Newmont Mining (NYSE: NEM) said on Monday that it would buy smaller rival Goldcorp (NYSE: GG) in a deal valued at $10 billion, creating the world’s biggest gold producer by output.
The deal is the second high-profile merger in the mining industry since Barrick Gold agreed to buy Randgold Resources Ltd in September last year to cut costs.
The gold mining industry has come under fire from investors in recent months for poor management of capital. This combined with falling gold reserves and higher extraction costs have prompted miners to look for cost efficiencies.
Goldcorp CEO David Garofalo said, "The strategic rationale for combining Goldcorp with Newmont is powerfully compelling on many levels."
The combined company is expected to produce six million to seven million ounces of gold over the next 10 years. In 2017, Newmont produced 5.3 million ounces of gold, while Goldcorp mined 2.6 million ounces.
Newmont will offer 0.3280 of its share and $0.02 for each Goldcorp share. Based on Newmont’s Friday close, that translates to $11.46 per share, a premium of about 18% to Goldcorp’s Friday close on the New York Stock Exchange.
The combined company’s reserves and resources will represent the largest in the gold sector and will be located in favorable mining jurisdictions in the Americas, Australia, and Ghana, the companies said.
Shares in Newmont faded $1.59, or 4.5%, to $33.30 Monday morning, while shares in Goldcorp in New York skyrocketed $1.14, or 11.7%, to $10.82
