March 11, 2019 - 10:35 am
Nevada’s two largest gold producers have agreed to merge their local assets to create the world’s single-largest, precious metal mining operation.
Barrick Gold Corp. and Newmont Mining Corp. will contribute production mines, processing facilities and infrastructure stretching from Wells near the Utah border to Winnemucca into a new joint venture.
Barrick Gold Corp. will own 61.5 percent of the Northern Nevada joint venture and operate the entity while Newmont Mining Corp. will own 38.5 percent, the companies said in a joint statement Monday. Barrick and Newmont could add more Nevada gold assets to the joint venture at a later date.
The new Nevada entity — some 20 years in the making — will produce more than 4 million ounces of gold annually and poses nearly 50 million ounces of proven reserves. It will be one of the most efficient gold producers in the world with an average 2018 output cost of $775 per ounce.
“This is the best way to realize the enormous potential of the Nevada goldfields’ unequaled mineral endowment, and to maximize the returns from our operations there,” Barrick President and Chief Executive Officer Mark Bristow said in the statement.
As part of Monday’s deal, Barrick has agreed to withdraw its unsolicited proposal to fully merge with Newmont.
Barrick and Newmont estimate the joint venture in Northern Nevada will generate $500 million in synergies over the first five years of operation and $5 billion over 20 years. The state will benefit from increased investment and taxation, Bristow told analysts during a conference call Monday.
The joint venture “puts us in a position to invest more capital in our collective mines and projects, complete more focused exploration,” he said.
Nevada is the “best gold district in the world” with plenty of untapped deposits, Macquarie Research said in a note Monday. The joint venture will be able to pursue projects that Barrick or Newmont might not have considered economically feasible to develop on their own, Macquarie said.
Barrick and Newmont have been developing the gold assets in Northern Nevada separately for decades and previous talks to combine their operations failed.
Monday’s announcement is the latest sign the global gold industry is heading toward a period of consolidation as producers seek to cut costs and boost efficiencies amid a stagnant price for the precious metal.
Barrick purchased Randgold Resources last year while Newmont is taking over Gold Corp.
Barrick last month made a hostile offer to merge with Newmont to create the world’s largest gold producer.
“We continue to believe overdue consolidation is needed to rationalize portfolios and attract capital back to producers,” Macquarie said.