Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Barrick Gold Corp’s top shareholder said on Tuesday the miner should focus on striking a joint venture deal in Nevada with rival Newmont Mining Corp before considering a full-blown merger.
“My preference is a joint venture,” Joe Foster of the Van Eck International Investors Gold Fund, said in a phone interview. “I don’t flat out oppose a merger. If a merger is the only way to unify Nevada then maybe, just maybe, that’s something we might consider. But as it stands the best path right now is to form a JV in Nevada.”
Creating a JV seems a lot simpler than mashing these two huge companies together
Barrick launched an $18 billion takeover offer for Newmont last month, which Newmont rejected. Both sides have said they agree their neighboring Nevada assets should be combined to cut costs, but they disagree on how this should be done.
Newmont said it prefers a joint venture in the state, a plan Barrick says would be too complicated and not financially beneficial to all shareholders.
A Nevada joint venture “would avoid exposing our investors to the complexity and significant risk that would come with combining the two companies,” Newmont spokesman Omar Jabara said on Tuesday in response to Foster’s comments.
Barrick did not immediately respond to a request for comment. Barrick Chief Executive Mark Bristow told Reuters on Monday he was ready to seriously negotiate a Nevada joint venture.
Bristow and Newmont CEO Gary Goldberg were meeting Tuesday in New York to discuss Newmont’s proposal for the joint venture, which was unveiled earlier this week, according to sources familiar with the matter.
Van Eck owns about 110 million shares of Barrick, or about 6.4 percent of the company, making it the largest shareholder. The fund is also owns about 7 percent of Newmont, making it the third-largest shareholder, with roughly 31 million shares.
Foster said he recognized that Bristow and Goldberg were “miles apart on a JV agreement,” but urged them to hash out a deal.
“These companies pay these guys a lot of money. They need to find a place in the middle where they can come together and create value for shareholders,” Foster said.
If there is no other way to combine the Nevada properties, a merger is “one way to create that value.” But Foster said a merger would create a “monstrous” gold company.
“Creating a JV seems a lot simpler than mashing these two huge companies together,” Foster said.
(By Ernest Scheyder and Liana B. Baker; Editing by Chizu Nomiyama and Tom Brown)
