Canada's Barrick Gold aims to merge with US Gold firm, Newmont

Gold mining
Representational picture Pixabay

Canada's Barrick Gold Corporation, the world's biggest gold mining firm, has launched a hostile takeover of its American rival, Newmont Mining Corporation, the world's second biggest gold mining firm.

Barrick Gold said it offered Newmont some US$18 billion in an all-stock merger that will form an industry behemoth worth more than $42 billion. In a statement, Barrick Gold said the buy-in will lead to the creation of "the world's best gold company."

Barrick's proposal unveiled Monday has it offering 2.5694 shares for each Newmont share. Should the merger prosper, Barrick will own 55.9 percent of the combined firm. Barrick's offer is worth almost US$18 billion based on Barrick's closing price of US$13.04 per share on the New York Stock Exchange on Feb. 22.

Should the deal prosper over the objections of Newmont, the combined company will have revenues of $15.6 billion and $7 billion in annual earnings. The combined company will also command massive gold reserves equivalent to 141 million ounces.

Barrick President and CEO Mark Bristow called the proposed merger "logical and long overdue."

"A combination of Barrick and Newmont would represent a unique, once in a lifetime opportunity to create the unrivalled leader in the gold sector and generate significant -- and in our industry, unparalleled -- value creation for our shareholders," said Bristow in a letter to Newmont's board of directors.

Bristow said the merger will generate $7 billion in cost savings. Much of these savings will stem from synergies in their "highly complementary" neighboring operations in Nevada. Newmont has a stake in Barrick's Turquoise Ridge Mine in Nevada.

Bristow also said the merger will position the Nevada assets "to deliver more than 20 years of profitable production."

"Most important, it will enable us to consider our Nevada assets as one complex, which will result in better mine planning and fully realize the state's enormous geological potential for all stakeholders," said Bristow.

Based in Toronto, Barrick reported revenues of $8.4 billion in 2017 while Newmont had revenues of $7.3 billion. Newmont, the largest gold miner in the U.S., is also the only gold mining firm in the Standard & Poor's 500.

Denver-based Newmont, however, noted that Barrick's bid was lower than its current share value, which shot upwards last week when news of the impending merger leaked-out. While not completely dismissing Barrick's bid, Newmont said it remains focused on closing its $10 billion acquisition of Canadian rival Goldcorp, Inc. in the second quarter.

Newmont's acquisition of Vancouver-based Goldcorp temporarily made it the world's largest gold mining firm. It will retain this status should it spurn Barrick's offer.

Barrick and Newmont, however, are not new to merger attempts. Both first made a stab at this five years ago but talks went nowhere over who would lead the combined firm and where to locate its headquarters.

This article was first published in IBTimes US. Permission required for reproduction.