Barrick Gold and Newmont Mining merger talks fail

21 April 2014 (Last Updated April 21st, 2014 18:30)

Proposed merger talks between Canadian Barrick Gold and Newmont Mining of Colorado have failed as the companies could not agree on which mines to be spun off.

Barrick

Proposed merger talks between Canadian Barrick Gold and Newmont Mining of Colorado have failed as the companies could not agree on which mines to be spun off.

According to sources, the companies had agreed the terms of the deal except for the selling-off of Australian and New Zealand mines, as cited by the Financial Post.

They had previously agreed to an all-stock merger and were preparing to make an announcement when talks were halted.

As per the discussions, Barrick had been planning to offer Newmont shareholders a premium of 13% above its average trading price for past 20 days.

Following the merger, the companies had estimated a saving of $1bn a year from the mines in Nevada, the report added.

If the deal had been completed, the combined entity would have been worth more than $30bn in terms of market capitalisation and would have created a major natural resource firm with mines in operation from Indonesia to Africa, and from North to South America.

The merger had been proposed when the companies were struggling to cope with falling gold prices, which has suffered a 28% drop since 2013.

"The combined entity would have been worth more than $30bn in terms of market capitalisation and would have created a major natural resource firm." 

The sharp price drop was the largest since 1981 and had significantly affected both businesses.

Even with lower gold prices, the combined organisation would have faced major issues, such as Newmont's ban from exporting raw mineral ores in Indonesia by the Indonesian Government and Barrick's environmental concerns and rising construction costs in Chile, for its Pascua Lama project.

However, the merger would have jointly owned the Turquoise Ridge mine in Nevada and the Kalgoorlie mine in Australia.

The mining firms have recently been divesting their assets and have plans to focus on lower-cost and more profitable mines. Since mid 2013, Newmont has made around $600m from selling its assets, while Barrick has generated more than $1bn.

Barrick and Newmont held merger talks in 1991 and 2000, which also failed.

The companies are still pursuing an agreement and intend to finalise the deal ahead of their annual meetings, which are scheduled later this month.


Image: Barrick Gold calls off merger deal with Newmont. Photo: courtesy of Bertrand Rieger / Corbis.