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April 20, 2014 1:36 pm
They had been discussing a deal that could have combined their substantial gold mine holdings in North America while spinning off some of their international assets into a separate vehicle.
Their talks almost reached a stage that would have allowed a merger to be announced on Tuesday, ahead of Newmont’s annual shareholder meeting, according to people familiar with the plans, which were first reported by the Wall Street Journal.
But, while the companies have decided to end their negotiations for the time being, they have not ruled out pursuing a deal in the future, the people said on Sunday.
With a combined market capitalisation of almost $33bn, a merger between Barrick and Newmont would be the biggest carried out in the gold sector. Talks between the companies came after both had been retrenching following a sharp fall in the gold price and demonstrated the need for major players in the industry to cut costs and reduce risk in more marginal jurisdictions.
A tie-up would also have been a remarkable conclusion to the career of Peter Munk, Barrick’s octogenarian founder, who is due to step down as chairman at the Canadian group’s shareholder meeting on April 30. He is due to be succeeded by John Thornton, the former Goldman Sachs investment banker who is already Barrick’s co-chairman and was closely involved in the latest merger plans.
Barrick and Newmont, which is headquartered in Colorado, have talked in the past about a possible link-up. Their combined annual gold output last year, of about 12m ounces of gold, is almost three times greater than that of AngloGold Ashanti, the number three producer.
Both Barrick and Newmont have substantial mining operations in Nevada, the centre of US gold production, and a merger would have been partly based on synergies of combining operations in North America. The two companies are already partners at one Nevada mine.
Other assets – including Newmont’s Australasian mines and African Barrick Gold, Barrick’s UK-listed subsidiary – could have been included in a spin-off. The two companies are joint owners of a gold mine in Kalgoorlie, Australia.
Both Newmont and Barrick have also been open to the possibility of expanding beyond the gold sector. Barrick diversified into copper by buying Equinox in 2011 while Newmont – which took on several key executives from Rio Tinto’s copper division – has also been looking at buying more copper assets. Most recently, it considered a bid for Las Bambas, recently sold by Glencore Xstrata.
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