Gold mining drama in Barrick’s Newmont takeover bid – The Wall Street Journal

DUBLIN — Barrick's takeover bid for Newmont is fast becoming a very dramatic chapter in the ongoing corporate thriller that is the gold mining industry. The bid, and Newmont's subsequent rejection of the bid in favour of its own planned deal with Goldcorp, underscores some of the most important features of today's mining industry. The gold mining business has always been about scale and costs. The goal is to have a lot of productive mines that are close enough to one another to achieve cost savings. In addition, there have been relatively new gold discoveries in the last few years. As a result, mergers and acquisitions have become the primary path to growth and cost cutting for gold mining companies. Barrick has been at the forefront of this. Its recent merger with Randgold Resources created the world's biggest gold mining company by some measures. In seeking to merge with Newmont, Barrick was hoping to increase its size and, crucially, to combine its Nevada operations with Newmont's, securing massive cost savings. But Newmont isn't keen – it prefers to pursue its own bid for Goldcorp, which will make the combined entity the world's biggest gold producer by output. It's not clear yet how this drama will play out, but one thing's for sure – this proves that Mark Bristow knew what he was talking about back in January when he said that the gold industry is in line for a major shakeup. – Felicity Duncan.Newmont Rejects Barrick Gold's Takeover Bid.By Alistair MacDonald.Newmont Mining Corp. turned down a proposal from rival Barrick Gold Corp. to merge and create one of the world's largest mining companies, a widely expected move..___STEADY_PAYWALL___.Newmont said in a news release that Barrick's all-share proposal was inferior to the Denver-based mining company's own deal with Goldcorp Inc..The company, the US's second largest mining company as measured by market capitalisation, said it would be able to deliver $365m in annual cost savings or a total of $4.4bn from any combination with Goldcorp..Early last week, Barrick offered $17.85bn for Newmont in a no-premium deal that would create a giant worth about $40bn at today's valuations..Barrick has said that a combination with Newmont could strip out costs of nearly $7.1bn, most of which will come out of the two companies' Nevada operations..Barrick wasn't immediately available for comment..Newmont's Chief Executive Gary Goldberg has said that both companies can reap costs savings in Nevada by forming a joint venture, and that a full merger isn't needed. On Monday, the company tabled a proposal to Barrick that details a joint venture in Nevada.."Realising value through Barrick's proposal for Newmont's shareholders hinges entirely on a new management team that lacks global operating experience and is only two months into its own transformational integration," Mr. Goldberg said in a statement..Last year Barrick merged with Randgold Resources in a $6bn all-stock deal. Randgold CEO became head of the new company..Newmont also said merger brought investors political risk, because so many of Rangold's mines are in Africa.."By contrast, Newmont Goldcorp's assets will be located in favorable mining jurisdictions and prolific gold districts on four continents," the company said..On Friday, Newmont's shares were trading at a premium to the offer, based on Barrick's current share price. That means that as things stand, Barrick would likely have to make a better offer to win over Newmont shareholders..Write to Alistair MacDonald at alistair.macdonald@wsj.com

Gold mining drama in Barrick’s Newmont takeover bid – The Wall Street Journal

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