Elko mayor opposes Barrick-Newmont mining merger
ELKO, Nev. (AP) — The mayor of the biggest mining community in Nevada has said he opposes the merger of the two largest gold mining companies in the world because it would reduce competition in the region and could drive down workers’ wages.
Barrick Gold Corp. announced this week it will try to acquire Newmont Mining Corp. in an approximately $18 billion all-stock deal that would create a corporate giant worth about $42 billion.
Colorado-based Newmont has rejected any talk of a buyout from the Canadian miner so far and the unsolicited bid from its fierce rival appears likely to become hostile.
Elko Mayor Reece Keener told the Elko Daily Free Press that “operationally” the merger may make financial sense.
But from a practical standpoint, Elko County reaps the benefits of having two major mining companies operating in northeast Nevada.
“Competition is a good thing,” Keener said. “These companies are each so large that they already enjoy enormous economies of scale.
“A single mining behemoth would remove much of the competition for talent and potentially put downward pressure on wages, and it would certainly squeeze the supplier community,” he wrote in an email to the newspaper this week.
In Nevada, Barrick operates surface and underground mines on the Cortez Trend, surface and underground mines on the Carlin Trend, and Turquoise Ridge. Newmont has the Twin Creeks Mine near Turquoise Ridge, underground and surface mines on the Carlin Trend, Emigrant Mine southwest of Carlin, Phoenix Mine near Battle Mountain and Long Canyon Mine near Wells.
Barrick has 3,780 employees in Nevada. Newmont currently has about 5,000 employees and contractors in North America, but doesn’t list them by state.
In Elko, Newmont’s offices have been its North American headquarters, but the headquarters would move to Vancouver under the Goldcorp deal. Barrick relocated headquarters for North American operations to Las Vegas a few years ago but still has an office complex in Elko.
Barrick’s proposal is an $18 billion stock deal that the market is considering hostile because Colorado-based Newmont has a $10 billion merger in the works with Goldcorp Inc. and has labeled Barrick’s offer as unsolicited and a negative premium proposal.
Barrick wants Newmont to drop the Goldcorp deal.
Toronto-based Barrick merged with Randgold Resources on Jan. 1 of this year in a $6.1 billion acquisition.
Barrick CEO Mark Bristow said in a conference call that the proposed merger “will create more value than any other combination in our industry,” with estimated savings topping $7 billion.
“Nevada is the crux of our proposal, because that is where the bulk of the synergies can be realized,” he said.
Newmont and Barrick already have a working agreement on the Turquoise Ridge Mine in Humboldt County. Barrick operates the mine and owns 75 percent. Newmont processes the ore and owns 25 percent.
Newmont Chief Executive Officer Gary Goldberg said he agreed with Barrick “that jointly operating our collective assets in Nevada represents a compelling value opportunity for all of our shareholders.”
“But there is no reason to bear the risk from Barrick’s other assets,” he said. He said Newmont remains willing to talk about joint ventures in Nevada.
John Dobra, who followed the mining industry in Nevada for years and recently retired as an associate economics professor at the University of Nevada, Reno, said the two companies have discussed mergers before.
But “this one seems a little bit different, a little more hostile,” he said.
Information from: Elko Daily Free Press, http://www.elkodaily.com