Denver-based Newmont Mining Corp. (NYSE: NEM – $31.83) said it plans to buy smaller rival Goldcorp Inc. in an all-stock deal worth $10 billion, creating the world’s largest gold producer. The combined company, which will be called Newmont Goldcorp, would overtake current leader Barrick Gold’s annual production and will have mines in the Americas, Australia and Ghana. After the deal the new company expects to produce 6-7 million ounces of gold annually over the next ten years and beyond. Newmont, which also mines copper, will sell $1 billion to $1.5 billion worth of assets over the next two years as part of the deal. NEM will offer 0.328 of its shares and $0.02 for each Goldcorp share. The deal is scheduled to close in the second quarter and is expected to generate up to $100 million in savings.
Newmont should continue to generate good cash flow from its operations following the combination. For aggressive accounts, a 5% allocation in the stock is best considered for portfolio diversification and moderate income.