Newmont’s $10bn Acquisition of Goldcorp

By Marcus Falck, Niclas Hallberg, Oscar Kock and Samuli Karjalainen (SSE & LSE) - Date: 02/02/2019


Overview of the deal

  • Acquirer: Newmont Mining Corp (NYSE:NEM)

  • Acquirer Advisors: BMO Capital Markets, Citi, Goldman Sachs & Co

  • Target: Goldcorp Inc. (NYSE:GG)

  • Target Advisors: Bank of America Merrill Lynch, Fort Capital Corp, TD Securities Inc

  • Deal value: $9.96bn

  • Announcement date: January 14, 2019

What was supposed to be a casual dinner in a restaurant in downtown Vancouver between the executives of Newmont and Goldcorp, turned out to be the starting point for the largest acquisition ever in the gold industry. With negotiations lasting just over a month under the code-name Altitude, the merger will give Newmont and Goldcorp shareholders a 65% and 35% interest respectively in the newly formed entity. Being mainly a stock-swap transaction, offering 0.328 Newmont common shares per Goldcorp share, an additional $0.02 was paid in cash per Goldcorp Share, which represents a 17% premium based on Goldcorp’s 20-day VWAP. The merged entity will be known as Newmont Goldcorp.


This merger comes four months after the mining industry’s latest big announcement, the mega-merger of competitors Barrick Gold Corp and Randgold Resources in an all-share deal worth $6.5 billion. With the gold sector still relatively fragmented, production reserves among senior miners declining worldwide and widespread investor concern, the purpose of the deal is for Newmont and Goldcorp to strengthen and create an unmatched portfolio of operations and assets located in favorable jurisdictions in the Americas, Australia and Ghana, 75%, 15%, and 10% respectively. The merged company will have the world’s largest production and reserve base, with enough liquidity and diversified assets to attract investors.

“All industries consolidate when they shrink. So I could see this coming for a while. We were looking at how is the best way to participate in this consolidation at a time when our stock price was underpressure.” - Ian Telfer, Goldcorp, Chairman of the Board.

Company details (Newmont Mining Corporation)

Newmont Mining Corporation is a mining company, which is focused on the production of, and exploration for, gold and copper. The company is primarily a gold producer with operations and/or assets in the United States, Australia, Peru, Ghana and Suriname.


- Founded in 1921, headquartered in Greenwood Village, Colorado, USA.

- President and CEO: Gary Goldberg

- Number of employees: 12,547 (2017)

- Market Cap: $17.7bn EV: $19.7bn

- LTM Revenue: $7.1bn LTM EBITDA: $2.3bn

- LTM EV/Revenue: 2.8x LTM EV/EBITDA: 8.5x


Company details (Goldcorp Inc.)

Goldcorp Inc. is a gold producer engaged in the operation, exploration, development and acquisition of precious metal properties in Canada, the United States, Mexico, and Central and South America. The company is involved in the sale of gold, silver, lead, zinc and copper.

- Founded in 1994, headquartered in Vancouver, Canada

- President and CEO: David Garofolo

- Number of employees: 7,079 (2017)

- Market Cap: $9.4bn EV: $12.4bn

- LTM Revenue: $3.1bn LTM EBITDA: $1.1bn

- LTM EV/Revenue: 4.0x LTM EV/EBITDA 11.3x

Projections and Assumptions

Short term consequences

Though the merger’s intents were to increase shareholder value, investor attitude has been ambiguous towards the announcement. Newmont’s share price fell 8.9% – wiping off more than $2bn of Newmont’s market value – most likely due to the premium paid, and thus the overvaluation of the target’s assets. Goldcorp, at the same time, experienced a surge in share price equivalent to 7.5%. However, the proposed synergies of the merged entity might explain both companies’ continual increase in share price, following the immediate reaction.