Barrick Gold Corp (NYSE: GOLD) inches down on pre trading session on Tuesday as The company’s chief executive has ruled out a counterbid for Australia’s largest gold producer, Newcrest Mining (OTCMKTS: NCMGY), after the world’s largest gold producer, Newmont Corp, made a $16.9 billion bid.
While the bid may prompt rival producers to consider a counter-move amid sector consolidation, the world’s second largest gold producer, according to Mark Bristow of Bloomberg, is not interested in making a higher offer.
“There is a difference between value merger acquisitions and getting bigger for the sake of getting bigger,” Bristow told Bloomberg on Monday. According to Reuters, Newmont Corp, based in the United States, is open to slightly increasing its $16.9 billion offer, amid concerns that the Australian company’s current bid is too low following recent leadership changes.
Barrick Gold has ruled out a counterbid for Australia’s largest gold producer, Newcrest Mining, according to its CEO, effectively ruling out what had appeared to be the most likely rival to bidder Newmont.
Analysts believe that another option for Newcrest would be to increase its value through asset sales.
On Monday, Newmont, the world’s largest gold producer, made a $16.9 billion bid for Newcrest, whose operations include the world-class asset Cadia in Australia and an expanding footprint in North America, Papua New Guinea, and Ecuador. It also has copper growth potential.
The offer from Newmont, based in the United States, could prompt rival gold producers to make bids. But none would come from Barrick, the world’s second-largest miner, according to Mark Bristow, CEO of the Canada-based company. “There is a difference between value merger acquisitions and growing for the sake of growing,” Bristow said in an interview on Monday. According to analyst Dan Morgan of investment bank Barrenjoey in Sydney, Newcrest had alternatives to being taken over by Newmont.
“The best help is self-help,” Morgan says.
He believes Newcrest should better articulate the value of its long-term growth projects and possibly adjust its portfolio. This could include selling the relatively small Havieron gold mine in Australia, as well as the nearby Telfer mine and processing plant, which is running at less than half capacity.
Newcrest could also sell its 32% stake in Canada’s Lundin Gold and the Lihir mine in Papua New Guinea, which uses deep sea tailings disposal and thus does not meet the environmental mandates of some investors, he said. Other analysts believe Havieron’s minority shareholder Greatland Gold, which plans to list on the Australian Securities Exchange this year, is the most likely buyer.
