Newmont Mining to buy Goldcorp

Newmont Mining to buy Goldcorp

U.S. gold giant Newmont Mining (NYSE:NEM) took a page out of Barrick's book by announcing that is buying Canada's Goldcorp (TSX:G) (NYSE:GG) in a $10 billion-deal that would create the world's largest producer by output, challenging Barrick's recently cemented supremacy. Shareholders of Newmont Mining Corp. will own 65 percent of the combined business, with Goldcorp shareholders owning 35 percent.

The newly formed Newmont Goldcorp shares would look to list on the Toronto Stock Exchange.

The combined company could log gold production of 6 million to 7 million ounces over a decade and recognize $100 million in annual pre-tax savings. Newmont Chief Executive Officer Gary Goldberg will oversee the closure of the transaction and integration of both companies. Based on Newmont's Friday close, that translates to $11.46 per share, a premium of about 18 percent to Goldcorp's Friday close on the New York Stock Exchange.

The stock-for-stock deal comes barely three months after Barrick move on Randgold Resources, which created the world's No. 1 gold company and prompted speculation that rivals would need to respond.

Newmont chairwoman Noreen Doyle will head the board of the combined company, while Goldcorp chairman Ian Telfer will be deputy chairman. Goldcorp shares were up 13% in premarket trading as the announcement was made.

"We see the transaction positively for Goldcorp, resolving short-term Goldcorp guidance risk as well as critical strategic and capital allocation questions", he said in a research note.

The deal has the unanimous support of the directors of both companies but requires regulatory approvals in several countries.

Goldberg said the company expects to generate up to $100 million United States in annualized "synergies" before tax and operate in the Americas, Australia and Ghana.

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