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.
After more than a week of tough talk firing back and forth, the leaders of the two biggest gold producers are finally coming to the table.
Newmont Mining Corp. Chief Executive Officer Gary Goldberg said he will be meeting with Barrick Gold Corp.’s Mark Bristow later Tuesday in New York to talk through their differences. However, he said in a Bloomberg TV interview that he won’t be discussing Barrick’s bid for his company, but rather Newmont’s proposal for a joint venture around the two companies’ assets in Nevada.
Goldberg said he heard from Bristow earlier and that “I’m looking forward to catching up with him later today here in New York. This will be the discussion on the joint venture with what we proposed yesterday.’’
Barrick is ‘swinging for the fences’
Barrick spokeswoman Kathy du Plessis didn’t immediately have a comment.
In the past week, leaders at the two companies have disparaged their counterparts as inept managers who have squandered assets and destroyed shareholder value. And that’s before a formal offer is even on the table.
At stake is a potential $17.8 billion deal that would create the world’s largest gold producer. Newmont kicked off the fighting talk, with Goldberg calling Barrick’s no-premium proposal to buy the company “desperate and bizarre” even before Barrick publicly presented its terms on Feb. 25. Bristow responded in kind, saying he could run Newmont’s assets better than Goldberg does.
Barrick is “swinging for the fences,” JPMorgan Chase & Co. analyst John Bridges said at the PDAC conference in Toronto Tuesday. It’s an “audacious bid,” he said, adding that “we don’t think it’s impossible.”
Newmont’s board rejected the offer on Monday, saying its shareholders would be better off completing a pending purchase of Goldcorp Inc. But Goldberg also offered a concession, saying his company would be willing to negotiate a friendly joint venture with Barrick at their Nevada operations that would give Barrick the greater share — in addition to pushing forward with the Goldcorp deal.
There’s no doubt there are significant synergies that could be realized between Barrick Gold and Newmont in Nevada, but the specific value is “questionable,” Bridges said.
Barrick has said it is keen to talk as well. But how such negotiations could ever be friendly is hard to imagine, given the company’s history and comments made over the past week.
The war of words started immediately after Barrick confirmed it was contemplating a bid. Goldberg quickly questioned whether Barrick’s management team is capable of running a combined Newmont-Barrick company, saying, “they haven’t delivered.’’
Later Goldberg got a bit more personal, targeting Bristow by name. “Mark has never run a global portfolio,’’ Goldberg said. “In fact, I’d say none of his team have run a global portfolio like what we have in place.’’
There’s no doubt there are significant synergies that could be realized between Barrick Gold and Newmont in Nevada
In a March 4 presentation, Goldberg seemed to damn Bristow with faint praise. Sure, “there is no doubt that Mark has been successful as an explorer and a geologist,’’ Goldberg said. But “as an operator, he has not created shareholder value and he has yet to prove that he can successfully manage or integrate a global portfolio.’’
Goldberg also didn’t spare Barrick Chairman John Thornton, a former Goldman Sachs Group Inc. president who joined the gold industry in 2012. In the presentation, Goldberg accused Thornton of “numerous missteps’’ and “value destruction.’’
Newmont’s slide presentation said that since Thornton arrived at the company, it has underperformed Newmont by more than $12 billion, “while pocketing over $65M from Barrick shareholders.”
For his part, Bristow has been less personal, though no less direct, saying he could do a better job managing gold fields in Nevada, where Barrick has long wanted to combine its fields with Newmont’s. Bristow also suggested that because Goldberg is scheduled to leave as CEO at the end of the year, Newmont is in an unstable situation. And he’s said Newmont’s play for Goldcorp would destroy shareholder value.
Newmont’s suggestion that Barrick could take the larger stake in a JV seemed to calm the waters today — but suspicions on both sides remain high. Bristow says Newmont’s JV pitch may be just a “smoke screen” to block its hostile bid. Meanwhile, Newmont has said all along that Barrick’s hostile is really about derailing its play for Goldcorp.
(By Danielle Bochove and Ed Hammond)
