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Newmont buying Goldcorp in US$10B all-scrip deal

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

Essential Metals & Mining Insights - September 2020

Essential Metals & Mining Insights - August 2020

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Newmont buying Goldcorp in US$10B all-scrip deal

Newmont Mining Corp. agreed to buy Goldcorp Inc. in a US$10 billion all-stock deal to create Newmont Goldcorp.

Newmont will acquire each Goldcorp share for 0.3280 of a share, a 17% premium based on the companies' 20-day volume weighted average share price.

The combined company will target US$1.0 billion to US$1.5 billion in divestitures over the next two years to optimize gold production at a sustainable, steady-state level of 6 million to 7 million ounces per year.

Newmont and Goldcorp shareholders will own about 65% and 35% of the combined entity, respectively. Newmont Goldcorp's assets will be based about 75% in the Americas, 15% in Australia and 10% in Ghana.

Goldcorp said separately that it produced 630,000 ounces of gold in the fourth quarter of 2018, a 25% quarter-over-quarter increase, ahead of guidance. Full-year production totaled 2.3 million ounces. All-in sustaining costs for 2018 are expected at about US$850/oz.

Newmont CEO Gary Goldberg said in the Jan. 14 release that the merger is expected to generate up to US$100 million in annual pretax synergies. The combined entity will have the highest reserves and resources in the gold sector, according to the release.

During the merger process, the company will be led by Gary Goldberg as CEO and Tom Palmer as president and COO.

On completion, expected in the fourth quarter, Goldberg will retire and Palmer will become the president and CEO. The board will include equal numbers of directors from Newmont and Goldcorp, with Noreen Doyle as chair and Ian Telfer as deputy chair.

The directors of both companies unanimously approved the transaction, which is subject to shareholder and regulatory approvals in EU, Canada, South Korea and Mexico.

Newmont Goldcorp's shares will be traded on the NYSE. An additional listing is expected on the Toronto Stock Exchange following transaction close.

Goldcorp achieved commercial production in December 2018 at the Pyrite Leach project at its Penasquito mine in Mexico under budget and ahead of schedule. Pyrite Leach is a major part of the Canadian miner's US$420 million investment to improve the processing facilities at Penasquito with the aim of raising the company's production at existing operations by 20% to 3 million ounces of gold by 2021.

BMO Capital Markets, Citi and Goldman Sachs acted as financial advisers to Newmont for the deal. TD Securities and Bank of America Merrill Lynch advised Goldcorp.