Newmont-Goldcorp Deal Puts Gold Mining ETFs In Focus

Like other sectors, gold mining space is also consolidating as miners are competing amid dwindling supply of easy-to-find gold. The latest to jump on the bandwagon is Newmont Mining Corp (NEM - Free Report) , which intends to acquire smaller rival Goldcorp Inc (GG - Free Report) for $10 billion or $12.5 billion including debt. The transaction represents the biggest ever acquisition in the gold sector.

The moves comes nearly four months after gold mining giant Barrick Gold (GOLDFree Report) agreed to buy Randgold Resources Ltd for $6.1 billion in an all-stock deal.

Inside The Deal

Under the terms of the deal, Newmont has offered 0.3280 of its shares and a couple of cents for each Goldcorp share. This translates to $11.46 per share, a premium of about 18% to Goldcorp's closing price as of Jan 11. Newmont shareholders will own roughly 65% and Goldcorp shareholders will own around 35% of the combined entity.

The combination will create the world’s largest U.S. gold producer, overtaking Barrick Gold, with an unmatched portfolio of operations, projects, exploration opportunities, reserves and people in the gold mining sector. The combined company will be called Newmont Goldcorp and will be headquartered in Denver. It targets to produce 6-7 million ounces of gold annually over the next 10 years and beyond. It will manage the post-merger business’ mines in the United States and Canada. Additionally, the new company will offer the highest annual dividend among leading gold producers.

The transaction will result in annual savings of $100 million, and is expected to be immediately accretive to Newmont's net asset value and cash flow per share. The deal is expected to close in the second quarter and is subject to approval from shareholders of both companies as well as regulators in Europe, Canada, South Korea and Mexico.

ETF Impact

The announced merger has put the spotlight on gold mining ETFs that could be the best ways for investors to tap the opportunity arising from the NEM-GG deal.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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