Gold's Next Fight: Barrick-Newmont's $4.5 Billion Castoffs

(Bloomberg) -- Barrick Gold Corp.’s plan to sell a cluster of Australian mines under its proposed $17.8 billion hostile takeover offer for Newmont Mining Corp. is set to spark a flurry of intense deal-making for the castoffs.

Toronto-based Barrick has already had “many conversations with interested parties” about assets that would be discarded should the combination of the two largest producers go ahead, Chief Executive Officer Mark Bristow said in an interview. “There’s a very good chance that some Australian operators will be involved.”

Evolution Mining Ltd. will review any sales of assets in Australia that have been earmarked to be hived off, according to Executive Chairman Jake Klein. It’ll most likely be challenged by rival local producers Newcrest Mining Ltd. and Northern Star Resources Ltd., as well as potentially Johannesburg-based AngloGold Ashanti Ltd., UBS Group AG analyst Daniel Morgan said by phone.

Newmont has three major mines in Australia’s Northern Territory and Western Australia, including a joint venture with Barrick in the Kalgoorlie Super Pit, which produce an annual total of about 1.8 million ounces for the two companies. The operations have a net asset value of about $4.5 billion, according to RBC Capital Markets.

Northern Star and Newcrest declined to comment. AngloGold is “currently not in the market for asset purchases, given our focus on the strong internal pipeline of opportunities we have,” the company said in an email.

The assets are “very profitable” and it’s probably appropriate to put them “into the hands of Australians who know how to operate in Australia,” Bristow said Monday at an industry conference in Hollywood, Florida. He described Newmont’s Boddington operation as a so-called tier-one asset, or one of the industry’s best mines.

Newcrest, which has previously said it is examining potential deals to improve the quality of its portfolio, could pay as much as $3 billion to $4 billion for the assets without significantly pressuring its balance sheet, Ord Minnett Ltd. said in a Monday note.

Certainly Interested

Evolution, Australia’s No. 2 producer, will “certainly be interested if he decided to dispose of those assets,” Klein said Monday, referring to Bristow’s remarks, in an interview with Bloomberg Television at the same conference.

The producer has undertaken about $1.5 billion of acquisitions since April 2015, including the $550 million purchase of Barrick’s Cowal operation in Australia, and would be among a potentially small field of candidates with the capacity to quickly complete a deal, Klein said.

Randy Smallwood, CEO of streaming company Wheaton Precious Metals Corp., said Tuesday there has been “lots of chatter around the bar” at the industry conference among potential acquirers of gold assets that may go up for sale after a possible mega-merger.

He said he’s already spoken informally about theoretical needs to finance the purchase of Australian assets and whether streaming finance would be appropriate.

“We’ve had discussions, in fact, a lot of discussions,” Smallwood said.

--With assistance from Ranjeetha Pakiam and Steven Frank.

To contact the reporters on this story: David Stringer in Melbourne at dstringer3@bloomberg.net;Danielle Bochove in Toronto at dbochove1@bloomberg.net

To contact the editors responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net, Keith Gosman, Joe Richter

©2019 Bloomberg L.P.