Newspaper article The Canadian Press

Barrick, Newmont Say They'll Work Together through Nevada Joint Venture

Newspaper article The Canadian Press

Barrick, Newmont Say They'll Work Together through Nevada Joint Venture

Article excerpt

Barrick, Newmont say they'll work together


TORONTO - Bluster has given way to pragmatism as the world's two largest gold miners have agreed to partner-up in Nevada.

Barrick Gold Corp. said Monday it will drop its US$17.8-billion hostile takeover offer for Newmont Mining Corp. and instead enter into a joint venture with its rival in the state, moving past a dust-up between CEOs over leadership and competence.

In the end, the promise of significant cost savings by co-ordinating operations at their vast Nevada mining sites helped bring the two sides together.

"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," Barrick chief executive Mark Bristow told a conference call.

"This agreement also paves the way for both Newmont and Barrick to unlock more value than either of us could create alone," Newmont CEO Gary Goldberg said on the call.

The promised savings amount to US$500 million a year before taxes in the first five years, and US$4.7 billion over 20 years, though analysts have raised doubts.

"Projected synergies over 20 years is something the market will be questioning, certainly as the magnitude of the synergies are rather large and given that the 20-year time period is more than the current reserves life," GMP Securities analyst Steven Butler wrote in a note to clients.

RBC has estimated annual savings of US$340 million pre-tax, or US$250 million after tax, which it figures is currently worth about US$2.6 billion over 20 years and significantly less than company estimates.

"This is above our more conservative published estimate," said RBC Dominion Securities analyst Stephen Walker on the Barrick estimates in a note.

Haywood Securities analyst Kerry Smith noted that while there are undeniable operating synergies, the totals might not be achieved. …

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