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Streetwise Hefty banking fees expected if Barrick succeeds in hostile bid for Newmont, estimates show

Former Citigroup banker Michael Klein is set for another big cheque if Barrick Gold Corp. succeeds in its US$17.8-billion hostile bid for Newmont Mining Corp.

Mr. Klein’s advisory firm, M. Klein and Co LLC, has already reaped the rewards after serving as one of Barrick’s financial advisers on the Toronto-based miner’s US$6-billion purchase of Randgold Resources in January.

Now, M. Klein and Barrick’s other financial adviser on the Newmont bid, Canadian Imperial Bank of Commerce, could earn US$50-million to US$70-million if the takeover is completed, according to estimates from financial services advisory firm Freeman & Co.

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The hefty banking fees come after years of tiny mining deals worth less than US$1-billion. During that time, mining companies sold single assets or tapped equity markets, but did not go ahead with multibillion-dollar acquisitions.

On the Randgold deal, Freeman estimates M. Klein shared US$25-million to US$35-million with Barrick’s other financial adviser on that deal, Morgan Stanley. Meanwhile, Freeman estimates Barclays and CIBC collectively earned US$35-million to US$45-million for advising Randgold.

And not just M. Klein, CIBC, Barclays and Morgan Stanley are pulling in the big fees.

Newmont had planned to acquire Goldcorp in a deal worth US$10-billion before Barrick disrupted the tie-up with its hostile bid.

Bank of Montreal, Citigroup Inc. and Goldman Sachs are Newmont’s financial advisers, and each stand to earn US$17-million if the Goldcorp acquisition succeeds, according to Newmont’s regulatory filings.

Meanwhile, Toronto-Dominion and Bank of America Merrill Lynch could collectively earn US$40-million to US$50-million for advising Goldcorp, according to Freeman’s estimates.

In addition, Newmont has retained the same three banks in its fight against Barrick. It is unknown how much each bank will earn for both defending Newmont and guiding Newmont in its Goldcorp bid.

“Typically, they will get paid for each mandate, but they won’t get paid double,” said Lam Nguyen, a director with Freeman’s consulting services. “When you have two mandates, you will negotiate it down a little. There may be some discount. How much of a discount I cannot tell," he said.

Newmont did not say whether each bank would take home $17-million if it succeeded in thwarting Barrick’s proposal, but failed to get the Goldcorp deal done.

All banks either declined comment, did not respond to a request for comment or could not be reached.

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