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Paulson won’t support Newmont's Goldcorp acquisition

Investment firm says merger creates ‘negative value’ for Newmont shareholders
goldcorp - Porcupine
In Canada, Goldcorp's assets include Porcupine Gold Mines in Timmins. (Goldcorp photo)

Paulson & Co., a major shareholder of Newmont Mining Corp., has said it will not support Newmont’s proposed bid to acquire Goldcorp.

Newmont announced its intention to purchase Goldcorp for $10 billion in January.

In Canada, Goldcorp’s assets include Porcupine Gold Mines in Timmins, which comprises the Hoyle Pond underground mine and the Hollinger open-pit mine; Musselwhite Mine, a fly-in complex located 500 kilometres of Thunder Bay; and the Red Lake operations, which include the Red Lake and Campbell underground mining and processing complexes.

The Vancouver-headquartered company also has a number of development projects in the works, including Borden Lake, its first all-battery-electric mine, located near Chapleau; the Century project, a potential large-scale open pit mine and related processing facility in Timmins; and the Cochenour development project, a potential new source of ore located five kilometers from Red Lake.

In a March 21 news release, Paulson said the deal, as it’s currently structured, “creates negative value for Newmont shareholders.”

Among Paulson’s complaints:

  • the $1.5-billion premium to Goldcorp shareholders is unjustified given Goldcorp's poor performance;
  • as currently structured, the synergies from the transaction would only accrue to Goldcorp shareholders;
  • the transaction would transfer a significant percentage of the value created by Newmont's recently announced Nevada joint venture with Barrick to Goldcorp shareholders instead of preserving this value for Newmont shareholders; and
  • following the creation of the Nevada joint venture, Newmont is positioned to create greater value as a stand-alone entity than if the acquisition were completed under current terms.

Paulson & Co., a New York-headquartered investment management firm, holds 14.2 million shares of Newmont.

The firm said it would reconsider the proposal if the premium was eliminated and the deal restructured so that Newmont shareholders benefit from the Newmont-Barrick joint venture.

“Adjusting the exchange ratio from 0.328 shares to a maximum of 0.254 would accomplish those objectives and result in an accretive transaction for Newmont shareholders,” Paulson said in the release.

Earlier this year, Paulson intervened to effect change to the entire board of Detour Gold, of which the firm is a majority shareholder with 5.7 per cent of Detour shares.

The firm believed Detour’s interim CEO was paid too much and suggested the board tried to inflate third-quarter results to make it appear the company was doing better than it was. Paulson also wanted a new plan put in place for the long-term management of the company.