Photo: Barrick Gold

Photo: Barrick Gold

Personalities Pervade Barrick Newmont Talks

Issue 82, May 2014

Hopes of a mammoth paper merger between gold majors Barrick Gold and Newmont Mining, first leaked to the Wall Street Journal in April, publicly broke down this week after Barrick’s ego-charged board appeared to let personality clashes override any possible cost savings. 

Barrick, valued at C$23bn ($21bn) on gold production of 7m ounces last year, kicked off the battle on Monday, saying Newmont’s board had “decided to terminate” discussions, adding that it still believed in the merger.

Newmont, valued at $12bn on production of 5m gold ounces last year, responded by releasing a private letter from its chairman to Barrick, saying that “our efforts to find consensus have been rejected out of hand repeatedly.”

Barrick’s co-chairman, the letter said, had twice told Newmont the deal was “dead”. The comment is thought to have come from Barrick’s John Thornton, rather than founder Peter Munk, over the Easter weekend.

If the leaking of merger talks was meant as a pawn in Barrick’s efforts to realise talk of a Chinese investment into its aborted $8.5bn Pascua-Lama project, the strategy has backfired, with Barrick’s rough-handling of Newmont instead showing it to be far from a face-saving deal with industry peers.

“As we contemplated further dialogue, we read in the continuing reporting of the transaction in the financial press a pointed characterization of our company as ‘extremely bureaucratic and not shareholder-friendly,’” Newmont’s letter read, this time quoting Munk, who retired from Barrick’s board on Wednesday at the age of 87 amid a string of outspoken interviews.

Glencore’s chief executive Ivan Glasenberg is who Munk most admires in the mining industry, he told one reporter. “He’s taken Xstrata, he’s now very close to the BHP Billiton’s,” Munk said. “He’s going to eat them all.”

Newmont’s chief executive Gary Goldberg and Barrick’s chief executive Jamie Sokalsky, who was due to lead a spin-out had a merger proceeded, emerged unsullied by the week’s drama. “I’m an accountant,” Sokalsky recently told the Toronto Star. “My wife is an accountant, my oldest daughter is an accountant and my youngest daughter is studying to be an accountant.”

Shares in Barrick and Newmont are down by around two-thirds since 2011.

“He’s going to eat them all.”

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