Newmont’s underperformance

Newmont Mining (NEM) stock returned 3.2% in the first quarter, almost half the gains in the VanEck Vectors Gold Miners ETF (GDX) in the same period. It also underperformed its peers (NUGT) Goldcorp (GG), Agnico Eagle Mines (AEM), and Yamana Gold (AUY).

Newmont Stock Will Take Cues from Its Goldcorp Merger Execution

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Newmont underperformed during the first quarter despite its earnings beat in its fourth-quarter results. Its EPS of $0.40 beat the consensus estimate by $0.16. Its revenue of $2.05 billion also beat the estimate by 9.0%.

Investors’ take on the NEM-GG merger

As we highlighted in Could the Newmont-Goldcorp Merger Form ‘The Go-To Gold Equity,’ investors weren’t happy with Newmont’s offer of a 17% premium on Goldcorp stock, which has been struggling to meet market expectations for over a year. Investors may see the deal as better for Goldcorp than Newmont. They may also be comparing this purchase price with Barrick Gold (GOLD) and Randgold Resources’ recent no-premium deal.

Future price action

While analysts and investors were unhappy with NEM’s offering a premium to Goldcorp, the combined company’s future price action will depend on how NEM is able to justify the premium through the execution of the merger. NEM will also need to assure investors that it can turn Goldcorp’s weaker assets around or sell them for a reasonable price.

Most of the obstacles for Newmont in terms of its Goldcorp merger seem to be in the rearview. Check out Will Newmont Investors Approve GG Merger after Special Dividend? for details on the merger’s timeline and recent developments.

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