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The Street's Jim Cramer Not A Fan Of Newmont-Goldcorp Merger

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(Kitco News) - While Newmont Mining's (NYSE: NEM) announced mega-merger with Goldcorp (NYSE: GG, TSX: G) is once again putting the mining sector in the investment spotlight, some market heavy weights including The Street’s Jim Cramer are not cheering on the deal.

As news of the merger broke, Cramer, said that he preferred the Barrick-Rand (NYSE: Gold, TSX: ABX) gold deal, which closed at the end of the year, because Goldcorp has been a horrible stock to own.

“It’s really poorly run,” he said on CNBC’s Squawk on the Street. “I’m surprised Newmont bought this stock deal.”
Cramer added that Goldcorp is an example of why investors are buying the physical metal or gold-backed exchange-traded funds.

“I don’t think people realize the execution risk at a gold company is incredible,” he said. “You see why people on own gold. Companies seem to have a very hard time keeping their costs down.”

Cramer said that he liked the Barrick Gold-Randgold merger because Randgold is a growth company that is dividend-orientated and has a proven record for making deals in jurisdictions that are seen as unstable.

Brent Cook, the creator of the investment newsletter Exploration Insights, described the deal as Newmont buying a used car.

“NEM is buying a junker in the hopes it can sell off an old transmission and tires, but there is still some gas in the tank,” he said in a Twitter post.

The comments came after Newmont Mining announced that it would merge with Goldcorp in a deal valued at $10 billion. The deal represents a 17% premium for Goldcorp, based on the companies’ 20-day volume-weighted average share prices, officials said.

With the merger, Newmont is expected to regain its title as the world’s largest gold producer, which was briefly given to Barrick gold after taking over Randgold.

While some analysts have said that mega-mergers like the Barrick-Randgold deal and Newmont-Goldcorp deal create some optimism for precious metals prices and the mining sector, others have said they are worried about the impact these deal with have on Canada’s long mining history.

At the start of the year, Pierre Lassonde, former Newmont vice chairman, said in an interview with the Canadian Newspaper, Globe and Mail that Peter Munk, the founder of Barrick Gold, would be “rolling over in his grave at the turn of events.”

In a comment to Kitco News, Frank Holmes, CEO of U.S. Global Investors echoed Lassonde’s sentiment.

“These two deals are not good for Canada,” said Holmes. “They are net flows out. First Randgold then Newmont. The offices in Toronto and Vancouver will shrink.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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