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Why BMO was Bullish at Barrick but is Neutral at Newmont



BMO bullish on gold and neutral on NEM

BMO Capital Markets resumed coverage on gold stocks Wednesday. BMO analyst Andrew Kaip is bullish on Barrick Gold (GOLD) and upgraded it from "market perform" to "outperform" and raised the target price from $ 14.5 to $ 20.0. At Newmont Goldcorp (NEM), however, he has a neutral attitude and he downgraded NEM from "outperform" to "neutral" and lowered the stock's target price from $ 45 to $ 42.

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GOLD and NEM's recent mergers

Both Barrick Gold and Newmont Goldcorp have Started mergers and acquisitions over the past to increase their reserves as organic growth has been hard to come by. Barrick Gold (GOLD) and Randgold Resources & # 39; merger announcement in September set the stage for heavily attracted gold sector consolidation. has been under enormous pressure in the last few years near workers have not stopped wider stocks (SPY) or gold, losing the benefit of institutional investors after making M&A decisions at the top of the commodity cycle, resulting in high debt.

On January 14, NEM and Goldcorp signed an agreement whereby Newmont agreed to acquire all of Goldcorps outstanding shares in a $ 10 billion shareholding. This merger created the largest gold miner who combined Newmont's 68.5 million ounces and Goldcorps 52.8 million ounces, which make up the world's largest asset base.

Barrick's enemy bid for Newmont

However, NEM and GG's merger did not fall very smoothly. In February, Barrick made an unsolicited bid for his rival Newmont in an all-share deal. Barrick mentioned that this all-share transaction was far superior to Newmont's proposed agreement with Goldcorp. However, Barrick did not give any prize to Newmonts value. Mark Bristow, Barrick's director, said this proposed merger could unlock more than $ 7 billion in the present value of real synergies. In March, Newmont rejected Barrick's hostile bid that Barrick's unsolicited negative premiums are not in the best interest of the shareholders. NEM mentioned that the combination with Goldcorp is significantly more accretive to Newmont's shareholders on all relevant measurements compared to Barrick's proposals.

Barrick and Newmont's joint venture in Nevada

Subsequently, Barrick concluded the hostile bid for NEM in view of the creation of a 61.5% -38.5% joint venture with their combined Nevada operations . By combining operations with Newmont, Barrick will be able to use its infrastructure to improve the profitability of the operation.

BMO's Andrew Kaip is also positive on the valuation of Barrick from the joint venture with NEM in Nevada. He expects this operation to unlock up to $ 2.8 billion. Dollars in combined synergies. As reported by Barrons, Kaip said: "We see … investors benefit from the net result of making the two companies stronger and more profitable gold industry masters."

BMO is positive for Barrick versus Newmont

So while Andrew Kaip recommends investors consider Barrick because of the synergies and value-saving potential of the Nevada operations. He does not see Newmont Goldcorp as a "buy" based on these synergy benefits because he sees recent problems with Newmont as having temperate investor interest. Recently, a fire at my firm's mining mine forced her to stop her operation. In addition, investors are still concerned about Newmont's Goldcorp merger. Kaip believes that a rating audit for NEM could be made when the Goldcorp acquisition and the Nevada joint venture begin to show benefits that he believes are unlikely to happen until the end of 2019 or early 2020.

Analysts' ratings on NEM and GOLD [19659002] Out of the 16 analysts covering NEM shares, 69% have "buy" ratings in the stock. Newmont has focused on reducing debt, which has contributed to turning analysts' opinion around. It had only 56% "buy" ratings a year ago. In the future, analysts and investors look forward to the company's merger control with Goldcorp.

Unlike Newmont, Barrick's shares "buy" ratings from only 16.0% of analysts covering the stock. Analysts were negative on the Barrick Gold stock following the long-standing problems in Tanzania and Argentina. While analysts are happy with Barrick Gold's merger with Randgold Resources, they are likely waiting for the performance of the business merger and the associated synergy benefits to become more positive in the inventory.

We have discussed the likely upside from both Newmont and Barrick shares in which Gold Equities could have upside potential as gold shines.


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