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Message: Barrick Makes Hostile Bid For Newmont Mining

Following a handful of amicable M&A proposals in the gold mining space, the drive for consolidation in the industry appears to have taken a hostile turn, as Barrick Gold has made a hostile bid for US-based rival Newmont Mining, opening the door to a deal that would create a $42 billion mining supergiant.

After Newmont revealed Sunday night that Barrick (which closed an $18 billion merger with Randgold Resources last month, creating the largest miner in the world) had purchased a small stake in Newmont (1,000 shares in Newmont, out of a total of 535 million outstanding), and that, following the purchase, petitioned to lower the threshold to call for a shareholders meeting, Barrick followed up Monday morning with a $17.85 billion unsolicited, all-share offer, according to the Wall Street Journal. 

Shares in Newmont have been climbing since Friday, when Barrick first revealed that it was considering making an offer. Now that an offer is officially on the table, it sets up a showdown between the management teams at two of the largest gold miners, and also threatens to scuttle Newmont's deal with Goldcorp, which was set to close during Q2. This would be the second attempt at a tie-up between the two companies, after a previous attempt didn't work out back in 2014.

Here's more from WSJ:

The offer sets up a showdown between management teams at two of the mining industry’s fiercest rivals. Barrick has long considered merging with Newmont, America’s largest listed miner, to pair up their large gold-mining operations in Nevada and create an industry giant that would dwarf the nearest competitor. A combination would create a behemoth worth about $42 billion at today’s valuations. Barrick said Monday it would create opportunities to squeeze out over $7 billion in cost savings.

The last serious attempt at a deal faltered in 2014. Barrick’s renewed interest in its rival reflects heightened pressure to rein in costs for ore extraction and production as gold prices languish and ore reserves shrink.

The impetus for this rash of dealmaking is clear: After years of underinvestment as the price of gold languished, miners have been emboldened by the recent uptick in gold prices, and the possibility that the business cycle might be nearing its end. Since it would take years to ramp up mining operations, acquisitions and mergers are the best option to expand production ahead of a possible boom.

With this in mind, don't expect Barrick to back off so easily.

 

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