Canadian miner Barrick Gold Corp on Friday said that it is weighing a mammoth bid for US rival Newmont Mining Corp to reclaim its dominance in the gold sector.
In a statement, the company said it had “reviewed the opportunity to merge with Newmont Mining Corp,” but added that “no decision” had been made yet.
Newmont has not commented on the proposed transaction. If it goes ahead, the US$19 billion hostile takeover would top the previous record deal, set only last month after years of waning investor interest due to lackluster bullion prices.
The industry has been consolidating as gold mines around the world get depleted, driving up costs and encouraging companies to come together in mergers and alliances.
Last month, Colorado-based Newmont announced a US$10 billion stock deal for another Canadian mining company, Vancouver-based Goldcorp Inc, in a move to leapfrog Barrick as top gold miner.
That acquisition — which is expected to close in the second quarter — came only three months after Barrick agreed to buy Britain’s Randgold Resources Ltd in a US$5.4 billion deal.
However, unlike past waves of mergers and acquisitions in the sector that saw big premiums being offered, but turned out to be disastrous and burdened buyers with huge debts, Barrick lowered the bar in the Randgold deal.
Barrick and Newmont flirted with the idea of merging five years ago, but talks fell apart over who would lead the combined firm and where to locate its headquarters — Toronto or Denver, Colorado.
Barrick’s renewed interest in its rival shows that it does not want to cede its gold crown.
However, observers said that its offer of a one-for-one share exchange at no premium might have to be sweetened to entice Newmont shareholders.
It could also complicate Newmont’s purchase of Goldcorp or even scuttle the deal, which would put Barrick on the hook for a huge break fee payable to Goldcorp.
Under the terms, Barrick would reportedly keep the bulk of Newmont’s assets including mines in Nevada and African countries, while its Australian assets would be sold to Newcrest Mining Ltd or another buyer, unnamed sources were cited as sayinf by the Globe and Mail newspaper.
Newcrest, which is largely focused on the Pacific Rim, itself last year walked away from talks to merge with Goldcorp, but it is said to be looking for new buying opportunities.
The Barrick-Newmont tie-up — which long eluded late Barrick founder and chairman Peter Munk — would produce more than 10 million ounces of gold a year, BMO Capital Markets said in an estimate.
The two companies have adjoining assets in Nevada and Newmont already has a stake in Barrick’s Turquoise Ridge Mine in the US state.
Their combined market capitalization would top US$40 billion.
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