomplish this.


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