NNewmont Mining Corp is set to acquire Goldcorp Inc in a US $10Bn deal. This move, according to media reports, will no doubt create the world’s biggest gold producer by output. This deal is the second high-profile merger in the mining industry since Barrick Gold Corp agreed to buy Randgold Resources Ltd in September last year in a move to cut costs.
The gold mining industry has come under fire from investors over the past few months for poor management of capital. This, combined with falling gold reserves and higher extraction costs have prompted miners to look for cost efficiencies.
Goldcorp Chief Executive Officer David Garofalo said that the strategic rationale for combining Goldcorp with Newmont is powerfully compelling on many levels. He further explained that the combined company is expected to produce 6-7m ounces of gold over the next 10 years. In 2017, Newmont and Goldcorp produced 5.3m and 2.6m ounces of gold respectively.
Newmont will offer 0.3280 of its share and US $0.02 for each Goldcorp share. Based on Newmont’s Friday close, that translates to US $11.46 per share, a premium of about 18%to Goldcorp’s Friday close on the New York Stock Exchange.
The companies said that the combined company’s reserves and resources will represent the largest in the gold sector and will be located in favorable mining jurisdictions in the Americas, Australia and Ghana. According to media reports, Goldcorp’s U.S.-listed shares were up 13% before the bell on Monday while Newmont Mining’s shares were down 2.6%.