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Barrick Proposes All-Stock Merger With Newmont

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(Kitco News) - Barrick Gold Corp. (NYSE: GOLD; TSX: ABX) has made a proposal to buy Newmont Mining Corp. (NYSE: NEM) in an all-stock deal, Barrick announced Monday.

News reports are pegging the value of the proposed acquisition at around $18 billion.

The move would combine the world’s two largest gold producers. The news came after recent press reports saying that Barrick was aiming to take over Newmont, which analysts said was a sign of the continuing consolidation in the precious-metals sector.

Barrick argued that the acquisition would unlock $7 billion net present value (pre-tax) of synergies, much of it by combining the company’s assets in Nevada. The proposal comes after Barrick’s acquisition of Randgold Resources Ltd. and Newmont’s agreement earlier this year to acquire Goldcorp Inc.

Under the Barrick proposal, each Newmont shareholder would receive 2.5694 Barrick shares per Newmont share, representing an at-market transaction based on the volume-weighted average trading prices of the shares of Barrick and Newmont on the New York Stock Exchange over the 20 trading days that ended Wednesday. This was the last trading day before news of the transaction was leaked through the financial press. Barrick shareholders would own 55.9% of the merged company and Newmont shareholders would own 44.1%.

“The combination of Barrick and Newmont will create what is clearly the world’s best gold company, with the largest portfolio of tier-one gold assets and the highest level of free cash flow to drive future growth and support sustainable shareholder returns, run by a management team with an unparalleled record of delivering value,” said Mark Bristow, the former Randgold chief executive officer who is now president and CEO of Barrick.

Bristow said that a Barrick-Newmont deal was long overdue and would be superior to Newmont’s proposed acquisition of Goldcorp, arguing that Barrick-Newmont annual synergies 7.5 times larger than the quoted annual synergies for the Newmont-Goldcorp transaction.

“Most important, it will enable us to consider our Nevada assets as one complex, which will result in better mine planning and fully realize the state’s enormous geological potential for all stakeholders,” Bristow said.

“Considered globally, the merger represents a radical and long-overdue restructuring of the gold industry, and a transformative shift from short-term survival tactics to the long-term creation of sustainable value.”

Should a merger with Newmont occur, the two companies’ teams would review the combined portfolio using strategic filters to maintain the best production, project and exploration assets in the industry, Barrick said.

Barrick said the combined company intends to match Newmont’s annual dividend of 56 cents per share which. Based on the proposed exchange ratio, this would represent a pro forma annual dividend of 22 cents per Barrick share, compared to the current annual dividend of 16 cents.

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