CEO of Newmont Mining on Operation Barrick Gold Deal and Goldcorp Offer

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Newmont Mining

Stock (NEM) is up on Tuesday, a day after announcing the creation of a joint venture with
Barrick Gold

(GOLD). Newmont CEO Gary Goldberg recounts Barron's that he is pleased to have the current partnership and is optimistic about the next vote on his vote.
Goldcorp

(GG) deal.

The story back. Operational negotiations can be an interesting way of tackling persistent problems such as falling commodity prices and worries about supply / demand dynamics. Barrick had already discussed with Newmont the merger several years ago, but no agreement was ever reached on these discussions.

More recently, Barrick has renewed its quest by launching a hostile bid on the company. However, the subsequent Newmont rally resulted in the price of the bid being lower than that of the stock just before the news. Newmont had benefited from optimistic profits and was already looking for another deal: a takeover of Goldcorp. Instead, he proposed a collaboration with Barrick.

What's up. On Monday, Barrick and Newmont agreed to create a joint venture that would consolidate their operations in Nevada. The companies said they were targeting pre-tax synergies of half a billion dollars over the first five years – a solution that Barron's This rating would probably provide shareholders with the best of both worlds, as it avoids an extended takeover process while saving costs.

Look to the front. Newmont CEO Goldberg spoke with Barron's Tuesday, saying the joint venture was fairly structured. Barrick will lead the project, with Newmont assuming an increased support role, but he has expressed confidence in Barrick's ability to achieve the expected efficiencies. (Barrick's recent acquisition of Barred Randgold Resources was opposed to a full merger, with some analysts arguing that a more recent transaction would increase execution risk.A joint venture will mitigate some of this pressure.)

The agreement with Barrick leaves Newmont free to continue its contract with Goldcorp. Indeed, and after the close of trading on Monday, Newmont announced a special meeting of shareholders on April 11 (shortly after the vote of the shareholders of Goldcorp). Goldberg highlighted synergies of $ 365 million that it believes would result from the streamlining of Goldcorp's head office in Vancouver and cost savings in the supply chain and portfolio, as well as the implementation of of Newmont's proven operational strategy. He added that if all went well, the final regulatory approvals could be granted as early as the second quarter. (Markets are still optimistic, with Goldcorp rising nearly 3% on Tuesday.)

Although the acquisition has its detractors, Goldberg said that Newmont signed the contract "eyes wide open after a due diligence." We knew what the problems were and [believe] we can apply the program we have successfully applied to Newmont and offer improved value. "

Goldcorp's operations prior to the deal may have raised question marks, but Newmont's track record should reassure investors that the company can offer the projected value, Goldberg said. "We are really looking forward, now that the joint venture process is underway …[to] we are focused on Goldcorp, "he said," Integration planning is on track, so when the deal is finalized, we will be ready to make the transition and reach our full potential. "

Nor does he think that the price of gold, which has not increased much in recent years, should deter investors from buying shares. "What is under our control is the way we run our business," he said, adding that Newmont had always been one of the most efficient operators in the industry over the years. last five years. "The addition of Goldcorp assets puts us in an even stronger position," and conservative models of Newmont, which uses a gold reserve price of $ 1,200 against the price current of $ 1,299, mean that a drop in the price of gold would not lose the company. Said Goldberg.

Newmont is up 3% to $ 34.46 in the afternoon.

Corrections & Amplifications

Newmont Mining CEO Gary Goldberg hopes to achieve $ 365 million in synergies by streamlining Goldcorp's Vancouver headquarters. An earlier version of this article indicated that he was planning to eliminate the seat, based on erroneous information that he had provided.

Write to Teresa Rivas at [email protected]