Newmont (NYSE: NO) -4.1% in trading Monday after falling as much as 6% following news that it offered to acquire Newcrest Mining ( OTCPK:NCMGF ) ( OTCPK:NCMGY ) in an all-stock deal valued at $16.9 billion.
Newmont (NEM), already the largest gold in the world producer by market capitalization and ounces produced, said the combination represented a “strong value proposition.”
The indicative offer represents a 21% premium to Newcrest’s ( OTCPK:NCMGF ) ( OTCPK:NCMGY ) last close of A$22.45 a share, significantly below the traditional takeover premium of 30%, said Morningstar analyst Jon Mills, who values Newcrest at ~A 31 USD.
Mills also said the offer could prompt other big gold miners to join the race for Newcrest ( OTCPK:NCMGF ) ( OTCPK:NCMGY ), given the quality of its assets, but the deal would likely have to be priced higher to succeed.
The deal should be viewed positively, as Newcrest’s ( OTCPK:NCMGF ) ( OTCPK:NCMGY ) assets fit well with Newmont’s ( NEM ) existing portfolio, said BMO analyst Jackie Przybylowski.
Goldman Sachs also reacted favorably, saying the integration of Newcrest ( OTCPK:NCMGF ) ( OTCPK:NCMGY ) would provide Newmont ( NEM ) with a path to significantly increase production, given the miner’s “uneven production” over the next two years. independent basis.
Mining stocks like Newmont ( NEM ) “offer potential recession protection as a strong ‘Fed pivot’ could send gold soaring to new all-time highs,” writes Harrison Schwartz in an analysis recently published on Seeking Alpha.