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3/11/19

Newmont and Barrick are BFFs again

Called it likely in the weekly yesterday, too. All the signs were there.


On the week Barrick rose 5.0%, which was a good snap-back performance from the world’s biggest gold miner but it’s not something that can be taken in isolation while the whole NEM/GG/hostile scenario goes on. Therefore we also note that Newmont (NEM) lost 0.3% on the week and Goldcorpse (GG) improved by 1.6%.

The reduction of the arbitrage between GG and NEM by nearly 2% is an indication that the market thinks that deal is now more likely. When we add in the newspaper reports last week of NEM’s Goldberg and GOLD’s Bristow meeting and having constructive discussions, this also explains the out-performance of GOLD compared to the rest of the market. Although we do not know for sure, it’s a safe bet that “constructive discussions” between the two big boys refer to synergy savings around the Nevada assets owned by both. If Barrick manages to nail down some type of JV deal with NEM (in exchange for backing off on the hostile angle), it would manage to get most of what it wants without incurring any further failure risk (or having to swallow any of the less palatable corners of NEM) and that would be good for its share price. Meanwhile, NEM sees the potential premium in its price unwind and Goldcorpse rebounds (the way it has) because there’s nothing left to stop its merger.

This isn’t over by a long chalk (and do not underestimate the stopping power of over-inflated egos) but the week saw the ABX/NEM hook up becoming a little less likely. That’s not an opinion based on personal bias, that’s what the numbers say.