Business

Barrick abandons Newmont takeover, will instead just merge Nevada gold mines together

Barrick Gold has abruptly cancelled its plans to take over rival gold miner Newmont and will instead just try to work together in a more limited way by building a joint venture to run their adjacent Nevada gold mines.

Move would create world's largest gold mine, producing 3 million ounces a year

Molten gold ore is poured out at Newmont Mining Corp.'s Carlin Trend gold mine, west of Elko, Nevada. (David Paul Morris/Bloomberg)

Barrick Gold has abruptly cancelled its plans to take over rival gold miner Newmont and will instead just try to work together in a more limited way by building a joint venture to run their adjacent Nevada gold mines.

Barrick announced on Monday morning that that two companies have put pen to paper on a deal that will see them "create a joint venture combining their respective mining operations, assets, reserves, and talent in Nevada."

The two gold companies have worked cheek by jowl in Nevada for more than 20 years, as they each have large gold-producing assets in the area. Barrick has long wanted to combine the two into one, but could never come to an agreement with Newmont. Then a few weeks ago, Barrick proposed to take over the entire company to run the two mines as one, but that deal would have seen the rest of the two companies' assets merged, too.

Monday's news means Barrick will abandon its $18 billion plan to take over Newmont entirely, and will instead just merge the two companies gold assets in Nevada into one company, which will be operated by Barrick.

The deal doesn't include Barrick's Fourmile project and Newmont's Fiberline and Mike deposits, pending the determination of their commercial feasibility. The two companies say the plan will save about $500 million a year by making the mining complex more efficient.

"This agreement represents an innovative and effective way to generate long-term value from our joint assets in Nevada, and represents an important step forward in expanding value creation for our shareholders," Barrick president Mark Bristow said. 

Barrick shareholders will own 61.5 per cent of the joint venture. Newmont shareholders will own the other 38.5 per cent. The new mine complex will be the biggest single gold mine in the world, with 48 million ounces of gold reserves.

The deal also clears the way for Newmont to then take over another gold company, Goldcorp. Newmont announced plans to buy Goldcorp in January, a development that seemingly prompted Barrick to swoop in to try to get the synergies it was looking for in Nevada.

Goldcorp said in a statement on Monday that it fully supports the plan to keep the Nevada assets out of its own friendly takeover by Newmont.

"Goldcorp also welcomes the announcement that Barrick has agreed to withdraw its proposal to acquire Newmont," Goldcorp said.