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Report on Business Newmont shareholders back Goldcorp takeover; deal expected to close later this quarter

A technician puts a gold 'button' into a furnace to be further refined to form gold doré bars at Newmont Mining's Carlin gold mine operation near Elko, Nevada, on May 21, 2014.

Rick Wilking/Reuters

Newmont Mining Corp. shareholders have voted resoundingly in favour of the company’s US$10-billion acquisition of Vancouver’s Goldcorp Inc., removing the last major obstacle to one of the biggest deals ever in the gold sector.

Shareholders on Thursday voted more than 98 per cent in favour of the transaction. A week ago, Goldcorp shareholders also voted in favour of the deal.

The transaction, expected to close later this quarter, means Colorado-based Newmont will bypass Toronto’s Barrick Gold Corp. and take the triple crown as biggest gold company in the world by market value, production and reserves.

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But now Newmont must follow through on its promises. The company said it can wring US$365-million a year in cost savings out of combining with Goldcorp. And Newmont and Barrick said they expect to generate an average of US$500-million in savings over the first five years from a joint venture (JV) agreement they reached to combine their Nevada gold-mining operations. Barrick had attempted to acquire Newmont in a hostile takeover and thwart its acquisition of Goldcorp, but reached an agreement with Newmont on the joint venture as an alternative.

Related: Goldcorp shareholders approve $10-billion acquisition by Newmont

RBC Dominion Securities Inc. analyst Stephen Walker, who has an “underperform" rating on Newmont’s shares, is taking a wait-and-see approach. In a note to clients on Thursday, he wrote that a higher valuation on the stock would require “evidence of a successful integration of the core Goldcorp assets” and proof that the joint venture with Barrick in Nevada is working.

"What strikes me as kind of peculiar is the market isn’t giving either company any credit for doing the JV, ” Goldcorp shareholder Doug Groh, portfolio manager with Tocqueville Asset Management, said in a recent interview. “What that tells me is that the market just doesn’t want a promise. They want delivery and they want to see results.”

Just more than three years ago, Goldcorp was the most valuable gold company in the world, but its share price wilted after a number of flawed acquisitions and operational setbacks at a few of its biggest mines. Proponents of the takeover of Goldcorp argue that Newmont’s superior technical skills will help turn around its struggling mines.

Investors have good reason to be skeptical of deals in the gold sector, because many have not worked out well in the past, with Barrick, Goldcorp and Kinross Gold Corp. writing down billions over the past decade in deals gone bad.

Gary Goldberg, who has been Newmont’s chief executive for six years, will step down later this year and be replaced by chief operating officer Tom Palmer. Mr. Goldberg’s retirement was announced the same day as the Goldcorp deal.

Newmont’s quest for Goldcorp was eventful from the start. About a month after the friendly deal was unveiled in January, Barrick made its hostile takeover play for Newmont. Later, Goldcorp’s agreement to nearly triple chairman Ian Telfer’s retirement package to US$12-million angered some shareholders. Newmont also encountered friction from some of its stakeholders, with institutional investors VanEck and Paulson & Co. arguing that it was overpaying for Goldcorp.

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But much of the uncertainty evaporated when Newmont agreed to pay a special dividend to its shareholders worth US$470-million if a yes vote was achieved.

The Goldcorp acquisition is the second biggest in the history of the global gold industry. The largest was Barrick’s US$10.4-billion acquisition of Placer Dome Inc. in 2005.

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