(Updates share prices, adds Breakingviews link)
By Euan Rocha
TORONTO, April 21 Talks between Barrick Gold
Corp and Newmont Mining Corp about a potential
merger have hit a snag, but sources close to the situation say
the companies remain keen to reach 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 under which Toronto-based
Barrick would acquire Denver-based Newmont in an all-stock deal,
said one source close to the matter.
That source said the deal would offer Newmont shareholders a
slight premium to its current share price. Newmont shares rose
6.4 percent to close at $25.05 on the New York Stock Exchange,
while Barrick's shares edged down 78 cents Canadian to C$19.03.
The sources, who asked not to be named due to the sensitive
nature of the situation, said the talks have stalled over the
issue of the spin-out of some assets from the combined entity,
which is among the hurdles to a deal.
After the close of a tentative deal, shareholders in the
combined entity would also get shares in a new company that is
likely to include assets in Australia and New Zealand. But the
two companies have not yet agreed on a final mix of assets in
the spun-out entity, said one source, adding that the new entity
could include some assets from outside that region.
The companies are also contemplating selling some non-core
assets 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 hoped to complete a deal
this month ahead of the annual shareholder meetings of both
companies, but that timetable was now looking unlikely.
Newmont's annual general meeting 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
Analysts and some investors have long thought a deal,
particularly involving their big operations in Nevada, was
logical from a cost-cutting perspective.
The sources said combining the mining giants' operations
could lead to nearly $1 billion in annual cost savings with
nearly half of those savings coming from reducing overlap in
"To the extent that a combination improved free cashflows
and the ability to service combined debt, we suspect investors
would welcome the deal," JPMorgan analyst John Bridges said in a
note to clients. "Especially, if the new company was able to use
the opportunity to do serious surgery to non-contributing
Under the most recent deal being considered, the combined
company would be headquartered in Toronto. But the new combined
entity would still retain a big operational presence in 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 worked for Barrick for over two decades. He served
as its longtime chief financial officer before being named CEO
John Thornton, the ordained successor to Barrick's founder
and outgoing chairman, Peter Munk, would become chairman of the
new combined entity and head a board comprised of a mix of
directors from both companies and possibly some outsiders.
(Additional reporting by Allison Martell ; Editing by Jeffrey
Hodgson, Frank McGurty, Paul Simao and Richard Chang)