Barrick and Newmont join forces to operate Nevada complex mining
Newmont Mining proposes a joint venture with rival Barrick Gold, after rebuffing a takeover. Shardell Joseph reports.
Canada’s Barrick Gold made an all-stock bid for USA rival Newmont Mining Corp in February this year, an attempt to further its dominance in the global gold sector, but the deal fell through shortly after.
Barrick agreed to withdraw its US$17.8bln hostile bid proposal, which did not offer any premium to Newmont’s shareholders. Rejecting the offer on 4 March, Newmont ended its feud with Barrick and offered to work together in the Nevada Desert where both companies operate vast mining complexes.
Under the proposal, Barrick will be the operator of the joint Nevada complex and will hold a 61.5% ownership stake in the joint venture, while Newmont will own 38.5%. According to Newmont’s incoming Chief Executive Tom Palmer, who will take over from Gary Goldberg this year, the two sides agreed on the ownership split based on the valuation ascribed to the assets by analysts – Barrick will have three seats on the board and Newmont two.
The new deal means Newmont Mining Corp can continue with its proposed friendly takeover of Vancouver-based Goldcorp, a deal valued at US$10bln, which will create the world’s largest gold miner. This followed the Barrick $5.4bln merger with Randgold Resources, which was agreed last September. The merger further presents a positive environment for an increase in mergers in 2019, especially among junior mining companies.
The Nevada complex joint venture will include Barrick’s Goldstrike, Cortez, Yurquise Ridge and Goldrush mines, and other assets as well as Newmont’s Carlin, Twin Creeks, Phoenix, Long Canyon and Lone Tree mines.
‘We view this as a benefit – not only to our collective shareholders, but to our employees, local stakeholders and Nevada as a whole,’ said Barrick Chief Executive Mark Bristow. ‘Our joint venture will allow us to tear down the fences and operate our assets as one mining complex, making the best use of our combined infrastructure.’
The joint venture is expected to save both companies US$500m collectively in annual pre-tax synergies in its first five full years, and billions of dollars in the long run. They are expected to produce 4.1 million ounces of gold this year, making the Nevada complex the third largest gold producer in the world.
Both Bristow and Goldberg are celebrating the deal, but some analysts and investors question whether the estimates of cost savings are accurate, and if they will be equal on both sides.