Canadian minder Barrick Gold said it had “reviewed the opportunity to merge with Newmont Mining Corporation”, which would top the previous record deal if it goes ahead (Arne Dedert)

Montreal (AFP) – Canadian miner Barrick Gold said Friday it is weighing a mammoth bid for American rival Newmont to reclaim its dominance in the gold sector.

In a statement, the company said it had “reviewed the opportunity to merge with Newmont Mining Corporation” but added that “no decision” had been made yet.

Newmont has not commented on the proposed transaction. 

If it goes ahead, the US$19 billion hostile takeover would top the previous record deal, set only last month after years of waning investor interest due to lackluster bullion prices.

The industry has been consolidating as gold mines around the world get depleted, driving up costs and encouraging companies to come together in mergers and alliances.

In January, Colorado-based Newmont announced a US$10 billion stock deal for another Canadian mining company, Vancouver-based Goldcorp, in a move to leapfrog Barrick as top gold miner.

That acquisition — which is expected to close in the second quarter — came only three months after Barrick agreed to buy Britain’s Randgold Resources in a US$5.4 billion deal.

But unlike past waves of mergers and acquisitions in the sector that saw big premiums being offered that turned out to be disastrous and burdened buyers with huge debts, Barrick lowered the bar in the Randgold deal.

– Gold crown –

Barrick and Newmont had flirted with the idea of merging five years ago, but talks fell apart over who would lead the combined firm and where to locate its headquarters — Toronto or Denver.

Barrick’s renewed interest in its rival shows it does not want to cede its gold crown.

But observers said its offer of a one-for-one share exchange at no premium may have to be sweetened to entice Newmont shareholders.

It could also complicate Newmont’s purchase of Goldcorp or even scuttle the deal, which would put Barrick on the hook for a huge break fee payable to Goldcorp.

Under the terms, Barrick would reportedly keep the bulk of Newmont’s assets including mines in Nevada and Africa, while its Autralian assets would be sold to Newcrest Mining or another buyer, according to unnamed sources cited by the Globe and Mail newspaper.

Newcrest, which is largely focused on the Pacific Rim, had itself walked away from talks to merge with Goldcorp last year. But it is said to be looking for new buying opportunities.

The Barrick-Newmont tie-up — which had long eluded Barrick’s late founder and chairman Peter Munk — would produce more than 10 million ounces of gold a year, according to an estimate by BMO Capital Markets.

The two companies have adjoining assets in Nevada and Newmont already has a stake in Barrick’s Turquoise Ridge Mine in the US state.

Their combined market capitalization, meanwhile, would top US$40 billion.

In early afternoon trading Friday, Barrick stock fell slightly to US$13.16 in New York, while Newmont shares rose more than three percent to US$36.52.

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