NEM

Business Context and Reporting Period

This Form 8-K, filed on March 29, 2019, by Newmont Mining Corporation (Newmont), addresses a class-action lawsuit regarding the proposed acquisition of Goldcorp Inc. The filing details a memorandum of understanding to resolve the litigation, Laidlaw v. Boyce, et al., which alleged inadequate disclosures in Newmont's proxy statement concerning the transaction. The filing provides supplemental disclosures intended to be added to the definitive proxy statement to facilitate the transaction's consummation, expected in the second quarter of 2019.

Key Financial Metrics and Transaction Details

The filing does not report standard quarterly financial metrics such as revenue, profit, or cash flow for a specific reporting period. Instead, it focuses on financial projections and valuation metrics related to the proposed merger:

• Transaction Consideration: The implied value of the consideration per Goldcorp share is $11.46.
• Expected Synergies: The combined entity expects to deliver $365 million in annual pre-tax synergies, including up to $85 million from general and administrative (G&A) expenses and up to $15 million from supply chain savings.
• Value Creation: The arrangement represents an opportunity to create $4.4 billion in net present value (pre-tax) through synergies and continuous improvement programs.
• Analyst Valuations:
  • Goldcorp: Analyst target prices ranged from $8.50 to $17.50. The median Net Asset Value (NAV) per share was $10.02, and median Cash Flow Per Share (CFPS) estimates were $1.83 for 2019 and $2.07 for 2020.
  • Newmont: Analyst target prices ranged from $30.00 to $49.00. The median NAV per share was $23.67, and median CFPS estimates were $3.87 for 2019 and $3.82 for 2020.

Material Changes and Disclosures

The primary material change disclosed is the agreement to amend the proxy statement to include specific financial data previously omitted, in exchange for the plaintiff discontinuing the lawsuit. Key updates include:

• Supplemental Disclosures: Newmont agreed to disclose specific analyst stock price targets, NAV calculations, and cash flow estimates for both Newmont and Goldcorp.
• Board Composition: The filing clarifies that Gary Goldberg, Newmont's CEO, is expected to retire and will not continue to serve as a director following the transaction. It also confirms that Ian Telfer, Goldcorp's Chair, will not join the combined board.
• Legal Status: The defendants (Newmont and its board) maintain that the original allegations were without merit but agreed to the supplemental disclosures to avoid delays in the transaction and minimize legal expenses.

Guidance, Outlook, and Risks

Outlook and Management Commentary:

• Management expects the transaction to close in the second quarter of 2019.
• Implementation of synergy strategies is expected to begin immediately following the closing.
• The filing includes extensive forward-looking statements regarding future production, costs, capital expenditures, and integration benefits.
Risks and Contingencies:
• Transaction Risk: The deal is subject to stockholder approval and regulatory conditions; failure to close could result in significant disruption.
• Integration Risk: Achieving the projected $365 million in synergies and $4.4 billion in NPV depends on the successful integration of operations.
• Market Volatility: Risks include gold price volatility, currency fluctuations, and operational variances in ore grade or recovery rates.
• Legal Uncertainty: While this specific suit is resolved, the filing notes risks associated with other potential legal proceedings related to the arrangement.

Investor Verification Checklist

• Verify the final terms of the Newmont-Goldcorp merger agreement and the status of regulatory approvals.
• Review the definitive proxy statement (filed March 11, 2019, as amended) to confirm the full scope of the supplemental disclosures regarding analyst targets and NAV.
• Monitor the timeline for the transaction closing, currently expected in Q2 2019, for any delays.
• Assess the feasibility of the projected $365 million in annual pre-tax synergies against historical integration performance in the mining sector.
• Confirm the final composition of the combined board of directors, specifically the departure of Gary Goldberg and Ian Telfer.