Newmont Mining’s (NYSE: NEM) shareholders have given the gold miner consent to complete its acquisition of Goldcorp (G.TO). According to a press release issued by Newmont, around 98% of the shareholder votes were in favor of the deal that looked in jeopardy earlier. The press release said:
“Newmont shareholders approved the increase in Newmont’s authorized common stock with more than 76 percent of the outstanding shares voting for the proposal and approved the issuance of shares pursuant to the transaction with more than 98 percent of the votes cast for the proposal.”
Certain Newmont shareholders were opposing the deal earlier as they believed Goldcorp’s shareholders were getting a rosier deal after the former struck a joint venture deal with Barrick Gold to jointly conduct their Nevada operations. Newmont rescued the day with a special dividend of $0.88 per share that was payable only on completion of the deal.
The dividend cost Newmont around $470 million and will be paid out on May 1 to shareholders of record as on April 17. But it was enough to win over those revolting investors who believed that Goldcorp shareholders would get an unfair benefit from the synergies of the Barrick joint venture.
Goldcorp shareholders had already voted overwhelmingly in favor of the transaction on April 4.
The world’s biggest gold miner is born
The approval from Newmont shareholders now creates the world’s largest gold mining company – Newmont Goldcorp. The combined corporation will have mining operations across Ghana, Australia, and the Americas, and could produce between 6 million and 7 million ounces of gold every year for the next decade and beyond.
Newmont management believes that the company now has an opportunity to create massive value. According to Gary Goldberg, Chief Executive Officer of Newmont:
“We thank Newmont’s shareholders for their overwhelming support for this compelling value creation opportunity as we build the world’s leading gold company.”
Newmont Goldcorp will also shed assets to the tune of $1 billion to $1.5 billion in the next couple of years, while achieving annual cost savings to the tune of $100 million. The transaction will officially close in the current quarter, and will be immediately accretive to Newmont’s net asset value by 27%. Moreover, the combined company’s cash flow per share is expected to rise by 34% in 2020.
The deal will also help Newmont Goldcorp deliver annual pre-tax synergies of $365 million, while creating $4.4 billion in net present value thanks to supply chain efficiencies and other improvements. Also, Newmont Goldcorp’s projects will have an internal rate of return of 15%, along with an investment-grade balance sheet.
Newmont CEO Gary Goldberg will initially lead the combined company until his retirement at the end of the year, following which Newmont’s chief operating officer, Tom Palmer, will take over the reins.
With gold prices rising of late on account of improving demand and a decline in discoveries, Newmont Goldcorp will be in a great position to boost its business as it will be able to increase production and keep costs under check. As such, investors of the combined company could enjoy strong upside in the future.
