Barrick and Newmont May Combine Nevada Gold Operations

Barrick Gold (TSX:ABX,NYSE:ABX), with soon-to-be merged Randgold Resources (LSE:RRS), is currently in discussions with Newmont Mining (NYSE:NEM) to combine their Nevada gold mining operations, sources told Reuters on Monday (November 5).

Barrick and Newmont attempted this type of joint venture back in 2014, and market watchers speculated that they would try again following last month’s merger announcement between Randgold and Barrick.

“They have been trying to negotiate for years but Newmont couldn’t agree with Barrick, now that you have a new management team, it’s certain they revived those talks,” a source told Reuters.

In 2017, Newmont produced 1.8-million ounces of gold in Nevada and has processing capacity which would significantly benefit Barrick Nevada. Last year, the company produced 2.3-million ounces of its owner’s output for 2017.

The 2.3-million ounces included a joint venture at the Turquoise Ridge mine, in which Newmont has a 25-percent stake in.

Analysts estimate that should the miners combine their efforts in Nevada, annual savings from a combination of Newmont and Barrick’s Nevada assets could reach up to US$300 million.

“They are looking to turn Nevada into a free cash flow machine and this is the easiest way to do it,” a source revealed.

While the companies declined to comment on the potential joint venture, Barrick was eager to release a statement on Monday, noting that shareholders have voted in favor of the the issuance of Barrick common shares in connection with the merger of Barrick and Randgold.

“Today marks an important step in our journey of taking Barrick ‘back to the future’,” said John L. Thornton, executive chairman.

“The combination of Barrick and Randgold will create the compelling gold investment,” he added.

Following the merger, which is planned to be completed on January 1, 2019, Barrick will likely maintain its copper mines despite the fact that it is slated to embark on disposing of non-core assets.

Late last week, Barrick and Randgold’s merger received “unconditional clearance” from the South African Competition Tribunal.  

As of 3:03 p.m. EST on Monday, Barrick’s share price was trading in Toronto at C$17.27. Meanwhile, shares of Randgold were trading in London at GBX 6,340.00 while shares of Newmont sat at US$32.30 in New York.    

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