Newmont Fends Off Barrick's Hostile Bid, But Only for Two Years

(Bloomberg) -- Newmont Mining Corp. managed to fend off a hostile bid by Barrick Gold Corp. by agreeing to a joint venture around the two companies’ projects in Nevada. That should shield the Colorado-based miner from an unwanted offer from its recent suitor, for at least two years.

“We won’t be going to buy each other’s shares and enter into any hostilities for the next two years,” Barrick Chief Executive Officer Mark Bristow said in a telephone interview Monday. The only way a full merger could occur within that period would be if it were “friendly,” he said.

The agreement to end Barrick’s $17.8 billion hostile bid for Newmont was reached after the companies opted to pursue a joint venture around their Nevada projects. In reaching that pact, Newmont accorded Barrick a 61.5 percent stake in the venture, up from the 55 percent offered last week.

Barrick’s decision to withdraw its bid allows Newmont to focus on securing shareholder approval for its offer to buy Goldcorp Inc. Newmont has repeatedly said the that deal makes more sense than a merger with Barrick.

“They’ve stood down and they’re going to be very focused on their integration process,” Newmont CEO Gary Goldberg said in a phone interview. “We’re going to be very focused on supporting that and then also moving forward with Goldcorp.”

Barrick had criticized Newmont’s plans to merge with Goldcorp as value-destructive but when asked Monday, Bristow said he no longer has any comment on the deal. That said, Barrick is partners with Goldcorp at a mine in the Dominican Republic so a Newmont-Goldcorp deal would create a JV with Newmont and Barrick there.

“At the end of the day, if Gary progresses with Goldcorp, he becomes my partner in Dominican Republic,” Bristow said. “It would be good for the industry if that happened. Maybe I’ve started a trend”

Barrick gained 1.5 percent to $13.125 at 11:22 a.m. in New York trading. Newmont was down 2.3 percent to $32.95.

Barrick and Newmont said in 2014 that there was plenty of hidden gold still to be uncovered in Nevada, which accounted for a third of their output then, and produced more of the metal than South Africa and Chile combined. The Nevada complex would be the biggest gold producing asset in the world, Bristow told analysts.

From the beginning, Bristow had said that the bulk of the $7 billion synergies he envisioned from a merger with Newmont would come from the two companies’ projects in Nevada but insisted that Barrick operate the mine and have the larger stake. In a joint presentation to shareholders the companies said they expect $4.7 billion in synergies from the JV.

“We want these companies to really focus on realizing these synergies,” said Simon Jaeger, a portfolio manager at Flossbach von Storch AG, one of the top five shareholders of both companies. “We weren’t focused too much on the format. We were not in favor of the merger or a big transaction or a JV per se.”

There is no urgent need to sell assets covered by the joint venture, according to Goldberg. “That would be something we’d work through as part of the overall joint venture arrangement," he said in a telephone interview Monday. "But I think that’s probably down the road a ways.”

Bristow said there are opportunities to expand the partnership within Nevada and beyond but he does not expect asset sales as part of the JV."

“This isn’t about personalities,” Goldberg said. “This is about working together and delivering on behalf of all of our stakeholders. So that’s it for the relationship talk.”

In September, industry leader Barrick agreed to buy Randgold Resources Ltd. for $5.4 billion.
These deals are transformative and should be a model for the industry, said Bristow, who officially took the helm of Barrick on January 1st.

“You can’t tell me that I’ve sat on my hands,” he said.

--With assistance from Justina Vasquez and Joe Richter.

To contact the reporter on this story: Danielle Bochove in Toronto at dbochove1@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Reg Gale

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