Nevada Mining Operations Key to Barrick Gold's Proposed Acquisition of Newmont Mining

Researched by Industrial Info Resources (Sugar Land, Texas)--Barrick Gold Corporation (NYSE:GOLD) (Toronto, Ontario) Chief Executive Officer Mark Bristow made it clear on Monday that a chief driver of the company's unsolicited bid to acquire Newmont Mining Corporation (NYSE:NEM) (Denver, Colorado) is the potential combination of their mining assets in Nevada.

Industrial Info is tracking 27 Nevada mining projects by the two companies, which have a combined value of $2.2 billion.

But Newmont said on Monday those Nevada synergies could be captured with less risk and more efficiency via a joint venture between the two companies instead of a merger.

Newmont is pursuing its own $10 billion acquisition of Goldcorp Incorporated (NYSE: GG) (Vancouver, British Columbia). For related information, see January 15, 2019, article - Newmont Agrees to Acquire Goldcorp to Become Leading Global Gold Producer.

Barrick Gold, which recently acquired Randgold Resources (Jersey, Channel Islands) for more than $6 billion, announced on Monday that its acquisition of Newmont would be "far superior" to Newmont's bid to acquire Goldcorp. The proposed all-share deal to combine Barrick Gold with Newmont Mining, which is valued at $17.8 billion, is conditional on Newmont terminating its proposed acquisition of Goldcorp.

During a conference call with industry analysts, Bristow said the proposed deal would unlock more than $7 billion in synergies.

"There have been many unsuccessful attempts over the years to forge such a merger, and the reason for not doing it escapes me," Bristow said. He added, "Nevada is the crux of our proposal, because that is where the bulk of our synergies can be realized."

For related information, see February 14, 2019, article - Barrick Gold Progresses With Nevada, Dominican Republic Projects.

Bristow said Barrick Gold has the bulk of the high-grade gold reserves in Nevada, while Newmont owns key processing plants. The grade of Barrick Gold's reserves in Nevada is nearly three times higher than Newmont's, "and the grade of our resources is even higher," Bristow said. "Newmont's reserve grade is only around 1.6 grams per ton, and their resources are even less than that. And so the pro forma company would not only deliver in increased production, at a higher grade, but would make more efficient use of processing facilities in Nevada."

Newmont said in a press statement it would analyze the unsolicited bid, but noted it has previously reviewed and rejected potential combinations with each of Barrick and Randgold Resources prior to their merger.

Newmont maintained the Barrick Gold proposal "ignores risks and overstates rewards...Newmont has previously determined that Barrick's risk and return profile is inferior on many fronts, including factoring Barrick's comparatively ineffective operating model, poor track record on delivering shareholder returns and unfavorable jurisdictional risk."

Newmont added: "Any of the Nevada synergies could be more efficiently realized through a Nevada joint venture between the companies without exposing Newmont's shareholders to Barrick's riskier portfolio, integration risks and transaction costs. Newmont has consistently communicated to Barrick its willingness to explore value-generating opportunities for the companies' Nevada assets."

Meanwhile, Newmont said it would continue to pursue its combination with Goldcorp, "which represents the best opportunity to create optimal value for Newmont's shareholders and other stakeholders."

Barrick's Bristow said that Newmont, "by all accounts, rushed into an ill-conceived premium merger with Goldcorp, which looks unlikely to deliver significant benefits to their shareholders."

Bristow said Goldcorp would dilute the quality of Newmont's assets, adding. "We as a team can't wait until after Newmont and Goldcorp merge, because we don't want Goldcorp's lower-quality assets in our portfolio."

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