On January 14, Newmont Mining Corp. (NYSE:NEM) revealed that it had placed an offer for Vancouver-based Goldcorp (TSX:G)(NYSE:GG) for $10 billion. Newmont devoted much of its press release to explaining how the merger would help Canada.
The recent Barrick Gold acquisition of Randgold has some concerned about how the consolidation of miners will pull influence away from Canada’s industry.
Newmont stock climbed 1.74% on January 16, but shares have dropped 8.1% week over week. The stock has experienced weakness as new bidder have reportedly emerged with interest in Goldcorp.
Some analysts have questioned the rationale of the deal while also pointing out that the bidding process could become more competitive going forward.
If the acquisition goes forward, Newmont would be renamed Newmont Goldcorp and would be able to sustainably produce six to seven million ounces of gold annually. Other analysts have questioned the deal as Goldcorp’s long-term production and cost outlook may drag on Newmont going forward.
Much of the criticism in this instance seems to be overblown. Assuming Newmont is successful in its bid, it will boast more production going forward and will join a short group of sure bets among gold mining equities.
The spot price of gold has held steady below the $1,300 mark as North American markets have rebounded in early January. Central banks are hinting at a dovish turn in 2019, and increased volatility from a low-growth environment should bode well for the yellow metal as we move into the next decade.
