JOHANNESBURG (miningweekly.com) – Shareholders will lose more than $750-million a year for every year that the merger with Newmont is delayed, Barrick said on Thursday.
Barrick calculates that there is potential to unlock more than $5-billion of real synergies from the Nevada mines alone and $7-billion-plus overall. It contends that the synergies would, in turn, drive a 15% to 20% share price uplift for all shareholders prior to any rerating.
Barrick sees itself as having the majority of high-grade reserves and resources in Nevada and Newmont the majority of processing plant capacity and infrastructure, with the combination of the two providing more than 20 years of profitable production across the complex.
“Synergies are the premium,” said the company now headed by South African-born president and CEO, Dr Mark Bristow, the former founding CEO of Randgold Resources.
However, Barrick said attempts to study the opportunity and exchange information had been rebuffed.
Newmont has expressed the belief that it could itself capture Nevada synergies more efficiently through a Nevada joint venture (JV) between the companies, without exposing Newmont’s shareholders to Barrick’s riskier portfolio, integration risks and transaction costs.
But Barrick said the JV option was not the right path forward as it would not capture 100% of the Nevada synergies and calculated that the Barrick/Randgold merger had already created shareholder value of more than $5-billion.
In an interview with Mining Weekly Online earlier this month, Bristow, whose Randgold Resources recently merged into Barrick, described Nevada as being "like the Witwatersrand of the 1970s", with its brand new Goldrush-Fourmile discovery already at 12-million ounces at over 10 g/t. “I reckon that’ll go over 20-million ounces and that’s an 8-km-long deposit,” South African-born Bristow told Mining Weekly Online. And then there is Turquoise Ridge, which is the richest gold mine in the world at 15 g/t.
The Barrick/Newmont transaction, Bristow contended, was a logical and long overdue imperative for shareholders that would be far superior to Newmont’s proposed acquisition of Goldcorp, with expected Barrick/Newmont yearly synergies 7.5 times larger than the quoted annual synergies for the Newmont/Goldcorp transaction.
The Barrick/Newmont merger would, Bristow added, result in an estimated 14% upliftment in Newmont’s current net asset value (NAV) per share, offering Newmont shareholders an investment in a company of a much higher quality with a better asset base, significant liquidity, a strong balance sheet and a proven management team.
Similarly, the Barrick/Newmont merger was expected to result in a significant uplift in Barrick NAV per share from synergies, plus the opportunity for improvement in Barrick’s trading multiple from compelling financial, strategic, scale and liquidity advances.