Barrick Gold studied possible Newmont merger

The Turquoise Ridge gold mine 70 km northeast of Winnemucca, Nevada, owned as to 75% Barrick Gold and 25% Newmont Mining. Source: Barrick Gold Corp.

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The Turquoise Ridge gold mine 70 km northeast of Winnemucca, Nevada, owned as to 75% Barrick Gold and 25% Newmont Mining. Source: Barrick Gold Corp.

Barrick Gold Corp. [ABX-TSX, NYSE] confirmed Friday February 22 that it has considered making a no-premium offer for Newmont Mining Corp. [NEM-NYSE] as the Canadian mining giant looks for ways to boost production.

Barrick has reviewed the opportunity to merge with Newmont in an “all-share in premium transaction,” but no decision was taken at this time, the company said in a brief statement Friday.

Barrick, which already ranks as the world’s second largest gold producer, was responding to earlier reports by Bloomberg and The Globe & Mail.

In an investment report on Friday, Scotiabank said one possibility that Barrick has studied would involve teaming up with a partner such as Newcrest Mining Ltd. [NCM-ASX], in a bid for Newmont, people familiar with the matter said.

Barrick’s new CEO Mark Bristow, who founded Randgold more than two decades ago, has also said the industry needs an overhaul, noting that it has “too few assets with too many management teams” and is ripe for reorganization.

Consolidation in the gold sector has been ramping up in recent months. In September, 2018, Barrick Gold greed to merge with Randgold Resources Ltd. [GOLD-NASDAQ, LSE] in a US$5.4 million deal. Barrick produced 4.53 million ounces of gold in 2018, and said it is planning to increase its production this year to between 5.1 and 5.6 million ounces.

Barrick has said it expects to produce between 375 and 430 million pounds of copper in 2019.

In January 2019, Goldcorp [G-TSX; GG-NYSE] and Newmont Mining agreed to merge in an all-stock deal worth $10 billion. The transaction is set the make the combined company, called Newmont Goldcorp, the world’s largest gold producer by some distance.

The combined company will have operations in the Americas, Australia and Ghana, producing between 6.0 million and 7.0 million ounces of gold annually.

On Friday, Newmont shares rose 2.6% or 94 cents to US$36.35, leaving the U.S. giant with a market cap of US$18.86 billion.

The shares were driven higher as the price of gold rose US$2.10 to US$1,327.56 an ounce.

On the Toronto Stock Exchange, Barrick shares eased 2.34% or 41 cents to $17.14 on volume of 4.48 million. The 52-week range is $18.90 and $12.54.

Talk of a Barrick-Newmont deal is nothing new. Back in 2014, Barrick and Newmont considered merging, but talks broke down over the deal terms. As noted in a Financial Post report, Barrick and Newmont have been neighbours in Nevada for many years. Newmont also has a 25% stake in Barrick’s Turquoise Ridge mine

Bristow has said he sees Nevada as a destination with enormous upside through brownfield extensions, new discoveries and combination opportunities with other operations in the area.

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