Barrick and Newmont have settled a dispute over their Nevada Gold Mines joint venture, with Newmont consenting to Barrick's plan to list a portion of its North American assets. Under the terms of the settlement, Barrick will add its Fourmile gold discovery into Nevada Gold Mines, the joint venture the two companies already operate together, while Newmont will make a one-time payment to Barrick of about $2bn, reflecting the additional value attributed to Fourmile. Barrick has said Fourmile could produce up to 750,000 ounces of gold a year.
The agreement follows a period of tension between the two miners. Earlier this year Newmont alleged "mismanagement" of the Nevada assets by Barrick, including a claim that resources had been diverted from Nevada Gold Mines toward Fourmile, a wholly owned Barrick property. The relationship between the two companies is reported to have been severely strained as recently as last autumn, with people familiar with the talks saying Hill and Newmont chief executive Natascha Viljoen met repeatedly over the following months as legal, financial and technical teams from both sides worked to rebuild trust. Barrick chief executive Mark Hill said Newmont has consented to the IPO and that the parties have agreed to expand the joint venture through an early transfer of Barrick's excluded properties, alongside a settlement of all outstanding disputes.
Nevada Gold Mines accounts for around half of Barrick's gold production and profits, and its US-based assets are more highly prized by investors than the company's African mines. The settlement also includes changes to the governance of Nevada Gold Mines, though the detail of those changes has not yet been disclosed.
Barrick intends to float between 10 and 15 per cent of the North American business, with the final size of the offering still to be determined in the coming months. The company is expected to return the vast majority of Newmont's $1.95bn payment to shareholders, subject to approval by the board, with that payment directed to Barrick rather than to the new North American company.
The settlement coincided with Barrick's second-quarter results, in which the company posted net earnings of $1.2bn, up 50 per cent on the same period last year. Earnings fell 24 per cent compared with the first quarter, a decline attributed to a lower gold price and higher costs, after gold had traded close to $5,600 per ounce in the earlier quarter. Barrick shares fell 8 per cent on Monday morning, putting the company's market value at $69bn.
Resolution of the Nevada dispute removes a governance and ownership uncertainty that had constrained Barrick's ability to proceed with a separate North American listing. It shifts the near-term financial questions toward the eventual size of the IPO offering, the mechanics of returning Newmont's payment to shareholders once board approval is secured, and the disclosure of the revised Nevada Gold Mines governance terms as the listing timetable advances.
