Newmont Goldcorp to Divest Stake in KCGM to Northern Star

Newmont Goldcorp Corporation NEM has agreed to divest its 50% interest in Kalgoorlie Consolidated Gold Mines (“KCGM”) to Australia-based Northern Star Resources Limited. The company expects the transaction to close in early January 2020, subsequent to the receipt of ministerial consent required for KCGM’s crown leases.

Per the terms, Newmont Goldcorp will receive $800 million in cash for its stake in KCGM. This includes a $25-million payment, which gives Northern Star transitional services support and specified exploration tenements along with an option to negotiate the purchase of the Kalgoorlie power segment at fair market value. 

Newmont Goldcorp has considerably surpassed market expectations by announcing more than $1.4 billion in fair value cash transactions in the past month. This includes the agreement to divest Red Lake in Canada for $375 million and sell its stake in Continental Gold for $260 million.

Building on the company’s $1-billion share repurchase plan, Northern Star’s all-cash offer supports Newmont Goldcorp’s disciplined capital allocation strategy. This includes strengthening investment-grade balance sheet, reinvesting in the business and returning capital to shareholders.

Moreover, the divestment of KCGM streamlines Newmont Goldcorp’s portfolio. The company now has 12 top-tier assets located on four continents, which have the most favorable gold mining jurisdictions.

Newmont Goldcorp is expected to issue an update on earlier announced 2020 outlook and longer-term view early in 2020.

Newmont Goldcorp’s shares have gained 26.1% in the past year compared with 52% surge of the industry.

In November, the company revised its outlook for 2019. It now expects attributable gold production for 2019 to be 6.3 million ounces, down from 6.5 million ounces projected earlier.

For 2019, all-in sustaining costs for gold are projected to be $965 per ounce, down from the previous expectation of $975. Costs applicable to sales expectation for gold are $715 per ounce compared with previous expectation of $735.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd KL, Impala Platinum Holdings Ltd IMPUY and Polymetal International plc AUCOY, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland Lake Gold has an expected earnings growth rate of 97.1% for 2019. The company’s shares have surged 65.1% in the past year.

Impala Platinum Holdings has projected earnings growth rate of 255.2% for fiscal 2020. The company’s shares have skyrocketed 267% in a year.

Polymetal International has an estimated earnings growth rate of 40.5% for the current year. Its shares have returned 42.6% in the past year.

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Newmont Goldcorp Corporation (NEM) : Free Stock Analysis Report
 
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