Media reports indicate that Canada’s Barrick Gold Corp is considering a hostile bid for Newmont Mining Corp for about US$19 billion in stock, in what would potentially be one of the largest-ever mining deals.
The country’s Globe and Mail newspaper reported that Barrick would flip some of Newmont’s assets to Australia’s Newcrest Mining, cited industry sources familiar with the situation. Under the potential terms, Barrick would keep Newmont’s Nevada and African mines, while Newcrest was considering taking over its Australian operations.
Barrick, which spent US$6.1 billion on buying rival Randgold Resources last month, has formed new management teams and cut administrative costs as part of new Chief Executive Mark Bristow’s plan to set the combined company firmly apart from peers.
Bristow had said on a post-earnings call that Barrick Gold would continue to look at opportunities for mergers or acquisitions. Barrick and U.S. company Newmont have long been touted as a potential match, as they have plenty of overlap around their North American operations, said an Australia-based banker, adding, there’s a danger that Barrick is biting off more than it can chew by making another large acquisition.
Without such a deal, Barrick could cede its crown as the world’s largest gold producer to Newmont, which is due to close its US$10 billion buyout of smaller rival Goldcorp Inc next quarter. If Barrick were to be successful, the merger between Newmont and Goldcorp would not go ahead, and Barrick would be liable for a US$650 million break fee, the newspaper reported.
Bloomberg reported that Barrick had studied a bid for Newmont as it looks for ways to boost production, citing people familiar with the matter.
Newmont declined a request from Reuters for comment, while Barrick did not immediately respond to request for comment.
A Newcrest spokesperson said the firm did not comment on M&A speculation. Goldcorp was not immediately available for comment.
Newmont has three gold mines in Australia, which have a net present value of $4.5 billion according to AME Group, but none of those are seen as the kind of large ‘tier one’ developments that Newcrest has said are a prerequisite for any major buys.
