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$25B deal promised to create best mining company ever

Barrick Gold management team
Barrick Gold management team

The largest precious metal miner in the world wants to spend $25 billion on making what it claims to be the best mining company in history.

Barrick Gold Corporation has offered US$17.8 billion ($24.8 billion) to Newmont Mining Corporation to merge in an all-share transaction. Barrick claims combining the two companies would make the “world’s best gold company with unprecedented potential for value creation”.

“The combination of Barrick and Newmont will create what is clearly the world’s best gold company, with the largest portfolio of tier-one 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 value,” Barrick president and CEO Mark Bristow said in a public statement.

The bid comes just weeks after Newmont agreed to pay US$10 billion ($13.8 billion) to buy Goldcorp, which would also create the world’s biggest gold mining company.

Bristow claims the deal will make Nevada in the US the world’s most prospective gold region by adding Barrick’s mineral endowments to Newmont’s processing plants and infrastructure by adding Barrick’s mineral endowments to Newmont’s processing plants and infrastructure with more than US$7 billion ($9.8 billion) in net present value.

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

Bristow believes Barrick merging with Newmont is perfectly logical and long overdue, promising annual synergies will be 7.5 times larger than for the existing Newmont-Goldcorp deal.

“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,” he said.

Barrick claims it will match Newmont’s annual dividend of 56 US cents a share (78 Australian cents a share), and shareholders will own about 55.9 per cent of the enlarged company if the deal goes ahead.

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