Talk about a convoluted deal – to get its controversial Goldcorp takeover over the line, Newmont Mining is promising to use some of the future ’synergies’ from its separate deal with rival Barrick to encourage its own shareholders to greenlight the deal.
It’s complex, but that is explained by the high level of opposition to the Goldcorp takeover as Newmont shareholders complain they will be losers from the $10 billion deal.
Newmont has promised to pay a special dividend of 88 US cents a share if shareholders approve the Goldcorp takeover. That’s around $US470 million in total for Newmont shareholders.
The payment could see Newmont accelerate plans to sell assets in Australia, such as the 50% of the Super Pit open cut mine in Kalgoorlie sooner than later.
Some large Newmont shareholders claim Goldcorp shareholders will benefit too much from the takeover and have threatened to vote against the proposal.
Big Newmont shareholders such as Paulson & Co and Van Eck International Investors have claimed the Goldcorp offer would hand too big a share of the $US4.7 billion in synergies from the Barrick deal to Goldcorp shareholders. Paulson said last week it would vote against Newmont’s bid for Goldcorp.
After talking to some of these shareholders in the past week or so, Newmont announced the immediate cash payment on Monday.
Newmont said the payment will be a portion of the savings from the Barrick Gold Corp deal in Nevada, which was settled earlier this month.
Newmont’s offer to buy Goldcorp (to create the world’s biggest gold producer) preceded a paper offer from Barrick for Newmont. That was dropped after Barrick and Newmont agreed to merge their gold mining and processing operations in Nevada.
Newmont said the special dividend delivers value to existing shareholders with an immediate cash payment for a portion of the synergy potential arising from the Nevada joint venture announced with Barrick.
The dividend will be paid to the holders of Newmont’s currently outstanding shares, and not in respect of shares to be issued in connection with the proposed Newmont Goldcorp transaction.
“We are pleased to make this special dividend payable to Newmont’s current shareholders in recognition of the potential synergy value of the Nevada joint venture agreement,” said Gary Goldberg, Chief Executive Officer said in the statement issued on Monday.
“We have continued to engage with, and have listened carefully to, our shareholders, and we are pleased that several of our largest shareholders have expressed their support for the combination with Goldcorp.”
Newmont said earlier this month that Goldcorp shareholders would get $US600 million of the pre-tax synergies from the joint venture with Barrick. Analysts say the $US470 million in cash payments is the after-tax value of the $US600 million promised by Newmont.
This money will have to be found before the so-called synergies emerge in Nevada. They money will have been spent before the savings are banked.
So asset sales loom, including 50% of the Super Pit open cut near Kalgoorlie.
It could be worth $400 to $600 million according to previous forecasts. The May 2018 rockfall costs and impact on output could lower the value.
