Newmont Mining Corp (NYSE:NEM) And Barrick Gold (NYSE:ABX) Fail To Agree On Merger

Lisa Ray - April 21, 2014

Boston, MA 04/21/2014 (wallstreetpr) – Newmont Mining Corp (NYSE:NEM) is a $12 billion gold mining company. The company entered into merger talks with Barrick Gold Corporation (USA) (NYSE:ABX). The central idea in the merger talks between the companies was about financial savings in the face of soft demand for gold, oversupply of the commodity and weak prices.

However, credible sources revealed that the merger talks between the two leading gold miners hit a snag due to a number of issues that could not be resolved immediately. However, the companies left options open to allow the revival of the talks in the future because they need to tie-up to ensure survival of their respective businesses.

In the proposed all-stock deal that was planned for public announcement this week, Barrick intended to offer Newmont shareholders a 13 percent premium over Newmont’s average stock price in the past 20 days. The merger talks also included agreements to spin off certain assets in Australia and New Zealand. In undertaking such divestment steps, the companies envisioned $1 billion a year in cost-savings. The resulting combined company was expected to be worth $33 billion in market value and with operations on five continents.

Trouble in gold market

Gold miners are troubled by the huge plunge in the price of the commodity. The sluggish demand and the overwhelming supply of gold in the global market have not made matters any better. Therefore, a tie-up between Newmont Mining Corp (NYSE:NEM) and Barrick that was expected to result in $1 billion annual cost savings was necessary.

However, the two companies could not agree to settle the deal before their self-imposed merger deadline of April 21. The companies mainly disagreed over the specific assets to be spun off. Following the disagreement, the talks were called off, but there is still room for the companies to resume negotiations on the merger.

All about saving

According to analysts and pundits, Newmont Mining Corp (NYSE:NEM) and Barrick are in desperate need for a tie-up to attain cost-saving amid the challenging gold market environment. The high costs of operating mines, low demand and weak prices have colluded to deny the companies the profits that they once enjoyed. However, the threat presented by the troubles in the gold market goes beyond current loss of profits to possible long-term challenge for the companies if timely improvements are not achieved.

Lisa Ray

Lisa Ray

Lisa has a Bachelor of Arts in journalism from Purdue University and 3 years of experience in the publishing field.

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