Barrick ends hostile bid for Newmont

Companies opting instead to forge a JV around their Nevada projects

by BLOOMBERG

NEW YORK • Barrick Gold Corp is withdrawing its US$17.8 billion (RM72.79 billion) hostile takeover bid for Newmont Mining Corp, with the companies opting instead to forge a joint venture (JV) around their Nevada projects.

The change came weeks after Barrick proposed an offer that would have created the world’s largest gold producer.

After Newmont’s board rejected Barrick’s bid to buy Newmont in an all-share deal, Newmont CEO Gary Goldberg proposed the JV as an alternative both companies could gain from.

Barrick’s decision ends two weeks of animosity between the two largest gold producers, helping Newmont focus on securing shareholder approval for its offer to buy Goldcorp Inc.

Newmont raised doubts about the Barrick bid proposal from the start, saying its previously announced agreement to take over Goldcorp offered better benefits.

“We listened to our shareholders and agreed with them that this was the best way to realise the enormous potential of the Nevada goldfields’ unequalled mineral endowment, and to maximise the returns from our operations there,” Barrick CEO Mark Bristow said in a statement yesterday.

Newmont rose 17 cents to US$33.88 in yesterday’s pre-market trading in New York. Barrick gained 2.4% to US$13.24.

Even after more than a century and a half of exploration, Barrick and Newmont said in 2014 that there was plenty of hidden gold still to be uncovered in Nevada, which already accounted for a third of their output then and produced more of the metal than South Africa and Chile combined.

“This isn’t about personalities,” Goldberg said in a telephone interview yesterday. “This is about working together and delivering on behalf of all of our stakeholders. So, that’s it for the relationship talk.”

Bristow had noted that the bulk of the US$7 billion synergies he envisioned from Barrick’s merger with Newmont would come from the two companies’ projects in Nevada.

Goldberg had offered a JV in those projects instead, saying Barrick could take a 55% stake, leaving Newmont the rest.

“We want these companies to really focus on realising these synergies,” said Simon Jaeger, a portfolio manager at Flossbach von Storch AG, one of the top five shareholders of both companies. “We weren’t focused too much on the format. We were not in favour of the merger or a big transaction oraJVperse.”

The hostile bid strengthened Barrick’s position. When the JV was finally announced, the Toronto-based miner got a 61.5% stake, leaving Newmont with just 38.5%.

The decision by Barrick to withdraw its bid comes after rhetoric escalated into an ugly brawl between the two gold giants, with each side calling the other “desperate”.

Newmont said its previously announced agreement to take over Goldcorp offered better benefits. Barrick CEO Bristow said his team could do a better job running his rival.

The gold industry’s largest producers are on a deal-making spree after languishing bullion prices the past few years squeezed margins and spurred a search for higher quality mines.

Companies such as Barrick are trying to boost reserves of the precious metal or win operational savings.

In September, industry leader Barrick agreed to buy Randgold Resources Ltd for US$5.4 billion.

Three months later, Newmont announced its plan to purchase Goldcorp for US$10 billion, which would leapfrog it into the leading gold-producer spot. — Bloomberg