Barrick synergies

Barrick (red) and Newmont (blue) properties in northern Nevada are shown on this page from a Barrick presentation titled "Capturing the Missing Billions."

Barrick Gold Corp. is trying to entice large shareholders of Newmont Mining Corp. to support Barrick’s proposed merger with Newmont, but Newmont is still touting its proposed merger with Goldcorp Inc. as the best move for the company.

While the courting of shareholders is ongoing, the next step is up to Newmont’s board of directors, which is evaluating Barrick’s bid and will “in due course respond to that proposal,” Newmont’s group executive for corporate communications, Omar Jabara, said March 1.

Once the board announces its decision, the ball will be in Barrick’s court, he said.

“Shareholders really make the decision. It’s our job to convince the markets,” Barrick Chief Executive Officer Mark Bristow said on March 1. “We’re getting a positive reaction.”

Newmont has talked with shareholders who are puzzled by Barrick’s bid, and they are “not excited about a negative premium,” Jabara said.

Barrick is attempting a $17.8 billion stock deal that would merge the two giant gold producers into a mega company to take advantage of potential cost savings and boost gold reserves and gold production. Newmont, however, is proceeding with the $10 billion plan to acquire Goldcorp.

“The critical mass of the new company will be Nevada,” Bristow said in a telephone interview.

He said Nevada will be a key part of the proposed merger to “increase mine life and improve profits,” and the combination would allow more mining and processing of lower-grade ores that in turn would increase the years of mining gold in Nevada.

“We are very committed to Nevada. Nevada hasn’t taken its correct place in the global mining industry. We think we can do more,” Bristow said.

Joint venture question

Newmont is in favor of a joint venture with Barrick in Nevada, just not a full merger. Jabara said Newmont Chief Executive Officer Gary Goldberg began communicating about a joint venture through emails with Bristow on Dec. 24, even before Barrick’s merger with Randgold Resources was completed on Jan. 1.

He said the emails continued into January, then “it was quiet” until Barrick’s unsolicited bid for Newmont on Feb. 25.

Bristow, who founded Randgold, said joint ventures are complicated “because no one works together,” but a merger would create a company that would “give us the absolute ability to restructure in Nevada,” which would provide more job security for employees and mean more tax revenue for Nevada.

Barrick and Newmont already have a joint venture in Nevada at the Turquoise Ridge Mine in Humboldt County, with Barrick as 75 percent owner and Newmont as 25 percent owner and ore processor for the gold mined at the underground operation.

Newmont has been operating in Nevada more than 50 years and “is anchored in Nevada” as an integral part of the northern Nevada communities, providing jobs, purchasing supplies, hiring contractors and “investing in social and economic development,” Jabara said.

Barrick has the Goldstrike underground and surface operations on the Carlin Trend, surface and underground mines and new discoveries on the Cortez Trend, along with Turquoise Ridge. Newmont has the Twin Creeks Mine near Turquoise Ridge, open pit and underground mines on the Carlin Trend, the Emigrant Mine south of Carlin and the Phoenix copper and gold mine near Battle Mountain.

“We think we can achieve additional value in Nevada with a joint venture, rather than combining” Barrick and Newmont, Jabara said in a phone interview. “It makes more sense rather than a complete takeover.”

Barrick and Newmont also have a 50-50 joint venture at the Kalgoorie Consolidate Gold Mine in Australia. Barrick and Goldcorp have a joint venture in the Dominican Republic now, but that operation would become a Barrick-Newmont joint venture if Newmont and Goldcorp merge.

If the merger with Newmont goes through, Bristow said the plan is to sell all the assets in Australia and focus on the Americas.

Bristow and Goldberg shook hands at a mining investor conference in Florida earlier this week, and Jabara said Goldberg suggested to Bristow that they talk.

Elko mayor’s concerns

Bristow answered questions raised by Elko Mayor Reece Keener that the merger would affect the community because there would be less competition for talent, have a possible impact on suppliers and possibly put downward pressure on wages.

“I think that may well be a concern,” Bristow said, but he countered that there won’t be any less work (for contractors, suppliers and mine employees) with the merger, and there will be more focus on Nevada workers rather than bringing people in from other countries.

“We are engaged with the community. We can always improve,” he said.

Newmont continues to plan for the merger with Goldcorp in the second quarter of this year, with Goldcorp shareholders voting on the proposal April 4. Jabara said Newmont hasn’t set a vote yet, but it should be in early April.

He said Newmont believes the Goldcorp deal is “a lot less of a risk” with 90 percent of mining operations in favorable mining jurisdictions in North and South America and Australia, and the company believes the Barrick proposal is “inferior on many fronts.”

Bristow said the real value would be in a Newmont-Barrick merger, and his proposal calls for Newmont dropping Goldcorp because Goldcorp doesn’t have any top assets.

The Newmont-Goldcorp merger “would mix high-quality, and poor-quality assets. Our responsibility as leaders is to maximize value for shareholders,” he said.

Jabara said the question also arises of whether Barrick’s move against Newmont is to increase value for shareholders “or try to subtract or derail the plan to merge with Goldcorp. We hear from a lot of folks that it’s really more about it potentially being an attempt to disrupt and distract from our combination with Goldcorp.”

Barrick is currently the world’s top gold producer, but Newmont would take the title if the Goldcorp merger goes through. If Barrick and Newmont combine, the new company would be the top gold company by far, with 141 million ounces of gold reserves and 275 million ounces of gold resources.

Barrick’s proposal

According to Bloomberg, Barrick doesn’t plan to increase its offer for Newmont, citing a source who asked not to be identified. Barrick’s offer based on share prices at the time would be a zero-premium deal.

“We made a very good offer,” Bristow said. “It will unlock $7 billion in synergies or $750 million a year.”

He said the combination would be 55 percent Barrick, 45 percent Newmont.

The Barrick proposal is for nearly 2.57 Barrick shares for each Newmont share.

Newmont shares closed March 1 at $33.82, down 30 cents, and Barrick shares closed at $16.35, down 25 cents.

Earlier this week, Bloomberg quoted Bristow as saying he was talking to the biggest shareholders regarding Barrick’s bid for Newmont. Many major Barrick shareholders also own stock in Newmont.

The Financial Times wrote the German fund manager Flossbach von Storch, one of the biggest shareholders in both companies, supports the merger if both parties want the deal.

Bloomberg reported that while larger shareholders are not saying much, smaller shareholders are commenting. David Neuhauser, managing director of Livermore Partners, said he likes the Barrick management team of Executive Chairman John Thorton and Bristow. James Rasteh, founder of Coast Capital LLC, said Newmont has the better managers.

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