Newmont Mining rejects Barrick's proposal; The Goldcorp deal offers better value

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(Kitco News) – The tragedy between the two largest mining companies is only increasing as Newmont Mining (NYSE: NEM) has rejected a merger entirely proposed by Barrick Gold (NYSE: GOLD, TSX: ABX).

In a press release issued Monday, Newmont executives said they always preferred to go ahead with their proposed merger with Goldcorp; The new company would surpass Barrick Gold as the world's largest gold miner.

"Newmont has already reviewed and rejected potential combinations with Barrick and Randgold Resources Ltd." before they merge. The proposed merger between Newmont and Goldcorp represents the best opportunity to create optimal value for Newmont shareholders and other stakeholders …, "said the company in a press release. "The ongoing transaction between Newmont and Goldcorp offers optimal value with greater certainty, as well as a proven management team and operating model."

The company added Barrick's $ 18 billion proposal was lower than the company's current valuation of $ 19 billion as of Friday. Newmont had some harsh words about the Barrick organization, saying it had an "inefficient business model".

"Newmont previously determined that Barrick's risk and return profile was inferior in many respects, including factoring in its relatively inefficient business model, poor track record of shareholder returns and adverse jurisdictional risk.

Newmont also noted that they have provided better value to shareholders over the years, compared to Barrick.

"Since January 1, 2014 (the Barrick – Newmont talks ended in April 2014), Newmont achieved a total shareholder return of 65%, compared to 22% for shareholders, while the price of the shares of the Company. gold rose by 15% during this period. "Said the company.

As part of the proposed deal with Goldcorp, Newmont said the deal could potentially generate a value creation of $ 2.5 billion.

"The combination will have an immediate effect on the value of Newmont's net assets and cash flow per share and will therefore have a very positive impact on the value of the asset. Estimated total improvements in costs and efficiencies, representing expected benefits of "About $ 165 million a year, as well as pre-tax synergies of $ 100 million, generating combined expected annual synergies of $ 265 million," he said.

Investor confidence does not appear to support Newmont's recommendations, as stocks fell more than 2% on the last day, to $ 35.69 a share.