Barrick’s bid for Newmont

As we discussed in Barrick Gold Makes a Hostile Bid to Acquire Newmont Mining, on February 25 Barrick Gold (GOLD) made an unsolicited bid for its rival Newmont Mining (NEM) in an all-share deal. Barrick mentioned that this all-share transaction was far superior to Newmont’s proposed deal with Goldcorp (GG). Barrick, however, didn’t offer any premium to Newmont’s value.

Newmont Mining Rejects Barrick Gold’s Hostile Acquisition Bid

Newmont rejects Barrick Gold’s bid

In a press release today, Newmont Mining said that Barrick’s unsolicited negative premium proposal is not in shareholders’ best interest. Earlier, Newmont mentioned that the proposed combination with Goldcorp “represents Superior Value Creation Opportunity.” Newmont CEO Gary Goldberg said in the press release, “Unlike Barrick, Newmont Goldcorp will be centered in the world’s most favorable mining jurisdictions and gold districts. The combination with Goldcorp is significantly more accretive to Newmont’s shareholders on all relevant metrics compared to Barrick’s proposal, even when factoring in Barrick’s own synergy estimates.” Newmont is also holding a conference call today to respond to Barrick’s claims and provide an outlook for Newmont-Goldcorp.

Mergers and acquisitions in the gold space

Mergers and acquisitions in the gold mining space have heated up. Barrick Gold (GOLD) and Randgold Resources announced a merger in September. Also, Pan American Silver (PAASannounced its $1.07 billion cash-and-stock acquisition of Tahoe Resources (TAHO) in November. On January 14, Newmont proposed a merger with Goldcorp.

Gold miners (GDXhaven’t kept up with broader equities (SPY) (IVV) or gold (GLD), having lost favor with institutional investors after making merger decisions at the peak of the commodity cycle, which resulted in high debt. Moreover, as the world’s economically accessible reserves are dwindling, gold miners (NUGT) need to find more reserves to keep their production pipelines full. So when reserve discoveries slow down, mergers and acquisitions may be miners’ next logical step.

Keep watching the Basic Materials page for updated coverage of the developments between Newmont and Barrick Gold.

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