Per a letter issued by the government of Korea, the proposed combination of the two gold mining companies does not violate Article 7 (1) or Restriction on Business Combination of the Monopoly Regulations and Fair Trade Act.
Notably, the Canadian Competition Bureau also issued a “no action” letter this month, approving the proposed deal under Canadian competition law. The companies are continuing to cooperate with other regulatory agencies to obtain the remaining approvals conditional to deal closing.
The parties’ shareholder votes are due in April and the companies are focused on progressing with plans to ensure a smooth and safe combination.
Expected Benefits of the Merger
The deal is expected to close in second-quarter 2019. Post deal closure, the combined entity – Newmont Goldcorp — will be immediately value-accretive to Newmont’s cash flow and net asset value per share. It is projected to generate an expected $75 per ounce in full potential efficiency and cost improvements. This represents annual expected benefits of roughly $165 million per annum.
Moreover, annual pre-tax synergies and full potential benefits are expected to be $265 million, representing value creation potential of more than $2.5 billion. The combined entity plans to generate around 6-7 million ounces of gold over decades-long time horizon. They are also expected to have the largest gold resources and reserves in the industry, including on a per share basis. Favorable mining jurisdictions along with prolific gold districts on four continents are additional advantages.
The combination will offer financial flexibility along with an investment-grade balance sheet that will ensure advancement of promising projects. Newmont Goldcorp is expected to generate a targeted IRR of minimum 15% and deliver the highest dividend among other senior gold producers.
Background of the Deal
In January 2019, Newmont entered into a definitive deal with Goldcorp to acquire all of the outstanding common shares of the latter in a stock-for-stock transaction valued at $10 billion.
Per the terms, Newmont will acquire each Goldcorp share for 0.3280 of a Newmont share. The deal combines two industry leaders, creating an unmatched portfolio of projects, operations, reserves and exploration opportunities in the gold mining sector.
Zacks Rank & Other Key Picks
Newmont currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the basic materials space include Kirkland Lake Gold Ltd. (KL – Free Report) and Ingevity Corporation (NGVT – Free Report) , both currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kirkland has an expected earnings growth rate of 20.9% for 2019. The company’s shares have surged 127.3% in the past year.
Ingevity has an expected earnings growth rate of 17.9% for 2019. The company’s shares have surged 40.4% in a year’s time.
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