Barrick and Newmont have come to form their JV company Nevada Gold Mines, which is now the world’s largest gold producing complex.
Barrick Gold (TSX:ABX,NYSE:GOLD) and Newmont Goldcorp (TSX:NGT,NYSE:NEM) have officially launched their joint venture (JV) project in Nevada, creating the world’s largest gold complex with the introduction of Nevada Gold Mines.
As per the joint statement released on Monday (July 1), Barrick holds a 61.5 percent stake in the new company and will also act as the operator; meanwhile, Newmont owns 38.5 percent of the Nevada-based company.
“(Nevada Gold Mines’) creation was driven by a compelling logic which had long been evident to all but had been elusive for two decades until we finally achieved a breakthrough this year,” said Barrick President and CEO Mark Bristow.
“Over the past months we have selected and set Nevada Gold Mines’ leadership in place. The company now has one team that shares one vision, and who are more than ready to race out of the starting blocks,” he added.
The miners, which have operated independently in Nevada for decades, spent years trying to join forces in a deal that would appease the shareholders of both companies. With this JV, which was proposed earlier this year in March, Barrick and Newmont could garner an estimated US$500 million in average annual pre-tax synergies in the first five full years of the combination, which is projected to total US$5 billion pre-tax net present value over a 20 year period.
Barrick also noted that, because Nevada Gold Mines now owns three of the world’s top gold assets — Cortez, Goldstrike/Carlin and Turquoise Ridge/Twin Creeks — the JV will be the largest global gold-producing complex, with competitors far in the distance.
“By combining our assets and talent in Nevada, the joint venture will extend safe, profitable and responsible production much further than what each company could have done on its own,” said Gary Goldberg, CEO of Newmont.
In total, the newly formed company’s assets consist of 10 underground mines and 12 open pit mines, with the added bonus of two autoclave facilities, two roasting facilities, four oxide mills, a flotation plant and five heap leach facilities.
Last year alone, the assets in Nevada produced a combined 4.1 million ounces of the yellow metal, almost doubling the industry’s next largest gold mine, Muruntau in Uzbekistan. Additionally, the company has a strong reserve and resource base with proven and probable reserves of 48.3 million ounces, along with measured and indicated resources of 27.4 million ounces and inferred resources of 7.5 million ounces.
The new company is expected to produce between 1.8 million and 1.9 million ounces of gold a year at a preliminary estimated cost of sales of US$940 per ounce to US$970 per ounce and all-in sustaining costs of US$920 per ounce to US$950 per ounce for the second half of this year.
In terms of management, Bristow noted that Nevada Gold Mines will include executives from both of the miners, and the executive managing director is Greg Walker, former head of operations and technical excellence for Barrick’s North American region.
Barrick will hold three board seats while Newmont will hold two, with the board supported by technical, finance and exploration advisory committees on which both companies have equal representation.
With the current price of gold hovering just below the US$1,400 per ounce level, a JV of this scale, with billions of reserves to uncover, could propel the price of the precious metal even further and continue the very recent trend of investors regaining some confidence in the metal, returning to the gold space and giving it the boost it has needed for quite some time.
As of 1:01 p.m. EST on Tuesday (July 2), Barrick was trading at C$20.31; meanwhile, Newmont was trading at US$49.70.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.