Canada's Barrick Gold Corp., the world’s biggest gold producer, dropped its takeover offer for its American rival Newmont Mining after the two agreed to create a joint-venture for their mining operations in Nevada.
The Canadian miner launched a $17.8 billion takeover bid for Newmont last month, but was rejected by the Colorado-based company. Barrick’s offer included Newmont ditching its previously announced $10 billion deal to acquire Vancouver-based Goldcorp Inc, which on Monday backed the joint venture plans. In a statement, Goldcorp said "it has consented to and fully supports the announced Nevada joint venture".
Barrick and Newmont have operated independently in Nevada for decades, where Newmont has 19 mines adjacent to Barrick’s but have previously been unable to agree terms for cooperation. The pair have many shareholders in common, and last week a top Barrick shareholder reportedly urged them to find a way to work together in the US state.
“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. 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 Chief Executive Officer Mark Bristow said in a statement.
The two gold mining companies noted that following the completion of the joint venture, which Bristow said had been more than 20 years in the making, the Nevada complex will be the world's largest gold producer, based on 2018 production of 4.1 million ounces.
The companies also said 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.
“This agreement represents an innovative and effective way to generate long-term value from our joint assets in Nevada, and represents an important step forward in expanding value creation for our shareholders” Newmont CEO Gary Goldberg, who will retire in the fourth quarter stated.
The establishment of the joint venture is subject to the usual conditions, including regulatory approvals, and is expected to be completed in the coming months.
The joint venture will exclude Barrick's Fourmile project and Newmont's Fiberline and Mike deposits, pending the determination of their commercial feasibility.
Barrick will be the operator and also own 61.5 percent of the joint venture, while Newmont will own the remaining 38.5 percent stake. The board representation will be based on the two companies' ownership.
Barrick said that as a result of this agreement, it has withdrawn its Newmont acquisition proposal announced on February 25, and its proposals for the Newmont annual general meeting submitted on February 22.
Barrick Gold was founded in 1983 and is headquartered in Toronto, Ontario, Canada. It has mining operations and projects in 15 countries, including Argentina, Australia, Canada, Chile, Côte d’Ivoire, Democratic Republic of Congo, Dominican Republic, Mali, Papua New Guinea, Peru, Saudi Arabia, Senegal, United States, and Zambia.
Barrick's Cortez and Goldstrike properties in Nevada employ a total of 3,000 employees and 800 contractors. Operations at Cortez are split between two complexes: the Pipeline complex is mined via open pit; and Cortez Hills is mined via open pit and underground. Goldstrike consists of the Betze-Post open pit, and the Meikle and Rodeo underground mines.
The company’s shares trade on the New York Stock Exchange under the symbol GOLD, and on the Toronto Stock Exchange under the symbol ABX.
Newmont was founded in 1921 and is headquartered in Greenwood Village, Colorado, USA. It has approximately 24,680 employees and contractors, with the majority working at managed operations in the United States, Australia, Ghana, Peru, and Suriname.
The company owns or controls approximately 2.6 million acres in Nevada. It has been pouring gold in the state for over 50 years along a 100-mile corridor, which includes 11 surface mines, eight underground mines and 13 processing facilities.
Newmont is publicly traded since 1925 and is the only gold producer listed in the S&P 500 index.
Following the joint-venture announcement on March 11, Barrick's shares advanced to $13.05 in morning trading in New York while Newmont fell more than three percent to $32.63.