By Alistair MacDonald
TORONTO-- Newmont Mining Corp. and Barrick Gold Corp. have had
continuing contact since the two miners last week broke off talks
to create a global mining giant, according to people familiar with
the situation.
But their senior executives are unlikely to resume formal talks
at least until after Newmont's annual general meeting on
Wednesday--if at all--these people and another person familiar with
the situation said.
Talks broke off because of a disagreement over plans for a
spinoff of some assets, people familiar with the matter said. The
continued contact suggests both sides are looking at a potential
resumption of formal high-level negotiations.
Peter Munk, Barrick's founder and chairman, said it is
"difficult to find a reason" for his company not to merge with
Newmont, in a deal that would provide cost savings given the
proximity of the companies' mines in Nevada.
"The economic gains of drilling the properties as one, of being
able to disregard [company] borders, of establishing common
infrastructure utilization, contain great benefits," he said,
declining to talk about any details of negotiations. Why have "two
accountants or two geologists when one could do?" he said.
Any return to high-level talks could also be on pause until
after Barrick's annual shareholder meeting in Toronto next week, at
which Mr. Munk is to step down from the board.
The latest round of negotiations was driven by Mr. Munk's
successor, John Thornton, according to people familiar with the
matter. The former Goldman Sachs Group Inc. banker is Barrick's
co-chairman, along with Mr. Munk, but is to become sole chairman at
next week's annual meeting.
Mr. Munk suggested that he has had less to do with negotiations,
calling himself a "retired gentleman," and referring several times
to Mr. Thornton's negotiating role.
In interviews, Mr. Thornton has indicated a willingness to
remodel Barrick, potentially increasing its exposure to copper and
silver and bringing in Chinese partners. Mr. Thornton, who has
served on the boards of several big-name companies, including Ford
Motor Co., would be chairman in any new company, according to
people familiar with the matter.
On Monday, many analysts welcomed the news of a potential tie-up
but said its success would hinge on the combined company being able
to generate the cost savings that the minors reportedly have
outlined.
According to people familiar with the matter, the companies
think they can wring out $1 billion in cost savings, with much of
the total coming from their operations in Nevada.
Most analysts, however, peg the potential savings at closer to
$500 million. Some shareholders and others say that even those
savings make the potential alliance worthwhile. "It makes sense;
cost savings are there," said John Ing, a longtime Barrick investor
at Toronto-based Maison Placements Canada Inc.
Several analysts have cautioned against too much excitement,
however, given the fact that the new companies would inherit around
$15 billion of net debt and would face the same issues of growing
their production at a time when new, large high-grade deposits are
harder to find. Part of that debt would go into the spinoff,
according to one person familiar with the matter.
This isn't the first time Newmont and Barrick have tried to come
to a deal, adding to the caution that some analysts and investors
are displaying. Previous talks mainly fell apart over the issues of
boardroom composition and which executives would get the top jobs,
several former executives said.
But Mr. Munk said that this history of talks suggests the deal
is more likely, not less. "Serious people do not talk to each other
over two decades unless there is a cogent, valid reason."
Dana Mattioli contributed to this article.
Write to Alistair MacDonald at alistair.macdonald@wsj.com
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