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Newmont (NYSE:NEM) -4.1% in Monday’s trading after falling as much as 6% following news it offered to acquire Newcrest Mining (OTCPK:NCMGF) (OTCPK:NCMGY) in an all-stock deal valued at $16.9B.
Newmont (NEM), already the world’s biggest gold producer by market cap and by ounces produced, said the combination represents “a powerful value proposition.”
The indicative offer implies a 21% premium to Newcrest’s (OTCPK:NCMGF) (OTCPK:NCMGY) last closing value of A$22.45/share, materially below the traditional 30% takeover premium, says Morningstar analyst Jon Mills, who values Newcrest at ~A$31.
Mills also said the offer may push other major gold miners to join the race for Newcrest (OTCPK:NCMGF) (OTCPK:NCMGY), given the quality of its assets, but a deal likely will need to be at a higher price to succeed.
The deal should be viewed positively, as Newcrest’s (OTCPK:NCMGF) (OTCPK:NCMGY) assets fit well with Newmont’s (NEM) existing portfolio, BMO analyst Jackie Przybylowski said.
Goldman Sachs also reacted favorably, saying the integration of Newcrest (OTCPK:NCMGF) (OTCPK:NCMGY) would provide Newmont (NEM) with path to substantially raise its production, considering the miner’s “flattish production outlook” for the next two years on a standalone basis.
Mining stocks such as Newmont (NEM) “offer a potential recession hedge as a strong ‘Fed pivot’ could send gold soaring to a new all-time high,” Harrison Schwartz writes in an analysis posted recently on Seeking Alpha.
