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Barrick Gold ends hostile takeover bid for Newmont, announces Nevada joint venture

The companies are combining their Nevada operations to cut costs with a bull market on the horizon
Gold mine
The companies had previously been at odds over Barrick's takeover attempt

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.

READ: Here’s why the consolidation in the gold mining industry is far from over

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.

Contact Andrew Kessel at [email protected]

Follow him on Twitter @andrew_kessel

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January 10 2017

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