NEW YORK (TheStreet) -- Newmont Mining (NEM) announced that it has agreed to acquire the Cripple Creek & Victor (CC&V) gold mine in Colorado from fellow gold producer AngloGold Ashanti (AU) for $820 million in cash.
Shares of Newmont Mining are down by 1.49% to $25.43 in mid-morning trading on Tuesday.
The company said by acquiring the mine it will create a value-accretive opportunity for Newmont that will improve its mine life and costs in a favorable jurisdiction.
"Consistent with what we've achieved elsewhere, we believe we can lower direct mining costs by up to 10% through improved productivity and optimization," Newmont CEO Gary Goldberg said in a statement.
The company expects the purchase to support its strategy of leading the gold sector in value by creating strong earnings and cash flow, adding between 350,000 and 400,000 ounces of gold per year in 2016 and 2017, and strengthening its reserve base.
The transaction is expected to close in the third quarter of 2015.
Shares of AngloGold Ashanti are higher by 8.37% to $9.45 in mid-morning trading on Tuesday.
Separately, TheStreet Ratings team rates NEWMONT MINING CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate NEWMONT MINING CORP (NEM) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 17.3%. Since the same quarter one year prior, revenues rose by 11.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- 46.60% is the gross profit margin for NEWMONT MINING CORP which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.27% trails the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, NEWMONT MINING CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- NEM's debt-to-equity ratio of 0.62 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.11 is sturdy.
- You can view the full analysis from the report here: NEM Ratings Report