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Canada's Barrick Gold To Make A Hostile Bid For Newmont Mining For $19 Bn

Canada's Barrick Gold To Make A Hostile Bid For Newmont Mining For $19 Bn
According to a report published in the Globe and Mail newspaper, a hostile bid for Newmont Mining Corp is set to be made by Canada's Barrick Gold Corp. The offer deal is expected to be about $19 billion and would include only stock. If this deal goes through it could be the largest ever till date of a deal in the global mining industry.
The report, based on industry sources familiar with the matter, also claimed that following the completion of the deal, some of Newmont's assets would be transferred to Australia's Newcrest Mining by Barrick.
There was an uptick in the shares of Newmont following the statement.
The report also stated that Newmont's Nevada and African mines would be retained by Barrick while Australian operations is being planned to be taken over by Newcrest.  
Last month, rival Randgold Resources was acquired by Barrick in a deal worth $6.1 billion and the company has now created new management teams and reduced administrative costs which have been instituted by the new Chief Executive Mark Bristow, who set an ambitious plan for creating a strong differentiation of the combined company compared to rivals.
All opportunities for mergers or acquisitions would be looked out for by Barrick Gold, Bristow had said on a post-earnings call earlier.
The report also quoted an Australia-based banker sating that there was much over alp in the operations in North America for Barrick and the U.S. company Newmont and therefore analysts have seen the two as a potential match for merger for quite some time now.
"(But) there's a danger that Barrick is biting off more than it can chew (by making another large acquisition)," said the banker, who did not want to be named because of the confidentiality of the issue. 
If the hostile deal does not go through, Newmont could become the largest gold producer of the world overtaking Barrick because the former is on the verge of closing down its takeover of smaller rival Goldcorp Inc for $10 by the next quarter of the current year.
The report said that if the hostile bid of Barrick materializes, it would derail the merger between Newmont and Goldcorp and Barrick would be liable for a $650 million break fee.
There were no comments from any of the companies in the media.
According to AME Group, there are three gold mines of Newmont in Australia and together those have a net present value of $4.5 billion. However according to analysts none of the three mines are viewed to be the kind of large 'tier one' developments, which according to Newcrest, is a prerequisite for any major acquisitions.
"Newcrest has a production hole in a couple of years' time with Cadia going offline," said one fund source based in Melbourne, referring to one of Australia's largest gold mines. "It makes sense that they would be looking, but I would question the 'tier one' nature of the asset."
According to the report, quoting bankers and a fund manager, price and the manner of payment would decide any deal for the assets. "I wouldn't care if they are not 'tier one' assets," said Simon Mawhinney of Allan Gray in Melbourne. "But I would care if they were overpaid for, that would be a big issue.

Christopher J. Mitchell

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