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 .
For further details see:
Newmont plunges after $17B bid for Newcrest Mining but analysts positive