Barrick proposal to acquire Newmont hits roadblock-sources

TORONTO, April 21 Mon Apr 21, 2014 12:46am EDT

TORONTO, April 21 (Reuters) - The talks between Barrick Gold Corp and Newmont Mining Corp over a combination that would create a gold mining behemoth have hit a snag, but two sources close to the situation say the companies remain keen on a deal and discussions are likely to resume.

The talks had been on for a few weeks and the two sides had broadly agreed to a transaction that would see Barrick acquire Denver-based Newmont in an all-stock deal, said one source close to the matter, adding that the deal would offer Newmont shareholders a slight premium to its current share price.

The sources, who asked not to be named due to the sensitive nature of the situation, said the talks have hit a snag around the spin-out of certain assets from the combined entity, among other issues.

Following the close of the tentative deal, shareholders in the combined entity would also get shares in a new company that is likely to include assets in Australia and in New Zealand. But the final mix of assets in the spun out entity has not yet been agreed upon said one source, adding that new entity could include some assets from outside that region.

The companies are also contemplating selling certain non-core assets that are not included in the spun out new entity, said one source.

Barrick and Newmont declined to comment on the matter.

Sources said the two companies had been hoping to get a deal done this month ahead of the annual shareholder meetings at both companies, but that is now looking unlikely. Newmont's AGM is set for April 23, while Barrick's is being held on April 30.

The latest round of merger talks between the two companies, initially reported by the Wall Street Journal, mark the third time that the two miners with large overlapping operations in Nevada, have contemplated a merger within the last seven years.

Sources familiar with the discussions said talks between the two sides had fallen apart in the past, largely due to personality issues.

Analysts and some investors have long mulled that a deal between the two miners, particularly around their big operations in Nevada, was logical from a cost-cutting perspective.

The sources said a combination of the mining giants could lead to nearly $1 billion in annual cost savings with nearly half of those savings coming from reducing overlap in Nevada.

Under the most recent deal being considered, the combined company would be headquartered in Toronto - Barrick's home base, but the new combined entity would still retain a big operational presence in Newmont's home town of Denver, said one source.

As earlier reported by Bloomberg News, the sources said Gary Goldberg, Newmont's chief executive, would become CEO of the new combined entity with Barrick's CEO Jamie Sokalsky bowing out. Sokalsky has been with Barrick for over two decades and he served as its longtime CFO, before being named CEO in 2012.

John Thornton, the ordained successor to Barrick's outgoing chairman Peter Munk, would become chairman of the new combined entity and head a board that would be comprised of a mix of directors from both companies and possibly some new faces. (Editing by Jeffrey Hodgson)