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Report on Business Barrick eyes hostile bid as Newmont set to become No. 1 gold producer

This undated file photo shows Barrick Goldstrike Mines' Betze-Post open pit near Carlin, Nev. A Barrick acquisition of Newmont would finally see the two mining giants join forces in Nevada.

Adella Harding/The Associated Press

Barrick Gold Corp. is mulling a takeover bid for Newmont Mining Corp., a transaction that would represent one of the largest mining deals ever and solidify the Toronto-based company’s position as the world’s largest gold producer.

Barrick is actively working on a plan for a two-step deal that would see it take over Colorado-based Newmont for about US$19-billion in stock, then flip some of Newmont’s assets to Australia’s Newcrest Mining, according to industry sources familiar with the situation.

The sources, who were granted anonymity by The Globe because they were not authorized by their employers to speak publicly, cautioned that there are still a number of hurdles. One of those obstacles is winning support from shareholders of Newmont. The company is attempting to close its own US$10-billion acquisition of Vancouver miner Goldcorp Inc., which was only announced last month.

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Under the potential terms of the deal, Barrick would keep Newmont’s Nevada and African mines, while Newcrest would take over its Australian operations, which are worth billions.

An industry source said that Newcrest’s participation is still very fluid and that the Melbourne-based miner is taking a very careful approach before committing. Barrick is also engaged in talks with other Australian miners who may end up buying the Australian assets, added the source. Newcrest operates mines in Australia, Papua New Guinea and Indonesia.

If Barrick were to successfully bid for Newmont, the latter’s acquisition of Goldcorp would not proceed and the Vancouver-based miner would remain as a stand-alone company. However, Barrick would be on the hook for a US$650-million break fee payable to Goldcorp.

More: Barrick confirms talks to buy Newmont Mining in no-premium deal

Barrick CEO Bristow stands to earn as much as $18-million if targets are met

CIBC World Markets Inc. and New York-based boutique investment bank M. Klein & Co are acting on behalf of Barrick in the negotiations.

Newmont and Newcrest declined comment. Barrick did not immediately respond to a request for comment.

Barrick and Newmont tried to merge about five years ago but talks fizzled at the 11th hour after the two were unable to reach an agreement on who would run the company and after the miners clashed on where the headquarters of the combined company would be located. (Barrick insisted it be in Toronto.)

Mark Bristow, chief executive officer of Barrick Gold, speaks during an interview at the Investing in African Mining Indaba conference in Cape Town, South Africa on Feb. 5, 2019.

MIKE HUTCHINGS/Reuters

A Barrick acquisition of Newmont would finally see the two mining giants join forces in Nevada. Synergies in the form of common processing facilities in Nevada are thought to be worth billions of dollars in cost savings. By comparison, when Newmont announced its acquisition of Goldcorp, only US$100-million a year in synergies were touted.

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Barrick last month closed its US$6-billion deal to acquire Randgold Resources Ltd., and Randgold CEO Mark Bristow took over as Barrick’s CEO. Mr. Bristow and the Randgold team in recent years have internally studied an acquisition strategy that involved merging with Barrick and then acquiring Newmont, according to people familiar with the matter.

Before the Barrick-Randgold merger was announced in September, Barrick and Newmont spoke about combining their Nevada operations, sources said.

After about seven years of little or no deal activity, mergers and acquisitions have roared back in mining.

Thanks to deep cost-cutting, tens of billions in writedowns and billions more in asset sales, many of the biggest miners are in much better financial position to strike large acquisitions. The recovery in the price of gold bullion over the past few months which has rallied to around US$1325 an ounce is adding to the air of optimism.

In September, Barrick announced its zero premium takeover of Randgold and Newmont followed with its deal to buy Goldcorp in January.

Newmont’s market valuation on Thursday was US$18.9-billion compared with Barrick’s US$23.2-billion.

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