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Mar 25, 2019

Newmont offers biggest dividend in 32 years ahead of Goldcorp vote

Newmont shareholders to receive a bonus if they approve Goldcorp takeover

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Newmont Mining Corp.’s (NEM.N) plan to issue its biggest cash dividend payout in more than three decades has already persuaded one of its largest investors to support a US$10 billion merger with Goldcorp Inc. (G.TO

Newmont is offering an 88-cents-a-share dividend if the deal is completed, the largest cash payout since 1987.

“From my standpoint, I think we’ve done what we needed to do,” Newmont Chief Executive Officer Gary Goldberg said in an interview. “It now is up to our shareholders. I’m really looking forward to positive results out of both votes.’’

Newmont announced plans in January to acquire Vancouver-based Goldcorp, which would secure its position as the world’s largest gold miner. But Newmont investors, including billionaire John Paulson and VanEck’s Joe Foster, had expressed concern about the terms of the deal given two events that have happened since.

On Monday, Foster said his concerns about Goldcorp investors benefiting unfairly had been put to rest by the dividend. VanEck is the third-largest shareholder in Newmont, with a 5.9 per cent stake, and the second-biggest in Goldcorp, according to data compiled by Bloomberg

“As things stand right now I plan to vote in favor of the Newmont deal,” Foster said in an interview. He added that he hopes Goldcorp will address concerns about lucrative compensation packages offered to its chairman and CEO if the deal goes through

Paulson is evaluating the Newmont dividend, a spokesman said.

Compensation Concerns

Separately, Institutional Shareholder Services Inc. said in a statement that Goldcorp investors should vote for the merger at a meeting scheduled for April 4. It hasn’t released an opinion on whether Newmont shareholders should support it.

Shareholders from both companies objected to compensation packages that would be given to Goldcorp Chairman Ian Telfer and Chief Executive Officer David Garofalo if the deal went through. Although there have been concerns about Telfer’s retirement compensation, approval of the deal is still warranted for Goldcorp shareholders, ISS said today.

Unfair Benefit

Also, Newmont subsequently negotiated a joint venture with Barrick Gold Corp. in Nevada, meaning Goldcorp investors would stand to benefit unfairly from that deal, some Newmont shareholders, including John Paulson, had said.

Paulson had said a 23 per cent reduction in the value of the transaction would ease his concerns. The hedge fund bearing his name said it purchased 14.2 million shares of Newmont in 2019 but has not revealed how much it bought before the Feb. 20 record date, a requirement to vote on the deal. Paulson & Co. sold all its Goldcorp shares this year, a spokesman said.

The biggest deal in gold mining history came just three months after rival Barrick Gold Corp. agreed to buy Randgold Resources Ltd. for about US$5.4 billion.

Barrick subsequently launched a hostile takeover of Newmont that ended with the two miners entering a joint venture and combining their Nevada operations instead. Barrick withdrew its hostile offer at the same time.

Shareholder Meetings

Goldcorp shareholders vote on the deal on April 4th. Newmont shareholders will vote on the deal April 11. The deal requires two votes from Newmont shareholders to pass: one, essentially on the deal, involves issuing shares to Goldcorp holders, while the other increases Newmont’s overall share count. The first vote requires majority approval from those shareholders who vote. The second requires majority approval from all shareholders outstanding, meaning absentee votes count against it.

Newmont has said the merger with Goldcorp will create more than US$4.4 billion in value and give the company sustainable production of 6 million to 7 million ounces a year.

If the transaction goes through, the combined company will control mines in the Americas, Australia and Ghana. The tie-up would dwarf the recent US$5.4 billion mega-merger between rival Barrick and Randgold Resources Ltd., and may exceed Barrick’s 2006 purchase of Placer Dome Inc. as the gold-industry’s biggest takeover, which had a final value of about US$9.6 billion.

Newmont rose 1.9 per cent to US$35.15 at 10:06 a.m. in New York, while Goldcorp’s U.S. shares climbed 2.8 per cent.

“This is a step in the right direction to getting the shareholders over the line who had outlined issues with the share ratio,” said Josh Wolfson, managing director of metals and mining at Desjardins Securities Inc. in Toronto, referring to the special dividend. “I’d say the payment reflects a response to reasonable concerns that were identified by some key shareholders.”