Barrick Gold Corp. made a proposal to merge with Newmont in an all-share transaction, saying a combination of the two would form a gold company with unprecedented potential for value creation. Barrick President and CEO Mark Bristow said the proposed merger is expected to unlock more than $7 billion net present value of real synergies, a major portion of which is generated by combining the two companies’ assets in Nevada, including Barrick’s mineral endowments and Newmont’s processing plants and infrastructure.
“The combination of Barrick and Newmont will create what is clearly the world’s best gold company, with the largest portfolio of tier one gold assets and the highest level of free cash flow to drive future growth and support sustainable shareholder returns, run by a management team with an unparalleled record of delivering value,” he said.
In the proposal, each Newmont shareholder would receive 2.5694 Barrick shares per Newmont share. Barrick shareholders would own approximately 55.9% of the merged company and Newmont shareholders would own approximately 44.1%.
Barrick also recently merged with gold miner Randgold Resources and Newmont has entered into an agreement to purchase Goldcorp Inc. That transaction is moving forward as Goldcorp recently obtained an interim order from the Ontario Superior Court of Justice to hold its shareholder meeting in April.
Bristow said the Barrick/Newmont deal was a logical and long overdue imperative for shareholders that would be superior to Newmont’s proposed acquisition of Goldcorp Inc., with expected Barrick/Newmont annual synergies 7.5 times larger than the quoted annual synergies for the Newmont/Goldcorp transaction.
The proposal is conditional on Newmont not proceeding with its proposed combination with Goldcorp Inc.
In a statement released by Newmont, it said it was confident the proposed combination of Newmont and Goldcorp “represents the best opportunity to create value for its shareholders and deliver industry-leading returns for decades to come.”
Newmont said it has previously reviewed and rejected potential combinations with each of Barrick and Randgold Resources Ltd., prior to their merger. Newmont said it believes Barrick’s risk and return profile is inferior, including an “ineffective operating model, poor track record on delivering shareholder returns and unfavorable jurisdictional risk.”
Barrick said, “A combination of Barrick and Newmont would represent a unique, once in a lifetime opportunity to create the unrivalled leader in the gold sector and generate significant — and in our industry, unparalleled — value creation for our shareholders.”
Bristow said the proposed merger would also secure Nevada’s position as the world’s most prospective gold region.
“Most important, it will enable us to consider our Nevada assets as one complex, which will result in better mine planning and fully realize the state’s enormous geological potential for all stakeholders,” he said.
Newmont said instead of a merger, the two companies could create a Nevada joint venture. “Newmont has consistently communicated to Barrick its willingness to explore value-generating opportunities for the companies’ Nevada assets,” it added.
According to Barrick, the transaction would create a company with eight tier-one gold assets, with a possible ninth in Goldrush/Fourmile; unmatched cash flow generation; the senior gold sector’s strongest balance sheet, which will fund growth and shareholder returns; an exploration and development portfolio covering all of the world’s major gold districts; a known senior executive team with one of the industry’s best track records for creating value for shareholders; revenues of approximately $15.6 billion, operating cash flow of approximately $4.6 billion and adjusted EBITDA of approximately $7 billion, based on 2018 reported results; and total gold reserves of 141 million ounces and total gold resources of 275 million ounces.
The Barrick Board of Directors is unanimously supportive of the transaction.
Newmont said its board of directors will fully evaluate the Barrick proposal and respond in due course.