Barrick Gold Corporation (USA) (NYSE:ABX) and Newmont Mining Corp (NYSE:NEM), the world’s largest gold producers, will start a joint venture in Nevada and tried to push the gold price environment on cost effective basis.
Barrick Chief Executive Officer Jamie Sokalsky and Newmont CEO Gary Goldberg said in their separate interviews that they are talking on finding efficiencies in their operations in Nevada.
According to Sokalsky, the assets should be combined into a single, managed joint venture with separate ownership of the respective assets to increase the revenue.
This agreement will add a new chapter to the shared history of Barrick and Newmont. According to “Going for Gold: the History of Newmont Mining Corporation” by Jack H. Morris (2010, The University of Alabama Press), the two companies also held meetings in 1991 and 2000 for joint ventures.
According to the Nevada Bureau of Mines and Geology website, both companies have their production units in northern Nevada with the largest concentration of neighboring mines in Carlin Trend. The zone is more than 50 miles long and 5 miles wide and has been producing more than 70 million ounces of gold since the 1860s.
Jason Neal, the Toronto-based co-head of metals and mining at BMO Capital Markets said its conventional wisdom that joint ventures are out there especially when there are adjacent properties and this is one example. The overall investors want to increase efficiency. Neal also said that investors are out there looking for those opportunities without a whole lot of limits.
Newmont took a $1.77 billion writedown in the second quarter. Its shares have decreased to 39 percent this year in New York, a bigger decline than the 20 percent drop in the price of New York gold futures. Barrick has plunged 45 percent in Toronto and took $8.7 billion of writedowns in the second quarter.
According to their websites, Newmont owns 18 mines in Nevada, while Barrick have six and operates another three as joint ventures. The companies already jointly own the Turquoise Ridge mine 45 miles west of the Carlin Trend, with Barrick having 75 percent of it. The companies also have partnership in the Kalgoorlie mine in Australia.
Rachel Benepe, who helps manage $1.4 billion at First Eagle Investment Management LLC said that this partnership will optimize their operations if they were cooperate in Nevada. Benepe said in Denver Sept. 24 that partnership is forcing them to think about their business models, it’s forcing them to think about what they have well at comparatively.
Barrick Gold Corporation (USA) (NYSE:ABX) stock opened the session at $18.61 but then moved to $18.67 while Newmont Mining Corp (NYSE:NEM) opened its shares at the price of $28.16 closed at $28.31 after gaining +1.11% on last trading day.