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Newmont CEO Admits World's Largest Mining Merger Was Deal He Wanted, Not Needed To Do

Kitco News

(Kitco News) - The creation of the world’s largest gold miner, as Newmont Mining and Goldcorp move forward with their merger plans, was an accretive deal that Gary Goldberg, CEO of Newmont, said he very much wanted to do, rather than needed to do.

“When you look at Goldcorp’s assets and ours, we sit very complimentarily to each other,” Goldberg told Kitco News. “They have some great assets in Canada and in Mexico and in Argentina that fit in well with our operating assets and our global footprint.”

The Newmont-Goldcorp merger was announced earlier in January and will form the world’s largest gold producer by production volume and reserves.

The deal, valued at $10 billion, trumps the previous mega-merger between Barrick Gold and Randgold Resources, which was valued at $5.4 billion.

The combined enterprise value of Newmont Goldcorp is expected to exceed $32 billion, while production will reach 7.8 million ounces, according to company data.

Combined, 24% of the portfolio reserves will come from the U.S., with 27% from Latin America, 14% from Canada, and the rest sourced from Australia, Ghana, and Mexico, the company reports.

“If you just brought the two together, [production] would go up to an excess of 7 million ounces, and what we’re really targeting is to be between 6 and 7 million ounces of gold production a year, probably in the lower end of that. It also brings in some significant by-products in terms of zinc and silver by-products that will be added to the mix,” Goldberg said.

In 2017, gold accounted for $7 billion of Newmont’s sales, or 96% of total revenues, while copper contributed to the remaining 4%.

Goldberg outlined that his corporate strategy for Newmont’s success lies in the company’s ability to be sustainable regardless of where gold prices are headed.

“It really is making sure we apply all the things that we’ve applied at Newmont. Our focus on exploration, I think Goldcorp had been underspending for a while on exploration, so we look forward on increasing that spend and focusing that spend on where we see the best value at,” he said.

Newmont’s share price has fallen 4% year to date but has risen more than 8% off its January lows, following its announcement to merge with Goldcorp.  By comparison, the VanEck Vectors Gold Miners ETF (GDX) rose 3% year to date.  

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