Barrick launches $25bn bid for Newmont

Barrick Gold has officially unveiled an offer to merge with Newmont Mining after several days of anticipation it would make a tilt for the gold rival.

The $US17.8 billion ($24.8 billion) all-share transaction would create the world’s largest gold company, with three Australian assets – the Super Pit and Boddington in Western Australia, and Tanami in the Northern Territory.

Barrick’s offer, however, represents a negative premium based on Newmont’s closing price on February 22. It also has the potential to derail Newmont’s $US10 billion plans to merge with Goldcorp, a deal the United States-based company believes offers better value than the Barrick tie-up.

Barrick chief executive officer Mark Bristow said the proposed merger with Newmont would unlock more than $7 billion of real synergies.

“The combination of Barrick and Newmont will create what is clearly the world’s best gold company, with the largest portfolio of Tier 1 gold assets and the highest level of free cash flow to drive future growth and support sustainable shareholder returns, run by a management team with an unparalleled record of delivering growth,” Bristow said.

A major portion of the synergies between the companies would be in Nevada, United States, where the deal would combine Barrick’s mineral endowments with Newmont’s processing plants and infrastructure.

Bristow said the proposed merger would secure Nevada’s position as the world’s most prospective gold region.

“Most important, it will enable us to consider our Nevada assets as one complex, which will result in better mine planning and fully realise the state’s enormous geological potential for all stakeholders,” Bristow said.

“Considered globally, the merger represents a radical and long-overdue restructuring of the gold industry, and a transformative shift from short-term survival tactics to the long-term creation of sustainable value.”

The Canadian company confirmed last Friday that it was reviewing the opportunity to make a takeover bid for Newmont following media speculation about a potential deal.

Barrick also completed a $US6.5 billion acquisition of Randgold Resources in January.

Newmont responded to the Barrick offer by stating it had a long history of evaluating potential transactions, and undertakes robust analysis and diligence on a continuous basis of acquisition opportunities.

“Newmont has previously reviewed and rejected potential combinations with each of Barrick and Randgold Resources, prior to their merger,” Newmont stated.

“Newmont’s proposed combination with Goldcorp represents the best opportunity to create optimal value for Newmont’s shareholders and other stakeholders.”

The company plans to fully evaluate the Barrick proposal and respond in due course.

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