Newmont to acquire Goldcrop for $10 billion

In a deal that will create the world’s largest gold producer, Newmont has agreed to buy its US-based rival Goldcorp, as consolidation increases in the sector.

Gold Bars Source: Bloomberg

Newmont Mining Corp announced that it will acquire its smaller rival Goldcorp in a deal worth around $10 billion.

The acquisition will create the world’s largest gold producer by output and comes hot on the heels of another major deal in the sector, notably Barrick Gold’s decision to acquire Rangold Resources, which was announced in September last year.

This combination will create the world’s leading gold business with the best assets, people, prospects and value-creation opportunities,’ Newmont CEO Gary Goldberg said.

‘We expect to generate up to $100 million in annual pre-tax synergies, with additional cost and efficiency opportunities that will be pursued through our proven full potential continuous improvement program.’

‘The combination is expected to be immediately accretive to Newmont’s net asset value and cash flow per share,’ he added.

Gold producers consolidate to improve cost efficiencies

The gold mining industry has struggled to satisfy investors, who have become frustrated with its mismanagement of capital over the last few months.

The sector has also had to ensure declining gold reserves and rising costs of extraction for the precious metal.

This concoction of headwinds has spurred many players in the industry to look at cost-savings measures and improve overall efficiencies of doing business, with consolidation viewed as a simple solution for some.

‘This combination creates the world’s premier gold company,’ Goldcorp President and CEO David Garofalo said. ‘In addition to the depth and quality of Newmont Goldcorp’s operations, projects, exploration properties and Reserves, the combined company’s assets will be centred in the world’s most favourable and prospective mining jurisdictions and gold districts.’

The strategic rationale for combining Goldcorp with Newmont is powerfully compelling on many levels, and both teams are fully committed to delivering on the transaction’s value proposition for all of our stakeholders,’ he added.

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