August 3, 2016 / 5:16 AM / 3 years ago

Newmont seen in strong position in Barrick Australian mine sale

VANCOUVER/TORONTO (Reuters) - Barrick Gold Corp’s (ABX.TO) sale of its stake in Australia’s Kalgoorlie mine should attract a string of suitors, but its partner Newmont Mining (NEM.N) may have an advantage over other bidders in the sale process, industry sources say.

Barrick Gold Corp Chairman of the board John Thornton looks on during their annual general meeting for shareholders in Toronto, April 28, 2015. REUTERS/Mark Blinch

Toronto-based Barrick said last week the time was right to sell its half of the so-called “Super Pit” gold mine, a stake analysts estimate is worth around $1 billion.

Newmont, which has publicly stated its interest in buying the 50-percent share it does not already own, is in a stronger position over rival bidders since taking over as operator of the mine last year.

Denver-based Newmont has “been there for some 20 years so they have the history behind them, they know the asset better than anybody. I would say they have an edge that way,” Haywood Securities analyst Kerry Smith said.

Barrick’s share of gold production at the Super Pit that it is looking to sell was 320,000 ounces in 2015 at all-in sustaining costs of $886 per ounce.

Newmont would keep its management rights and responsibilities after any potential deal, the company said in an emailed statement, letting it call the shots on spending and development plans.

Under the joint venture structure, Newmont has a right of first refusal on the asset, meaning if Barrick wants to sell its stake it must first offer it to Newmont, which has to make an all cash offer, a source familiar with the matter said.

But because the two miners hold the asset in a holding company, Barrick can get around Newmont’s right by offering shares in the holding company to other interested parties, the source said.

Barrick spokesman Andy Lloyd said on Tuesday the transaction it was contemplating “would not include a right of first refusal”, suggesting it is one of the options.

Newmont’s intimate knowledge of the mine also could be a disadvantage in that it might not be as willing as an outsider to pay up, BMO Capital Markets analyst Andrew Kaip said.

“They might be more cautious and conservative on it than what Barrick is looking for and what Barrick might actually get,” Kaip said.

Given that Newmont has publicly stated its interest in the mine, the price already may have been a sticking point.

“I’ve said if we’re able to come to a view on value that works for both of us then that would be something we’d be interested in,” Newmont’s Chief Executive Gary Goldberg said in a July 21 interview.

BMO’s Kaip said there was a “long list of potential candidates” for the mine, speculating that several Australian gold miners would be interested.

Canadian miners with gold mines in Australia, such as New Gold Inc (NGD.TO) and Newmarket Gold NMI.TO, might also take a look, Kaip said. New Gold and Newmarket did not immediately respond to a request for comment.

Australia’s Northern Star Resources (NST.AX) would take any opportunity to look at Kalgoorlie, Chief Executive Bill Beament told Bloomberg on Monday.

Barrick has engaged Credit Suisse to run the sale process, which will start up in late August.

Additional reporting by James Regan in Australia and John Tilak in Toronto; editing by Diane Craft

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