Barrick, Newmont joint venture gets green light
Barrick Gold Corp. [ABX-TSX; GOLD-NYSE] and Newmont Mining Corp.‘s [NEM-NYSE] Nevada joint venture, which will create the world’s largest gold-producing complex, has cleared the regulatory conditions required for its completion.
The U.S. Federal Trade Commission granted an early termination of the waiting period under the Hart-Scott-Rodino Act on April 19, 2019.
“The joint venture is a historic accord between two gold mining companies, which have operated in Nevada for decades, but have previously been unable to agree terms for co-operation,” Barrick Gold said in a press release, Monday April 22.
It follows Newmont’s decision to reject Barrick’s $18 billion hostile takeover bid in early March 2019, prompting the proposal of a Nevada joint venture with Barrick instead.
The joint venture will allow them to capture an estimated $500 million in average annual pre-tax synergies in the first five full years of the combination, which is projected to total $5 billion pre-tax net present value over a 20-year period.
Following completion of the joint venture, the Nevada complex will be the world’s single largest gold producer, with pro forma output of more than 4.0 million ounces in 2018, three Tier One assets, potentially another one in the making, and 48 million ounces of reserves at a grade of 2.26 g/t gold.
That does not include another measured and indicated resources of 28 million ounces at a grade of 2.18 g/t gold.
Barrick will act as operator of the joint venture and hold a 61.5% ownership stake. Newmont will hold a 38.5% interest.
Under the agreement, Barrick will contribute its Goldstrike, Cortez, Turquoise Ridge, Goldrush and South Arturo assets to the joint venture.
Newmont will contribute its Carlin, Twin Creeks, Phoenix, Long Canyon, and Lone Tree assets. Also included in the joint venture will be associated processing facilities and other infrastructure.
However, it will not include Barrick’s Fourmile Project and Newmont’s Fiberline and Mike deposits. Those assets may be included at a later date if the required investment hurdles are satisfied.
Barrick President and CEO Mark Bristow said that practical measures required to integrate the joint venture assets and establish the new business are now being taken and are anticipated to be completed within the current quarter.
Bristow said the joint venture agreement will unlock the enormous geological potential of the Nevada goldfields and maximize the many value-creating opportunities.
On Monday, Barrick shares eased 1.75% or 31 cents to $17.39 on volume of 1.14 million. The shares trade in a 52-week range of $12.54 and $19.49.
Newmont eased 1.6% or US$0.53 to US$32.51. The shares trade in a 52-week range of US$29.06 and US$41.49.