* Newcrest could face top-tier local rival if Barrick,
* Speculation merged company will spin off Asia-Pacific
* Newcrest March qtr gold output drops 11 pct vs previous
By James Regan
SYDNEY, April 23 Australia could spawn a new
mega gold producer if Barrick Gold Corp and Newmont
Mining Corp spin off their Asia-Pacific assets, heating
up competition with the country's underperforming market leader
Newcrest Mining Ltd.
Barrick and Newmont have been holding friendly merger talks,
but remain at odds over how to group mines each company owns in
Australia, New Zealand and possibly Papua New Guinea and
Indonesia into a separate company, sources close to the talks
If the two companies' Asia-Pacific mines were grouped
together, annual output could exceed 2.3 million ounces,
challenging Newcrest as Australia's biggest gold producer and
the world's fifth largest.
The new entity could also potentially gain a higher rating
among investors than it would receive within a combined
"There's huge investor appetite for an alternative to
Newcrest," said Eagle Mining Research gold analyst Keith Goode.
"The next stages of growth for Newcrest are seen as either
risky, as in the case for their assets in Ivory Coast, or too
long term. What the Barrick-Newmont assets in Asia-Pacific offer
is immediate production and cash flow, with growth through
Anglogold Ashanti has also considered spinning off
its Tropicana and Sunrise Dam mines in Australia into a separate
entity to benefit from investor interest in an alternative to
Newcrest, but has yet to act.
Newcrest has held the No. 1 spot on the Australian Stock
Exchange since 2010, with total production this year seen at
about 2.3 million ounces. Number two is Evolution Mining
, a distant second at less than a half-million ounces.
However, the miner's stock has lost three-quarters of its
value over the past three years as it has struggled with high
costs, disappointing output at its Lihir mine in Papua New
Guinea and a 28 percent fall in the gold price in 2013.
A sharp drop in half-year profit and a jump in debt also
fuelled concerns it may need to tap the market for capital,
while it reported an 11 percent fall in March quarter gold
output from the previous quarter on Wednesday, well above the 7
percent drop forecast by UBS.
Newcrest also said it had cut 208 jobs over the last quarter
at its Lihir mine.
ARRAY OF MINES
Australia was the world's second-biggest gold producer
behind China in 2013, with output of 10.5 million ounces,
according to ThomsonReuters data, but many of its biggest mines
are in the hands of foreign-owned miners.
Newmont owns Australia's biggest gold mine, Boddington, and
is a 50-50 partner with Barrick in the 800,000-ounces-per-year
Super Pit lode 700 km (440 miles) away. Other assets include the
Jundee and Tanami gold mines in Australia and Waihi in New
Zealand. Newmont's other main asset in the Asia-Pacific region
is the Batu Hijau copper and gold mine in Indonesia.
Besides its half-stake in the Super Pit, Barrick could roll
its Porgera mine in Papua New Guinea into the fold, bringing
with it close to 500,000 ounces.
"If you have an Asia-Pacific-listed demerged asset, you
would get strong Asia-Pacific interest and be more competitive
for those investment dollars than otherwise in North America,"
said Morgans mining analyst James Wilson.
Still, there's no guarantee a sizeable number of investors
would drop Newcrest for a new Barrick-Newmont combination.
"If it was to be listed here (Australia) and it was
materially cheaper than Newcrest, then maybe you'd consider it,
but I would say from what I've seen, Newcrest has the better
asset mix than the proposed spin co," said Darko Kuzmanovic, a
portfolio manager at Caledonia Investments. Caledonia does not
own Barrick or Newmont shares.
Barrick gained 1.8 percent to C$19.37 ($17.55)in heavy trade
on Tuesday after Goldman Sachs upgraded the stock to a "buy"
from "neutral" and investors placed bets on whether it can pull
off a bid for Newmont.
($1 = 1.0703 Australian Dollars)
(Additional reporting by Sonali Paul in Melbourne; Editing by