Barrick Gold Has Studied Offer for Newmont Mining
(Bloomberg) -- Barrick Gold Corp., the world’s second-largest gold producer, has considered a bid for Newmont Mining Corp. in what could be the biggest-ever industry merger and propel the Canadian miner to the No.1 spot globally.
Shares of Newmont rose 3 percent to settle at $36.48 in New York, valuing the company at more than $19 billion. Barrick slipped 2.4 percent in Toronto, while Goldcorp Inc., which Newmont agreed to acquire in January, fell 4 percent.
Barrick has reviewed the opportunity to merge with Newmont in an “all-share nil premium transaction,” but no decision has been taken, the company said in a statement Friday. 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 earlier.
Newmont is aware of the statement but won’t speculate “on Barrick’s interest or motivation,” spokesman Omar Jabara said in an email.
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, including 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 Greenwood Village, Colorado-based 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 Friday morning. “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, according to the people, who asked not to be identified because the talks were private.
Representatives for Goldcorp and Newcrest declined to comment. Representatives for 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 last 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.
“We remain confident that the combination of Newmont and Goldcorp represents an unparalleled opportunity to create value for our shareholders and deliver industry-leading returns for decades to come,” Newmont’s Jabara said in the email.
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, who founded Randgold more than two decades ago, has also said the industry needs an overhaul, noting that it has “too few assets with too many management teams” and is ripe for reorganization.
Newcrest, Australia’s top gold producer, is largely focused on the Pacific Rim. It’s seeking to add more assets under a program to improve its exposure to the industry’s best operations. Newcrest shares rose 0.6 percent in Sydney trading Friday.
©2019 Bloomberg L.P.