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Barrick drops hostile bid for Newmont, signs Nevada joint venture

Barrick drops hostile bid for Newmont (Bloomberg)

Barrick Gold (ABX.TO) has pulled its $18 billion hostile bid to buy Newmont Mining (NEM) but will work together on a joint venture.

The two companies will pool their mining operations, assets, reserves, and employees in Nevada. The companies say the joint venture will result in an estimated $500 million in annual pre-tax synergies in the first five years.

Barrick President and CEO Mark Bristow says the partnership was a long overdue.

“We listened to our shareholders and agreed with them that this was the best way to realize the enormous potential of the Nevada goldfields’ unequalled mineral endowment, and to maximize the returns from our operations there,” said Bristow in a news release.

“We are finally taking down the fences to operate Nevada as a single entity in order to deliver full value to both sets of shareholders, as well as to all our stakeholders in the state, by securing the long-term future of gold mining in Nevada.”

Once the joint venture is complete, the Nevada complex will be the world’s single-largest gold producer. Barrick will be the operator and will own 61.5 per cent while Newmont gets 38.5 per cent. Board representation will be based on ownership.

Newmont CEO Gary Goldberg says the logic of combining operations was compelling.

“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,” said Goldberg in a news release.

“Through the joint venture, we will also continue to pursue the highest standards in
safety, along with responsible and meaningful engagement with our employees, communities, and other stakeholders.”

Joe Mazumdar, co-editor and analyst at Exploration insights, told Yahoo Finance Canada today’s announcement is the best and most logical outcome for all.

“No doubt shareholders had a role to play in convincing Newmont to concede ownership of the JV with Barrick (61.5/38.5) operating the 4 million ounces per year complex,” said Mazumdar.

“If the mining industry can continue to show that it can make value-added decisions on this scale, that is positive for the sector and will attract more investors.”

Rick Rule, president and CEO at Sprott U.S. Holdings told Yahoo Finance Canada some details could’ve been ironed out.

“While I welcome the long ( twenty years ) overdue cooperation agreement in Nevada, I would like to have seen some form of general amalgamation, which could have been used to drastically reduce General and administrative expense, at both companies,” said Rule.

Barrick shares are up 1.5 per cent as of 10:54 am EST. Newmont is down 3.2 per cent.

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