Barrick Gold Considers US$19-billion Offer for Newmont Mining

With Barrick Gold’s (TSX:ABX, NYSE:GOLD) massive merger with Randgold Resources complete, inside sources revealed on Friday (February 22) that the giant gold miner is now considering a hostile bid for Newmont Mining (NYSE:NEM).

According to the source quoted by The Globe and Mail, which has been noted as “familiar with the matter,” said Barrick is looking at Newmont for approximately US$19 billion in stock, in what could potentially be one of the largest-ever deals in mining history.

“Barrick Gold today confirmed that the company has reviewed the opportunity to merge with Newmont Mining in an all-share nil premium transaction. No decision has been taken at this time,” Barrick stated in a press release.

There are whispers that should this deal come to fruition, Barrick would give some of Newmont’s assets to Australia’s Newcrest Mining (ASX:NCM, OTC Pink:NCMGF).

According to the source, Barrick would hold onto Newmont’s Nevada and African mines, while Newcrest may consider taking over its Australian operations.

This takeover would align with earlier comments that Barrick CEO Mark Bristow made regarding the potential for more consolidating within the gold space in the future.

Additionally, it was reported at the beginning of November, that Barrick and Newmont were in discussions to combine their Nevada gold mining operations, something that they attempted to do back in 2014 but never managed to come to an agreement on how to make the joint venture work.  

Despite many market watchers who believe that the two gold miners make the perfect match for a merger, some industry insiders are hesitant to celebrate another potential merger just yet.

“There’s a danger that Barrick is biting off more than it can chew [by making another large acquisition],” said an Australian banker who declined to be identified.

It is quite possible that Barrick is also dealing with the idea that if a deal of this magnitude wasn’t to happen, the miner could give up its crown as the world’s top gold producer to Newmont, which is on the verge of closing its own giant US$10 billion buyout of smaller rival Goldcorp (TSX:G,NYSE:GG) next quarter.

However, if the deal does materialize, the merger between Newmont and Goldcorp would not go ahead, leaving Barrick liable for a US$650-million break fee.

As of 1:10 p.m. EST on Friday, Barrick was trading at C$17.40; meanwhile Newmont was up 4.32 percent, trading at US$36.94.

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