Talks between Newmont and Barrick stall

April 21, 2014

Recent talks of a merger between Newmont Mining Corp. and Barrick Gold Corp., the two largest gold mining companies in the world, reached an advanced level before faltering in April. However, The Wall Street Journal reported that additional discussions are still possible.

The two companies each have major operations in Nevada where both companies reach about 40 percent of the respective production.
A merger of the two companies, which each have major operations in Nevada, could potentially create synergies that would save millions of dollars at a time in which gold prices are suffering. In 2013, the price of gold declined 28 percent, the largest one-year drop.

Of Barrick's seven mines in the United States, six are in Nevada, accounting for about 40 percent of the Toronto-based mining company's total production last year. The biggest of those Nevada mines, Cortez, produced 1.34 million ounces of gold in 2013, making it one of the world's largest. But output is expected to fall to 925,000-975,000 ounces this year.

Likewise, about 40 percent of Newmont's production also came from Nevada, including from 14 openpit and four underground mines and 14 processing facilities.

Two sides believe they could save as much as $1 billion by taking advantage of an increased scale and reducing overlap, The Wall Street Journal reported.

It appears unlikely that a combination of these giants would raise concerns among competition regulators. For Canada's antitrust watchdog, production of the combined entity likely would need to exceed 35 percent of annual global output to represent a potential problem, one Canadian competition expert said. Based on world gold-production figures from the U.S. Geological Survey for 2013 and the two companies' gold output last year, Barrick and Newmont together generated about 12.6 percent of total global output.

Talks broke off because of a disagreement over plans for a spinoff of assets, according to people familiar with the matter.

Barrick was set to offer Newmont shareholders a premium of 13 percent over a calculation of Newmont's average share price for the 20 trading days before the signing of the deal, according to a person familiar with the matter, Bloomberg News reported,

A deal would have created a Toronto-based giant with operations on five continents, with Newmont CEO Gary Goldberg as its chief executive. Barrick Co-Chairman John Thornton was set to be named as executive chairman, a person familiar with the matter said, The Wall Street Journal reported.


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