Canada’s Barrick Gold (TSX:ABX)(NYSE:GOLD), the world’s second-largest gold producer, may eclipse its recent and perhaps overly analyzed Randgold Resources takeover by buying rival gold major Newmont (NYSE:NEM) in a $19 billion all-share deal.
Replying to media speculation, the Canadian miner confirmed it has reviewed the opportunity to merge with the US miner in an all-share nil premium transaction. “No decision has been taken at this time,” Barrick said.
Both Bloomberg and The Globe and Mail said Barrick had been considering an hostile-bid as Newmont is about to officially become the world’s No. 1 gold producer once it closes its announced merger with Goldcorp (TSX:G) (NYSE:GG).
This is not the first time rumours of Barrick toying with an offer for Newmont grabs headlines. As close as November last year, the Toronto-based gold giant was said to have resumed talks with Newmont to at least merge their operations in Nevada.
“They have been trying to negotiate for years but Newmont couldn’t agree with Barrick, now that you have a new management team, it’s certain they revived those talks,” anonymous sources said at the time.
Speaking at the Denver Gold Forum in September, however, Newmont chief Gary Goldberg said the company had examined a deal in the past and had not “seen anything”. He did acknowledge some opportunities highlighted by RBC Capital Markets then.
According to the bank’s analysts, the US gold miner could achieve $300 million in operating and cost savings from combining its mines in Nevada with those of the Canadian company.
Goldberg also said at the time he was interested in buying Barrick’s half shares of their jointly-owned Kalgoorlie mine in Australia.
Newmont and Barrick own Turquoise Ridge, in Nevada, in a 25%-75% partnership. In February, the Toronto-based miner said the operation was one of its core ones due to its exceptional growth potential. It also noted it would invest between $300 and $325 million to build a third shaft there, which combined with additional processing capacity, is expected to enable the mine to roughly double annual production to more than 500,000 ounces per year.
More to come…
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