The great $US18 billion Barrick Gold bid for Newmont Mining is over as fast as it emerged last week after the two companies agreed to do a deal on their gold mining and processing assets in the US state of Nevada.
So all that talk about how Newcrest Mining – which on Monday revealed it’s own $1 billion plus play with the purchase of 70% of a Canadian gold and copper mine – could be a target for a takeover can now be put back in the box. It won’t happen.
Newmont can now continue to buy Goldcorp for $US10 billion and Barrick can bed down its most recent buy – Randgold.
It’s probably no coincidence that the no premium takeover offer from Barrick was dropped less than a week after both CEO’s started real talks on combing their interests in Nevada after 2o years of off/on/off/on talks that went nowhere.
Under the deal, Barrick will operate a new joint venture company and take a 61.5% stake, with Newmont owning the balance.
Barrick and Newmont said the venture would generate an estimated $US500 million in annual pre-tax synergies in its first five full years. Many of these savings will come from white collar job cuts at both companies.
Barrick’s increased shareholding reflects the fact that Newmont has not included its Cripple Creek & Victor gold mine in Colorado, which was included in its original proposal.
Also not in the new venture is Barrick’s Fourmile exploration prospect in Nevada, which can be placed in the joint venture if it meets certain targets.
Both companies and their CEOs rushed to claim victory for the creation of the partnership, which had originally been proposed by Newmont.
Mark Bristow, Barrick’s CEO said the two sides had come to an agreement after he had dinner with Gary Goldberg, Newmont’s CEO, in New York a week ago. That progressed to talks in Toronto on Thursday and an agreement that was signed in Elko, Nevada, on Sunday.
Last week Newmont formally rejected Barrick’s all-share bid, with Mr. Goldberg calling it “egocentric”. It countered with a proposal for a joint venture with a 55% share for Barrick, which Mr. Bristow rejected.
The Financial Times reported that “the mood changed after some of Newmont and Barrick’s largest shareholders indicated their preference for a joint venture over a takeover of Newmont.
“Barrick has only just completed its $6bn acquisition of Randgold and some shareholders worried that another deal would be taking on too much, too quickly. Tom Palmer, Newmont’s incoming chief, who will take over from Mr. Goldberg this year, said the deal came about due to the encouragement of the company’s shareholders,” the paper reported.