What does the mega merger of Newmont, Barrick mean for Nevada mining?
After years of discussion, Nevada’s two largest mining companies struck a deal this summer to join forces and combine operations in the world’s largest gold-producing complex.
The joint venture between Barrick Gold Corp., and Newmont Goldcorp Corp., ushers in a new era in Nevada hard rock mining. Barrick owns and operates 61.5 percent of the newly formed Nevada Gold Mines, while Newmont owns 38.5 percent of the company. By sharing assets and access to each other’s facilities, Nevada Gold Mines expects to save close to a half-billion a year.
NGM Executive Managing Director Greg Walker, who started with Barrick in 2002, has seen his share of failed merger discussions over the years. Just this year, Barrick tendered an $18 billion stock offer to acquire Newmont outright. That plan, like many others, was scuttled — but with so many assets and ore bodies in proximity, it didn’t take a crystal ball to see that pooling those assets could increase value and extend mining capabilities.
“No one ever disputed the value, it was the corporate piece that (always) fell over in the past,” Walker says. “But this year when Barrick merged with Randgold, we got a new leader (Randgold Chief Executive Officer Mark Bristow), and he immediately saw the synergies and said we’d make a lot more money if we put those assets together.”
Barrick retains the larger share of the joint venture because of market consensus for value, Walker says. Certain Barrick and Newmont assets aren’t included in the joint venture, either. Newmont’s Fiberline and Mike early stage projects, as well as Barrick’s Fourmile project, could not be fully valued, so those assets currently are outside of the joint venture. However, as those projects advance to commercial feasibility, they are expected to be operated by Nevada Gold Mines.
PROVIDING ACCESS TO MORE MINEABLE GOLD
By combining assets, Nevada Gold Mines expects to add approximately $480 million in value per year. The impact on mining operations along the Carlin Trend are clear:
Barrick and Newmont both worked Carlin Trend ore bodies that crossed each other’s company boundary lines. In certain instances, each company had chased ore right up to those boundaries but couldn’t cross them. Eliminating that roadblock allows Nevada Gold Mines to instantly access about 1 million additional ounces of mineable gold, Walker says.
Newmont’s Carlin Mill 5 was scheduled to shut down in June of this year due to low through-put, but Barrick had 4 million tons of low-grade ore stockpiled at Goldstrike that wasn’t scheduled to be processed until 2030. That ore was redirected to Mill 5 on July 1, which allowed the mill to keep operating and saved 100 jobs in the process.
Each day, Barrick’s haul trucks carry ore from its Cortez mine to processing facilities at Goldstrike — passing Newmont’s Carlin operations in the process. Newmont’s haul trucks, meanwhile, ran north past Goldstrike. Now, Newmont’s trucks are redirected to Goldstrike while the Barrick’s trucks are redirected to Newmont’s facilities, which shortens the haul journey by some 20 miles, Walker says.
In addition to reducing cost, it also shortens the time haul trucks are on public highways.
“We are hauling 2 million tons a year from Cortez. That is a lot of haul trucks on the road,” Walker says. “It reduces greenhouse gas emissions, saves damage to public roads and reduces opportunity for (safety) incidents. Getting trucks off the road is a high priority for a cost perspective but also for a social perspective.”
IMPACTS TO OPERATIONS, JOBS AND MORE
The joint venture also has deep impacts on operations at the Twin Creeks and Turquoise Ridge mines in Humboldt County. Newmont owned Twin Creeks, but Turquoise Ridge was operated as a joint venture (75 percent Barrick, 25 percent Newmont). Barrick shipped ore from Turquoise Ridge to Twin Creeks under a toll-milling agreement. Now that the premium Newmont charged to mill that ore has been eliminated, Nevada Gold Mines is free to pursue lower-grade ore at Turquoise Ridge.
“As soon as we took away the toll milling agreement, it added the best part of a million ounces to the immediate short-term reserve resource for Turquoise Ridge,” Walker says. “It allowed us to further push down the cost and the cutoff grade. We look at adding about 3 million ounces to Twin Creeks and Turquoise Ridge reserves and resources just by purely focusing on reducing the cost of the cutoff grade.”
The merger did result in the elimination of some 130 job redundancies between the two organizations; however, many employees were offered positions either with Newmont or Barrick, Walker says. Some 60 positions were cut, though that’s offset by the aforementioned jobs saved by not shuttering Carlin Mill 5.
There is much optimizing and sharing in other areas as well — Nevada Gold Mines is now flush with multimillion-dollar heavy equipment around its various mine sites. For instance, Newmont had a fleet of equipment parked at its shuttered Emigrant Mine that’s been put in operation at Twin Creeks.
IMPACTS TO THE ELKO COMMUNITY
The joint venture employs more than 7,000 people in the state, Walker says. While there was a great deal of trepidation among rank and file employees prior to the joint venture, Day 1 came and went without any disruption to production or each company’s stringent safety standards.
“That’s a testament to the workforce and to management,” Walker says.
There was quite a bit of concern about how the joint venture would impact the greater Elko community as well — but Mayor Reece Keener says NGM senior management has been quite “user-friendly” throughout the process. NGM Chief Executive Officer Mark Bristow has made regular trips to the town to provide clarity and visibility about the impacts and mission of the JV.
“Initially, there was a lot of fear, uncertainty and doubt,” Keener says. “Going from two major operators, to one mammoth entity created legitimate concerns within the community of being at the mercy of one all-powerful entity that could dictate wages and ‘make or break’ our local businesses.
“I believe NGM understands the magnitude of their community responsibility in Nevada,” he adds. “They have demonstrated their benevolence with a long-term outlook toward the Elko region. Their management understands that Elko’s success ultimately leads to NGM’s success. They’re engaged in expanding local healthcare services, education and development on the economic, broadband, air service and workforce fronts, and these initiatives will move Elko forward and make us a more prosperous community, now and into the future.”
Barrick’s share price is a good indicator of market perception to the joint venture. Barrick shares traded at the end of May for $12.42, but by mid-August shares were trading at $18.18, a rise of 46 percent. Newmont’s share price, meanwhile, was $30.09 at the end of May and rose to $37.97 by mid-August.
WHAT THE FUTURE HOLDS
Moving forward, Nevada Gold Mines will conduct its own exploration in all areas included under the joint venture — and future mining efforts hold great promise for the organization, Walker says.
“Inside that area, NVG has its own exploration group,” Walker says. “We are more efficient with higher cash flow, we have combined the best skills from Newmont and Barrick, and we are very bullish on exploration.
“There will be a lot of exploration happening,” he adds. “The most exciting thing over the next two to three years is near-mine exploration. It’s really close to where we (already) are, and we are looking at significant targets with many millions of ounces of potential upside. We have the people, the skills, the ground, and if you are a gold miner, Nevada is the best address in the world.”
Elko Mayor Keener believes that the strength NGM brings to bear will extend mining activity in northeastern Nevada, as well as lift the tide for the entirety of Northern Nevada.
“There will be a greater motivation for new investment in their assets, which will result in increased employment and prosperity for not only the city of Elko, but the entire Northern Nevada region,” Keener says. “NGM will continue to use what was Newmont’s logistics center for warehouse receiving in Elko, and this is key for Elko because sales tax proceeds flow to our city (and county), and sales tax receipts account for most of the city’s general fund. We are a bedroom community to the predominantly Eureka- and Lander County-based mining industry, which reaps the gold tax (net proceeds) windfall without the infrastructure impacts that the population center (Elko) incurs.
“I see a very bright future for Elko,” Keener adds. “In the coming years and decades, we will become an internationally recognized gold industry capital, and NGM will be the pivotal component. With the tailwinds of upward gold prices, and new projects that are in permit review, Nevada Gold Mines is off to a very robust start.”