TORONTO — Barrick Gold Corp. dropped its hostile takeover offer for Newmont Mining Corp. on Monday in favour of a friendly deal to create a joint-venture that will combine the two companies’ mining operations in Nevada.
They say the Nevada complex will be the world’s largest gold producer, based on 2018 production of 4.1 million ounces.
The two big gold miners have operated independently in Nevada for decades, but previously had been unable on agree on a way to co-operate.
“We view this as a benefit — not only to our collective shareholders, but to our employees, local stakeholders and Nevada as a whole,” Barrick chief executive Mark Bristow told a conference call with financial analysts.
“Our joint venture will allow us to tear down the fences and operate our assets as one mining complex, making the best use of our combined infrastructure.”
Newmont CEO Gary Goldberg, who plans to retire later this year, said Barrick and Newmont have been operating as good neighbours in Nevada and have worked together successfully on a smaller joint venture at Turquoise Ridge.
“This agreement also paves the way for both Newmont and Barrick to unlock more value than either of us could create alone,” Goldberg said.
For Newmont, it will be able to continue with a proposed friendly takeover of Vancouver-based Goldcorp Inc., which said it fully supports the joint venture.
Under the deal, Barrick will be the operator of the Nevada Complex and will hold a 61.5 per cent ownership stake in the joint venture, while Newmont will own 38.5 per cent.
Board representation will based on ownership, while advisory committees will have equal representation.
The joint venture will include Barrick’s Goldstrike, Cortez, Turquoise Ridge, Goldrush mines and other assets as well as Newmont’s Carlin, Twin Creeks, Phoenix, Long Canyon, and Lone Tree mines.
The companies, which report in U.S. dollars, said the joint venture will allow them to capture an estimated $500 million in average annual pre-tax synergies in the first five full years of the combination.
Over a 20-year period, they estimate $4.7 billion of total savings with $2.8 billion attributable to Barrick and $1.8 billion attributable to Newmont.
Barrick had launched a takeover offer for Newmont in February but was rebuffed by the Denver-based company, which countered with its own proposal of a joint venture.
The establishment of the joint venture is subject to conditions, including regulatory approvals, and is expected to be completed in the coming months.
Barrick shares were up 45 cents at C$17.81 and Goldcorp shares advanced 31 cents to C$14.69 in Toronto, while Newmont shares decline less than a cent to US$33.71 in New York in the first minutes of trading Monday.