Sierra Leone woos miners to clean energy with $11 billion plan
Most mining firms rely on their own diesel supplies to extract iron ore, diamonds, rutile and bauxite in the resource-rich country.
US gold giant Newmont Mining (NYSE:NEM) took a page out of Barrick’s book by announcing that is buying Canada’s Goldcorp (TSX:G) (NYSE:GG) in a $10 billion-deal that would create the world’s largest producer by output, challenging Barrick’s recently cemented supremacy.
The combined company, which will be called Newmont Goldcorp, will mine in the Americas, Australia and Ghana, producing between 6 and 7 million ounces of gold annually over the next ten years and beyond, the parties said.
As part of the transaction, Newmont has committed to sell between $1 billion to $1.5 billion worth of assets over the next two years. It has also promised initial cost savings of $100 million a year.
The combined miner, named Newmont Goldcorp, will have operations in the Americas, Australia and Ghana, producing between 6 and 7 million ounces of gold annually over the next ten years and beyond.
The new gold miner will be led by Newmont’s Chief Executive Officer Gary Goldberg, who is retiring by the end of the year. Tom Palmer, the company’s current chief operating officer, will then take over as the CEO.
The stock-for-stock deal comes barely three months after Barrick’s move on Randgold Resources, which created the world’s No. 1 gold company and prompted speculation that rivals would need to respond.
Newmont’s move proves Barrick Gold Corp.’s new chief executive officer words prophetical. Mark Bristow said earlier this year the gold industry was heading for irrelevance unless major changes took place and added the arrival of new Barrick was just the start of a big shake-up.
The two massive gold transactions have the potential to boost investor interest in an industry that has fallen out of favour after years of weak metal prices, dubious investments and failed deals.
Canada’s Goldcorp, the world’s third largest bullion producer by market value, has underperformed its peers in recent years. In late October, The Vancouver-based miner lost close to a fifth of its market value in a single day after reporting weak production, climbing costs and a decline in reserves.
The company’s shares have been in a long-term tailspin, trading at $12.86 Friday on the Toronto Stock Exchange, down from more than $54 in 2011.
The merger is scheduled to close in the second quarter.
Newmont shares were down almost 6% in New York, trading at $32.85 by 9:32 a.m. local time.
3 Comments
George Nowak
Fascinating. The big players are mapping out the end-game of the gold and precious metals industry, maybe even base metals too. Why not even include iron ore mining. At least then we can talk about more than two super-merged players. It’ll be like the English Premier League (or NFL), but with four or five teams in it.
Top-tier miners are looking to emulate top-tier bankers. Swallow the competition, strip out the small mines and the aged ones. Talk growth. Talk innovation. Talk efficiency and leaner head offices. Pay fewer top people even more, ridiculously so. Talk up the share price. Be seen on TV. The rich will get richer on the M&A fees.
But some cautionary lessons need to be observed. Never build a megaproject, they’re company killers. Don’t blow the budget on exploration, the big finds are like unicorns and it’s cheaper to buy them. Never close a mine, always sell it off. Talk innovation but keep it at the level of lip service “i.e. AI or digitalisation”. And again remember, it’s too damn expensive, unpredictable and risky to ever build a megaproject.
So what of the rest? The rest can console themselves in the 4th League (farm league). They may be a source of talent or good exploration finds, but there’s no TV time for them and they’ll fade away slowly. That’s good for metal prices. And who even cares about all the old “boomer” talent that built your mines, they too wll fade away.
Nasdaq7
Isn’t this the response to how the world’s central banks have treated the commodities? Doing technical damage to gold, silver and stripping away all value while propping up falling stock markets. Undervaluing everything commodity related, controlling value. Well that’s what these big mining companies now do. Only they try to restore some value. The gold price hasn’t moved in almost a decade despite the largest quantitative easing program by 200 countries in world history. In 2016 global interest rates were at the lowest level in 5000 years. Interest rates were 15% in the Roman Empire.
Donald Trump
Wow you could get the Barrick guys and the new and improved Newmont senior management together in a bar and they could all start a pissing contest on who can build the biggest and best projects the fastest with the cheapest crew. Barrick can talk about Pascua Lama. Newmont can talk about the fabulously successful Minas Conga. It would be an amazing evening. More lies would be told in a shorter period of than at a convention of used car salesmen.