Gold Mining ETFs Heat Up On M&A Buzz

The gold mining space has been heating up with a three-way fight between the world’s largest gold companies. This is especially true as Newmont Mining Corp (NEM - Free Report) rejected an all-stock merger proposed by Canada’s Barrick Gold (GOLD - Free Report) and reiterated its intention to move forward with the planned smaller U.S. rival Goldcorp (GG - Free Report) merger.

Proposed Barrick Gold Deal

Barrick Gold, the world's largest gold producer, offered to buy U.S. rival Newmont for nearly $18 billion in an all-stock transaction. Under the proposed deal, Newmont shareholders would receive 2.5694 Barrick shares per Newmont share. Barrick shareholders will own roughly 55.9% and Newmont shareholders will own around 44.1% of the combined entity.

The combination will create the world's best gold company, with the largest portfolio of Tier One gold assets and would unlock more than $7 billion net present value (pre-tax) of real synergies. The proposed deal was contingent upon the company scrapping its merger with Goldcorp.

Barrick president and CEO Mark Bristow said the deal to be beneficial for shareholders of both companies and far superior to the Newmont’s proposed acquisition of Goldcorp. He estimated the proposed deal will produce annual synergies 7.5 times larger than the projected annual synergies for the Newmont/Goldcorp transaction.

The proposal comes within a month after the world’s largest miner completed its buyout of Randgold Resources for $6.1 billion in an all-stock deal.

Recap of Newmont-Goldcorp Deal

Newmont plans to acquire its smaller rival Goldcorp for $10 billion that will create the world’s largest U.S. gold producer, overtaking Barrick Gold. The transaction represents the biggest ever acquisition in the gold sector. Under the terms of the deal, Newmont has offered 0.3280 of its shares and a couple of cents for each Goldcorp share. Newmont shareholders will own roughly 65% and Goldcorp shareholders will own around 35% of the combined entity.

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