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Newmont Unveils Special Dividend, Gets Mexican Anti-Trust Nod

Zacks Equity Research

Newmont Mining Corporation NEM has received clearance from the Comision Federal de Competencia Economica (COFECE) for its pending acquisition of Goldcorp Inc. GG. The company had earlier obtained clearance from the Canadian Competition Bureau and the Korea Fair Trade Commission in February 2019. The parties continue to cooperate with other regulatory agencies to secure the pending approvals that are conditions to deal closing.

Newmont’s board also announced a one-time special dividend of 88 cents per share of common stock, which is conditional on approval of the transaction with Goldcorp. The dividend will be paid to shareholders of Newmont of record as of Apr 17, 2019, which is prior to closing of the proposed combination.

The special dividend is conditional upon the approval by the shareholders of Newmont and Goldcorp at their respective meetings on Apr 11 and Apr 4, 2019. Notably, Goldcorp expects that following a positive shareholder vote, Newmont may complete the acquisition as of Apr 18, 2019.

Subject to satisfaction of the conditions, special dividend will be paid on May 1, 2019. Also, the closing of Newmont Goldcorp transaction is expected shortly after the two special meetings, considering that it receives shareholders’ approval.

The special dividend will boost the value of Newmont’s current shareholders with an immediate cash payment from a portion of potential synergy arising from the Nevada joint venture announced with Barrick on Mar 11, 2019.

Notably, the dividend will be paid to the holders of Newmont’s currently outstanding shares as of the earlier mentioned record date of Apr 17, and not in respect of shares to be issued for the proposed Newmont Goldcorp transaction.  

Newmont stated that the proposed combination with Goldcorp represents a significant value creation opportunity for shareholders. The combined company’s shareholders will have an unmatched portfolio of world class operations, exploration opportunities, projects, along with reserves and talent. The transaction is unanimously supported by Newmont’s board of directors.  

Significance of The Goldcorp Deal

Upon the transaction closure, the newly-formed entity will start delivering a total $365 million in expected annual pre-tax synergies, supply chain efficiencies and full potential improvements. It will have the opportunity to create pre-tax NPV worth $4.4 billion.

Moreover, the deal will be immediately accretive to Newmont’s net asset value per share by 27% as well as 34% accretive to cash flow per share in 2020. The company will be able to leverage its combined scale, targeting a profitable gold production in the range of 6-7 million ounces over long-term horizon.

Price Performance

Newmont’s shares have lost 12.5% in the past year, against the industry’s 1.7% rise.

Zacks Rank & Key Picks

Newmont currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd. KL and Ingevity Corporation NGVT, both currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland has an expected earnings growth rate of 8.8% for 2019. The company’s shares have surged 110% in the past year.

Ingevity has an expected earnings growth rate of 17.9% for the current year. The company’s shares have rallied 41% in a year’s time.

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