MINING THEIR BUSINESS
Barrick Gold mulls merger with Newmont Mining as it looks to boost production,
Barrick Gold Corp., the world’s second-largest gold producer, has studied a bid for Newmont Mining Corp. as the Canadian mining giant looks for ways to boost production.
Barrick has reviewed the opportunity to merge with Newmont in an “all-share nil premium transaction,” but no decision was taken at this time, the company said in a statement Friday, confirming an earlier Bloomberg story. One possibility that Barrick has studied would involve teaming up with a partner, such as Newcrest Mining Ltd., in a bid for Newmont, people familiar with the matter said.
Newmont, based in Greenwood Village, Colo., has a market value of almost $19 billion (U.S.). Newmont’s shares climbed 3.8 per cent before regular trading in New York, while Barrick slipped.
The chief executive officers of Newmont, Barrick and Newcrest will all be in Florida next week for a BMO Capital Markets mining conference. News of what could be the largest gold deal in history would dominate the gathering, which brings together almost 2,000 mining executives and large investors, in- cluding sovereign wealth funds. In September, Barrick’s $5.4- billion merger with Randgold Resources Ltd. broke just ahead of the Denver Gold Conference and upstaged presentations by other competitors, including Newmont.
“We are not in the position to comment on speculation, but the timing is interesting,” heading into the conference, Andrew Kaip, an analyst with BMO, said in a research note. “Simple math,” suggests a Barrick-Newmont tie-up would produce more than 10 million ounces of gold a year, at an all in sustaining cost of around $900 per ounce, he wrote. Barrick and Newmont have come close to merging before. In 2014, talks broke down at the last minute over disagreements on the terms of the deal. Separately, Barrick and Newmont have also previously discussed a joint venture for their Nevada operations, according to the people, who asked not to be identified because the deliberations are private.
Newcrest has also held conversations about transactions with Barrick, Goldcorp Inc. and Nevsun Resources Ltd. in the past year before those miners opted for other deals, the people said.
Representatives for Newcrest and Newmont declined to comment. Representatives for Goldcorp and Nevsun didn’t immediately return calls seeking comment outside regular business hours.
An agreement would be the third massive deal in the gold space in the past six months. In January, Newmont agreed to buy Goldcorp in an all-stock deal valued at $10 billion. That purchase was set to be the largest gold mining deal in history and would secure Newmont’s lead over Toronto-based Barrick as the largest producer. It could also explain why Barrick might feel compelled to move now, before Newmont becomes even bigger. And it could leave Goldcorp stranded — or back in play — amid a wave of consolidation in the gold sector.
Building the world’s largest gold miner was “the ultimate goal” of Barrick’s late founder, Peter Munk. In recent years, the company has struggled to keep pace as it dealt with debt issues by selling assets and seeking joint ventures. Executive chairman John Thornton, a former Goldman Sachs Group Inc. banker, has streamlined the company and extended partnerships with governments and other miners around the world.
Barrick’s new CEO, Mark Bristow has also said the industry needs an overhaul.
Barrick and Newmont have adjoining assets in Nevada, and Newmont also has a 25 per cent stake in Barrick’s Turquoise Ridge mine. The two companies have talked about how “unification” of operations in the region could benefit them.