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Newmont To Acquire Goldcorp In $10 Billion Deal

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(Kitco News) - Newmont Mining Corp. (NYSE: NEM) will acquire Goldcorp Inc. (TSX: G, NYSE: GG) in a mostly all-stock transaction, the gold-mining giants announced Monday.

Under the deal, Newmont will acquire each Goldcorp share for 0.3280 of a Newmont share, which puts the total value of Goldcorp shares at $10 billion. This will represent a 17% premium for Goldcorp, based on the companies’ 20-day volume-weighted average share prices, officials said.

Newmont will also pay 2 cents per share.

The new company will be named Newmont Goldcorp.

This is the second blockbuster merger in the gold-mining industry in recent months. Barrick Gold Corp. (NYSE: GOLD; TSX: ABX) acquired Randgold Resources Ltd., with the deal effective at the start of the year, to create a new Barrick that had a market capitalization of nearly $24 billion on the first day of trading.

The Newmont-Goldcorp merger “will create the world’s leading gold business with the best assets, people, prospects and value-creation opportunities,” said Gary Goldberg, Newmont’s chief executive officer.

He later added: “We expect to generate up to $100 million in annual pre-tax synergies, with additional cost and efficiency opportunities that will be pursued through our proven full potential continuous improvement program. The combination is expected to be immediately accretive to Newmont’s net asset value and cash flow per share.”

The companies said Newmont Goldcorp will offer shareholders the largest gold reserves per share in countries considered to have favorable mining jurisdictions, as well as the highest annual dividend among senior gold producers. Newmont Goldcorp will target a sustainable annual dividend of 56 cents per share.

Goldberg said the merged company will have a “stable and profitable gold production” of 6 million to 7 million ounces annually over a decades-long time horizon. In 2017, Newmont output was 5.3 million ounces and Goldcorp’s was $2.6 million.

The merger announcement said the new company will prioritize project development based on returns and risk, while targeting $1 billion to $1.5 billion in divestitures.

“The strategic rationale for combining Goldcorp with Newmont is powerfully compelling on many levels, and both teams are fully committed to delivering on the transaction’s value proposition for all of our stakeholders,” said Goldcorp’s president and chief executive officer, David Garofalo.

The announcement said Goldberg will lead Newmont Goldcorp through closure of the transaction and integration of the two companies. This should be “substantially completed” in the fourth quarter, the companies said. At that time, Tom Palmer, who will be president and chief operating officer, will become president and CEO of the new company.

The board of directors will be proportionally comprised of Newmont and Goldcorp directors, with Noreen Doyle as chair and Ian Telfer as deputy chair, the companies said. The company will be headquartered in Colorado, where Newmont is based. Goldcorp’s Vancouver office will become Newmont Goldcorp’s North America regional office.

Newmont Goldcorp’s shares will be traded on the New York Stock Exchange under Newmont’s ticker symbol NEM. The new company also will be listed for trading on the Toronto Stock Exchange once the transaction closes.

Under the deal, Newmont shareholders will hold 65% of the new company, while Goldcorp shareholders will hold 35%, officials said.

Officials said the boards of both companies have unanimously approved the merger. The transaction is expected to close in the second quarter. This is subject to approval by shareholders, regulatory approvals and other customary closing conditions.

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