On the same day Toronto-based Barrick Gold Corp. put forward a $17.8-billion hostile bid for its rival Newmont Mining Corp, the chief executives of both companies conveniently found themselves at the same industry conference in Florida — and the acrimony flared up.
Speaking to a packed-hotel ballroom, on Monday, Newmont Mining Corp. chief executive Gary Goldberg denounced the integrity and qualifications of his counterpart, Barrick chief executive Mark Bristow.
“Clearly, our hope that Mark and his team would bring a fresh and professional approach to managing Barrick’s business has proven disappointing,” said Goldberg at BMO’s Metals and Mining Conference in Hollywood, Fla.
He added, “Barrick’s behaviour this morning unfortunately provides yet another clear example of why they are unqualified to manage Newmont’s global portfolio of world class assets.”
Bristow reciprocated the sentiment by saying Goldberg would soon be gone, having already announced retirement plans for the end of 2019 — a plan that one person familiar with the deal noted undercuts Goldberg’s argument that Newmont has a more experienced management team.
“Gary Goldberg’s not in place for long, by his own admission,” Bristow told a Bloomberg reporter at the conference.
Thus continues the latest chapter in the long running, ongoing duel between Newmont and Barrick, the two largest gold companies in the world, who last dabbled with merger talks in 2014 only for the discussions to break down amid sniping comments in the press.
This time, however, the stakes are different: Colorado-based Newmont Mining Inc. is hoping to close a $10-billion acquisition of Vancouver-based Goldcorp, which would make it the largest gold producer in the world, and is scheduled for a shareholder vote in April but has been thrown into question by Barrick’s unexpected all-share offer — which it calls no-premium, and Newmont calls a negative premium.
Both companies operate mines in a dense patch of Nevada desert, and Barrick told shareholders this creates an obvious rationale for a combination: Newmont owns the majority of the processing plants and infrastructure in the area while Barrick, it says, controls more gold in the ground in that area — 26.5 million ounces at 3.43 grams of gold per ton in proven and probable versus Newmont’s 21.8 million ounces at 1.6 grams per ton.
“I’ve spent a lot of time in Nevada and I have no doubt that we can do a better job than Newmont,” Bristow said in one interview with a Bloomberg reporter at the conference.
According to a Barrick presentation, the combination with Newmont would create US$7 billion in synergies over the next 20 years, with about US$4.7 billion of that coming from the Nevada complex, and the rest from corporate governance and administration, exploration and project planning and supply chain.
The deal would would provide each Newmont shareholder with 2.5694 Barrick shares per Newmont share, and give Barrick shareholders control of 55.9 per cent of the new company.
At 3:04 p.m. EST, Barrick’s stock was trading down 3.42 per cent to US$12.59 and Newmont’s stock was down one per cent to US$30.12. Goldcorp’s stock meanwhile traded up 0.34 per cent to $14.65.
Mike Parkin, an analyst at National Bank Financial, wrote that the offer implies an eight per cent discount to the price Newmont shares closed at on Feb. 22.
“It does not appear Newmont is interested in entertaining Barrick’s proposal,” Parkin wrote. “However, we could see a different outcome emerging whereby Newmont and Barrick turn their respective Nevada operations into a combined JV, realizing US$250 million of annual savings.”
I’ve spent a lot of time in Nevada and I have no doubt that we can do a better job than Newmont
Barrick CEO Mark Bristow
Bristow has said his company went hostile in part because Newmont rebuffed attempts to forge a working relationship to share assets in the area through a single operator — an assertion Goldberg called “simply not true,” saying he remains open.
Instead, Goldberg said the Goldcorp deal could allow for as much as US$265 million in synergies per year, plus the potential synergies in Nevada.
He pointed out that Bristow spent most of his career managing mines in Africa as the chief executive of Randgold Resources Inc., which was acquired by Barrick for US$6 billion in January, allowing Bristow to ascend to the helm of the newly combined company.
Goldberg said he had evaluated acquisitions of both Barrick and Randgold over the years, but neither deal would have met the risk and return requirements at his company.
Since January 2014, he said Newmont had delivered 65 per cent returns compared to Randgold’s “anemic 9 per cent” and Barrick’s “shocking negative 22 per cent.”
But one looming question is how shareholders will view this track record, in light of the fact that Goldberg is stepping down at the end of the year, and his successor, Tom Palmer, cannot claim his track record.
One analyst at the conference asked Goldberg whether he would reconsider his retirement plans and he replied by restating his confidence in Palmer, the president and chief operating officer at Newmont.
“I think we sit in a good place with Tom to take over,” Goldberg replied, but he added that he’s there to do what is necessary to make the company and the Goldcorp acquisition a success.