ASX gold shares were on fire on Tuesday as Saracen Mineral Holdings Limited (ASX: SAR) and Northern Star Resources Ltd (ASX: NST) announced a new mega merger. That’s good news for shareholders in those companies, but what does it mean for the Newcrest Mining Limited (ASX: NCM) share price?
What was announced on Tuesday?
Northern Star and Saracen are set to combine forces under a $16 billion merger of equals. The merger would form a top 10 global gold company with target production of 2 million ounces of gold per year.
This is the latest step in the companies’ relationship after both become 50% joint venture partners in the Kalgoorlie Super Pit Mine.
Northern Star will acquire 100% of Saracen shares for 0.3763 Northern Star shares for each Saracen share to form the new company.
Both companies’ boards have supported the move as a way to unlock more value and give Saracen broader international reach.
What does this mean for the Newcrest share price?
The Newcrest share price closed 0.2% lower following Tuesday’s news. Clearly, a bigger, badder ASX gold company isn’t good news for Newcrest’s position as top dog.
However, I don’t think there is too much to fear from the planned merger. Newcrest is still Australia’s largest gold producer and will continue to be after the merger.
However, there are a couple of issues that might weigh on the Newcrest share price. One is potentially higher supply which may impact on gold prices.
I’m not sure that’s too much of a problem given the company’s target 2 million ounces per year production level. There’s also a potential threat to Newcrest’s status as the leading Aussie gold producer around the globe.
I think that’s what is weighing on investors’ minds as the Newcrest share price closed slightly lower on Tuesday.
Foolish takeaway
It’s still too early to determine what the impact of the merger will be on the Newcrest share price as well as its market share and profits.
I don’t think it’s particularly good news but it may not be too much of an issue given Newcrest’s scale and dominance.
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More reading
- ASX 200 rises on mixed day, big gold merger
- ASX 200 down 0.2%: Northern Star & Saracen announce mega merger, IAG settles class action
- Why Baby Bunting, Northern Star, Oil Search, & Telix shares are storming higher
- Northern Star (ASX:NST) and Saracen (ASX:SAR) announce mega merger
- 5 things to watch on the ASX 200 on Tuesday
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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