Newmont to pay a 17% premium for Goldcorp
Newmont Mining (NEM) has agreed to pay a 17% premium to acquire stock from Goldcorp (GG), which has been struggling for over a year to meet market expectations. Investors may be comparing this purchase price with Barrick Gold (GOLD) and Randgold Resources’ recent no-premium deal. Worsening the situation is Goldcorp’s recent performance, which has disappointed investors and analysts.
Goldcorp’s disappointing performance
In fact, Goldcorp missed analysts’ expectations in last year’s first three quarters. When it reported its Q3 2018 results, it downgraded its 2018 production and unit cost guidance because of its weak operational performance year-to-date. The company’s three consecutive quarters of disappointing results and missed expectations drove a sell-off in Goldcorp stock on October 25, prompting the stock to fall more than 18.0%. Whereas GG fell 23% last year, the SPDR Gold Shares ETF (GLD) fell 1.9% and the VanEck Vectors Gold Miners ETF (GDX) fell 9.3%. Newmont stock outperformed peers, falling just 7.6%.
GG up, NEM down
As investors may see the deal as better for Goldcorp than Newmont, and it was an all-stock deal, GG stock rose 7.5% on January 14, while NEM stock fell 8.9%. Next, we’ll discuss the merger’s details and conference call highlights after the merger.