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Newmont Falls on Midas Mine Sale Deal

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Gold miner Newmont Mining Corporation (NEM - Free Report) has entered into a deal to sell its Midas underground operation and mill complex in Nevada to Klondex Mines Ltd. for a total consideration of over $83 million. The market reacted negatively to the news and Newmont’s share price dropped as much as 3.5% in the trading session following the news.

Newmont is selling its Midas assets to optimize its portfolio and focus on core assets that have longer life and lower cost. Newmont will sell the assets to Klondex for a purchase price of $55 million, subject to customary adjustments, and the replacement of Newmont surety arrangements with Nevada and federal regulatory authorities amounting for roughly $28 million. In addition, Newmont stated that it will receive 5 million purchase warrants for Klondex common shares with a 15-year term, having an exercise price to be determined on the closing date of the acquisition.

Newmont expects to close the deal after receiving the regulatory and third party approvals by early 2014.

Last month, Newmont released its third-quarter 2013 results. The company’s adjusted earnings of 46 cents a share fell 46.5% from the year-ago quarter’s earnings of 86 cents, but exceeded the Zacks Consensus Estimate of 32 cents.

On a reported basis, the company’s profit from continuing operation of $429 million or 86 cents per share in the quarter was up 7% from $400 million or 81 cents a year ago. The bottom-line benefited from the sale of Newmont’s investment in Canadian Oil Sands Limited, and higher production from Nevada and Other Australia/New Zealand operations.
Newmont’s revenues declined nearly 20% year over year to $1,983 million in the quarter, missing the Zacks Consensus Estimate of $1,978 million.
Newmont currently carries a Zacks Rank #3 (Hold).

Companies in the gold mining industry with more favorable Zacks Rank are Golden Star Resources, Ltd. (GSS - Free Report) , AngloGold Ashanti Ltd. (AU - Free Report) and Lake Shore Gold Corp. . While Golden Star holds a Zacks Rank #1 (Strong Buy), both AngloGold Ashanti and Lake Shore carry a Zacks Rank #2 (Buy).

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