Hedge funds slash bullish wagers on gold before war jitters
Speculators have reduced net-long positions by 3.6%.
Canada’s Barrick Gold (TSX, NYSE:ABX), which last month announced it was buying Randgold Resources (LON:RRS) in a $6.1-billion deal, is said to have resumed talks with rival Newmont Mining (NYSE:NEM) aimed at merging their gold operations in Nevada, US.
“They have been trying to negotiate for years but Newmont couldn’t agree with Barrick, now that you have a new management team, it’s certain they revived those talks,” anonymous sources told Reuters.
Speaking at the Denver Gold Forum in September, however, Newmont chief Gary Goldberg said the company had examined a deal in the past and had not “seen anything”. He did acknowledge some opportunities highlighted by RBC Capital Markets then.
RBC Capital Markets believes Newmont could achieve $300 million in operating and cost savings from combining its mines in Nevada with those of Barrick.
According to the bank’s analysts, the US gold miner could achieve $300 million in operating and cost savings from combining its mines in Nevada with those of the Canadian company.
Goldberg also said at the time he was interested in buying Barrick’s half shares of their jointly-owned Kalgoorlie mine in Australia.
Newmont and Barrick own Turquoise Ridge, in Nevada, in a 25%-75% partnership. In February, the Toronto-based miner said the operation was one of its core ones due to its exceptional growth potential. It also noted it would invest between $300 and $325 million to build a third shaft there, which combined with additional processing capacity, is expected to enable the mine to roughly double annual production to more than 500,000 ounces per year.
Located in the heart of northern Nevada — one of the world’s top jurisdictions for gold mining — Turquoise Ridge has 5.9 million ounces of proven and probable gold reserves (Barrick’s share) at an average grade of 15.56 grams per tonne — the highest reserve grade in the company’s operating portfolio, and among the highest in the gold industry.
The mine added 2.1 million ounces of proven and probable gold reserves in 2017 through drilling, and the deposit remains open in multiple directions, including at depth.
Analysts expect up to $5 billion worth of mining assets to be offloaded as a result of the merger between Barrick and Randgold, which was approved by the gold giant’s investors in Toronto on Monday, with 99.8 percent in favour of the deal. Randgold’s vote is scheduled for Nov. 7 and the deal is expected to close on Jan. 1, 2019.
List produced by Andrew Kaip | BMO Capital Markets.
