Barrick Gold Corp (NYSE:GOLD) (TSX:ABX) withdrew its unsolicited $17.85 billion bid to acquire Newmont Mining Corporation (NYSE:NEM), the companies announced on Monday, a move that would’ve united the world’s two largest gold producers.
Instead, Barrick and Newmont will embark on a joint venture in Nevada.
Barrick will be the majority owner of the combined mining operation, with a 61.5% stake in the venture. The deal will allow the companies to capture an estimated US$500 million in average annual pre-tax synergies in the first five years and $5 billion in pre-tax present value over 20 years.
“We are finally taking down the fences to operate Nevada as a single entity in order to deliver full value to both sets of shareholders, as well as to all our stakeholders in the state, by securing the long-term future of gold mining in Nevada,” Barrick President and CEO Mark Bristow said in a statement.
The joint venture demonstrates that mergers and acquisitions activity Is speeding up as miners look to amass assets in anticipation of a bull market, industry executives say.
“Acquiring ounces before the bull market fully takes hold seems to be the strategy,” Gold Resource Corporation (NYSEAMERICAN:GORO) CEO Jason Reid told Proactive Investors. “Once the bull market is on solid ground, M&A opportunities will get expensive fast. …To me, bear markets are for buying, and the recent M&A activity is behind the curve and should have taken place years ago.”
The joint venture is already paying off for Barrick’s share price, which was ahead 2.8% to $13.29 on the NYSE and up 2.2% to $17.34 on the TSX Friday morning. Newmont, meanwhile, fluctuated around the flatline of $33.75.
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