Barrick, Newmont Settle Nevada Dispute in US$1.95 Billion Deal

Gold giants Barrick Mining (TSX:ABX,NYSE:B) and Newmont (NYSE:NEM,ASX:NEM) agreed to a US$1.95 billion truce on Monday (August 10), resolving a months-long dispute that threatened to derail Barrick's planned North American spin-off.

Under the settlement, Newmont consented to the IPO and agreed to pay Barrick US$1.95 billion within 30 days.

In exchange, Barrick contributed its Fourmile gold project into the Nevada Gold Mines (NGM) joint venture, alongside Newmont’s Fiberline and Mike developments. Barrick expects Fourmile to produce up to 750,000 ounces of gold annually.

Newmont previously attempted to block the spin-off, alleging that Barrick mismanaged the joint venture by diverting resources from NGM to benefit Fourmile.

“Newmont has consented to the IPO and the parties have agreed to expand NGM with the early vend-in of our excluded properties, as well as settling all disputes,” said Barrick CEO Mark Hill in its recent second quarter statement.

The Toronto-based miner reported second-quarter adjusted earnings of US$0.82 per share, missing the US$0.88 average analyst estimate compiled by LSEG. Retrospective tax penalties in Mali and higher production costs hurt profitability, offsetting an 11 percent quarter-over-quarter increase in gold production to 796,000 ounces.

Overall, Barrick recorded net earnings of US$1.2 billion for the quarter, a 50 percent increase year over year, but a 24 percent decline compared to the first quarter, when gold prices approached US$5,600 per ounce.

The settlement removes a major roadblock to Barrick's North American corporate separation. Mark Hill, whom Barrick appointed as chief executive after chairman John Thornton pushed out former CEO Mark Bristow, will lead the new standalone company.

Thornton has led Barrick since 2014, first as executive chairman and as chairman since last year.

The proposed IPO gives Thornton an opportunity to unlock value from Barrick’s Nevada assets and rebuild investor confidence. Frustration among institutional shareholders has led to public calls for leadership change.

Benoit Gervais, portfolio manager at Mackenzie–Barrick’s tenth-largest shareholder–has criticized the current governance.

“If you ask me, it would be nice to have a graceful exit of this current chairman and have someone else come in,” Gervais recently told Bloomberg News.

The proposed IPO gives Thornton an opportunity to unlock value from Barrick’s Nevada assets and rebuild investor confidence.

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.