Newmont Goldcorp’s price performance
Newmont Goldcorp (NEM) has gained 4.4% YTD as of June 10, slightly outperforming the SPDR Gold Shares (GLD), which has returned 3.4% in the same period. The VanEck Vectors Gold Miners ETF (GDX), on the other hand, has returned 6.5% in the same period. NEM’s performance versus its peers has been mixed, outperforming some while underperforming others.
As we highlighted in Newmont (NEM) and Goldcorp Merge, Forming the World’s Largest Gold Company, the merger of Newmont and Goldcorp was completed on April 18 and resulted in the creation of the world’s largest gold miner. This merger combined Newmont’s 68.5 million ounces and Goldcorp’s 52.8 million ounces to form the world’s largest asset base.
During NEM’s Q1 conference call, its CEO Gary Goldberg stated that the company is only expecting to generate $365 million in annual pre-tax savings. These savings would be mainly due to the general and administration synergies, supply chain efficiencies, and full potential improvements. Combined, the above-mentioned efforts could lead to the potential value creation of $4.4 billion.
Increased shareholder returns
Both the companies identified increased shareholder returns as the main motivation behind the merger. The combined company is set to deliver stable free cash flow from steady production and an improving cost profile. It is also expected to unlock further value through project sequencing, portfolio optimization, exploration, and divestments. The company is expected to deliver the highest dividend among senior gold producers.