The industry slump that drove Barrick Gold Corp. and Newmont Mining Corp. to renew merger talks may yet send the world’s two largest gold producers back to negotiations.
The North American-based companies had hoped to finalize an all-stock deal before Newmont’s annual meeting of shareholders, scheduled for Wednesday, April 23, sources said.
But negotiations hit a snag late this past week and the companies decided to take a break, said one person familiar with what transpired.
The miners are still open to merger discussions and could rekindle talks ahead of Barrick’s annual shareholder meeting April 30, this person said.
It is not known whether or when the miners could resume talks.
Barrick shares were down nearly 4 per cent just before noon on Monday in Toronto. Newmont stock was up nearly 6 per cent in New York.
Combining the companies would create a North American mining giant valued at more than $30-billion (U.S.), with gold production exceeding 11 million ounces a year.
For years, Barrick and Newmont have talked about joining forces in Nevada, where they both have long histories of operating.
The miners already jointly own the Turquoise Ridge mine in Nevada and have some neighbouring assets in the state. A merged Barrick-Newmont could save millions by combining more of their Nevada operations, analysts have said.
Toronto-based Barrick owns six mines in the state, including its most prolific, Goldstrike. Colorado-headquartered Newmont owns 18 mines there.
The companies’ last serious merger discussion came in 2009 when the gold market was thriving.
Barrick had recently bought Placer Dome Inc. in a $10.2-billion deal and was hungry for growth. But those talks fell apart when Newmont wanted to move Barrick’s Toronto headquarters.
In this latest go-round, negotiations come amid a tough time for the gold industry.
The price of the precious metal lost nearly 30 per cent last year, once falling below $1,200 an ounce. It recovered slightly at the beginning of this year but is now trading below $1,300 an ounce.
Barrick and Newmont have already cut costs and written down assets. The companies are looking for ways to further reduce expenses.
Under the terms of their latest proposal, Barrick’s incoming chairman, John Thornton, would have become executive chairman of the combined company and Newmont’s chief executive officer, Gary Goldberg, would have assumed the CEO role, one source said.
The miners would have spun out some of their non-core assets, and Barrick’s chief executive, Jamie Sokalsky, would have become the head of the smaller company, the source said.
If the companies ultimately do succeed, it will be the final deal for Barrick’s outgoing chairman, Peter Munk, who founded the company and built it into the world’s largest gold producer through a series of acquisitions.
Mr. Munk will be handing over the chairman position to Mr. Thornton, a former Goldman Sachs Group Inc. executive, at Barrick’s shareholder meeting.
Mr. Munk will leave after presiding over Barrick’s recent overhaul, which included raising $3-billion to reduce the company’s debt, suspending construction of the miner’s key asset Pascua Lama and revamping the board and executive compensation schemes.
His legacy at Barrick has been marred after the company levered up its balance sheet to buy copper company Equinox Minerals Ltd. near the height of the commodity boom.
Mr. Munk’s vision was to create a North American powerhouse to rival mining titans Anglo-Australian Rio Tinto and BHP Billiton.
Mr. Thornton shares Mr. Munk’s vision of diversifying Barrick.
“The priority is to be the world’s leading gold company and to be the leading, or a leading copper company,” Mr. Thornton told The Globe and Mail in an interview mid-March.
Toronto-based Barrick has a market capitalization of $21-billion and Colorado’s Newmont is worth $11.7-billion.
Spokesmen for Barrick and Newmont declined comment.