Barrick chief executive Mark Bristow, pictured in 2014, said a new deal with Newmont Mining will secure the “long-term future of gold mining in Nevada” (RODGER BOSCH)

Montreal (AFP) – Barrick Gold dropped a hostile bid for Newmont Mining on Monday, and instead the two companies announced plans for a multi-billion dollar joint venture combining their operations in Nevada.

Upon completion of the joint-venture agreement, which must still be approved by regulators, the Nevada compact “will be the world’s single-largest gold producer,” with three mining properties producing more than four million ounces last year, and a fourth in the works.

“We are finally taking down the fences to operate Nevada as a single entity in order to deliver full value to both sets of shareholders, as well as to all our stakeholders in the state, by securing the long-term future of gold mining in Nevada,” said Barrick chief executive Mark Bristow.

“We listened to our shareholders and agreed with them that this was the best way to realize the enormous potential of the Nevada goldfields’ unequalled mineral endowment, and to maximize the returns from our operations there,” he said in statement.

Barrick’s Cortez and Goldstrike properties in Nevada consist of an open pit and an underground mine at the former, and an open pit and two underground mines at the latter.

Newmont has been pouring gold in Nevada for the last half century along an adjacent corridor in the northern part of the state, which includes 11 surface mines, eight underground mines and 13 processing facilities.

The joint venture, the companies said, would save them an estimated $500 million “in average annual pre-tax synergies in the first five full years of the combination,” which is projected to total $5 billion in pre-tax net present value over a 20-year period.

Both have also said there is more hidden gold to be discovered in the US state.

– Hostile takeover dropped –

The joint venture announcement comes less than a month after the Canadian miner launched a nearly $18 billion hostile merger offer for its American rival in a record deal to create a global gold juggernaut.

Newmont, however, pushed back against Barrick’s February takeover offer, saying it was focused on closing its own acquisition of another Canadian firm, Goldcorp — a tie-up that would allow Newmont to leapfrog Barrick as top gold miner.

Barrick and Newmont had flirted with a merger five years ago, but talks fell apart over who would lead the combined firm and where to locate its headquarters.

The pair have many shareholders in common, and last week one of them — Van Eck International Investors Gold Fund, which is Barrick’s top shareholder and Newmont’s third-largest — reportedly urged them to find a way to work together in Nevada.

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. For investors, low bullion prices have also been a concern.

Late last year, Barrick agreed to buy Britain’s Randgold Resources in a $5.4 billion deal.

Its Nevada joint venture with Newmont now means the Newmont-Goldcorp merger can proceed unhindered.

In a statement, Vancouver-based Goldcorp said “it has consented to and fully supports the announced Nevada joint venture” between Barrick and Newmont.

In morning trading in New York, Barrick stock rose slightly after the announcement to $13.05, Goldcorp fell slightly to $10.66, and Newmont dropped more than three percent to $32.63.

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