Barrick could be bidder in future Newmont auction

If, as seems likely, Minerals and Resources Corp. (Minorco) succeeds in taking over Consolidated Goldfields PLC., Barrick could be one of the bidders for ConsGold’s 49.7%-owned subsidiary Newmont Mining.

Analysts expect Luxembourg- based and South Africa-backed Minorco to sell the assets of Denver-based Newmont to finance a $5.8 billion(US) bid for ConsGold. The jewel in Newmont’s crown is Newmont Gold which extracted 895,500 oz of gold last year from the same 45-mile tract of Nevada landscape where American Barrick is developing its huge Goldstrike gold mine.

“If Newmont comes up for sale, there is no doubt that we would take a look at it,” said Jerry Garbutt, Barrick’s chief financial officer at the company’s recent annual meeting in Toronto.

“But we wouldn’t do anything to jeopardize the financial health (of American Barrick),” he said.

As Barrick and other Canadian companies wait for the outcome of the Minorco bid, which is scheduled to expire May 17, ConsGold shareholders are being asked to vote on the offer. ConsGold and Newmont have stalled the bid alleging that a takeover would violate U.S. anti-trust laws.

With Chairman Peter Munk at the helm, Barrick is no stranger to the world of high level wheeling and dealing. Back in 1986 it sparked a furor in the British Government’s Department of Industry and Trade by acquiring a 4.9% stake in ConsGold.

After rumors circulated that it was about to make a takeover bid for the United Kingdom-based gold company, Barrick made a $10- million profit on the sale of the block.

Two weeks ago, Barrick said it would attempt to boost its balance sheet by tendering a second 3.4- million-share block of ConsGold shares which it bought in 1987. Valued at 13.2 UK pounds each, the shares would fetch about $100 million if the Minorco takeover bid is successful. That could result in a profit of about $10 million.

However, if Newmont Mining is put up for sale it would be too large for Barrick to handle on its own, according to a Toronto analyst who believes that the working relationship between the two companies would make a takeover bid inadvisable.

Earlier this month Newmont agreed to reimburse Barrick for material mined by Barrick on Newmont’s Post claims during 1989. Rich in the deep sulphides that have focused attention on Nevada, the claims are adjacent and strategically vital to Barrick’s Goldstrike open pit development plant.

According to Garbutt, Barrick will receive about $14 million from Newmont this year and the companies are working towards extending the agreement.

“If Munk was suddenly to become Newmont Gold President Peter Philip’s boss, things could get a little bit touchy,” said Merrill Lynch Canada mining analyst Catherine Gignac.

More significantly, Gignac says, if Barrick was to take on five mills and all of the deposits that Newmont has, the Toronto company would have to triple its size and incur a lot of short-term debt.

On March 31, Barrick reported $468 million in long-term liabilities.

“But that wouldn’t prevent it from raising the money if Newmont was considered a good acquisition,” Garbutt told The Northern Miner.

Meanwhile Barrick currently has its hands full with a $365-million(US) expansion plan which is designed to increase gold production at Goldstrike to a minimum 900,000 oz in 1992 from 180,000 oz last year.

In-fill drilling at the project’s Betze pit recently returned a series of intersections including 920-ft of grade 0.58 oz gold per ton at the centre of the deposit and upper 600 ft of grade 0.80 oz. At the eastern end of Betze, Barrick also drilled 1,190 ft of grade 0.32 oz.

But intersections which would be regarded as astonishing at most other gold projects won’t materially affect the Goldstrike reserves that Barrick announced earlier this year, according to President Robert Smith.

As reported (N.M., Jan 16/89) Goldstrike reserves in all categories now stand at 128.4 million tons grading 0.095 oz and represent 12 million oz.

Production from Barrick’s seven operating gold mines should increase this year to 440,000 oz from 341,000 oz in 1988. The company is sheltered from a recent decline in the price of gold to $376(US) per oz by a 3-year hedging program.

Under the plan, all of this year’s gold sales are hedged to realize a minimum of $437 per oz, said Garbutt. Next year 70% of production is hedged at $431 per oz and in 1991 Barrick will realize a minimum of $433 per oz for its gold output.

The Toronto company’s net income for the three months ended March 31, was up by 61% to $7.2 million or 12 cents per share fully diluted, compared to $4.5 million or 8 cents per share at the same time last year.

First quarter revenues increased to $46.6 million from $27.4 million in 1988. Income from operations was also up to $17 million from $9.8 million a year earlier.

A semi-annual dividend of 7.5 cents (C) per common share was declared payable to shareholders of record May 31. This represents a 2.5 cents increase in the company’s semi-annual dividend.

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