Fool's Gold Report: Will a Newmont-Barrick Merger Really Happen?

Metals mostly fell again, but would a huge merger among gold miners change the industry?

Apr 22, 2014 at 5:55PM

Gold continues to languish, with gold investors seeing few reasons to get optimistic about the yellow metal's prospects. As the stock market has risen, interest in gold has waned, and a lack of any important new developments out of Ukraine, or other contentious areas of the world, has made investors more interested in what they see as higher-returning investments elsewhere. With little interest in the bullion side of the market, investors are focused on possible merger talks between Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX) that could result in a huge gold-mining giant. Does a merger between Barrick Gold and Newmont Mining make sense? Let's take a closer look.

Newmont Mining's Boddington gold mine. Source: Newmont Mining.

Getting it together
With the Osisko Mining deal getting so much attention lately, it's somewhat surprising to see merger talks between Barrick Gold and Newmont Mining get relatively little play. The first hint that many investors got of a potential deal came last Friday when the markets were closed, as reports surfaced that the two companies had been in merger talks, but that they had broken down. Although the parties identified about $1 billion in potential cost savings annually due to synergies and other positive elements of a deal, and with those savings equating to around $85 per ounce of gold production, the merger would undoubtedly produce an attractive boost to margins. Yet, the intricacies of which assets would remain in a combined Newmont-Barrick entity, and which would be spun off into separately traded companies, was apparently a sticking point between the two mining giants, and so as of yesterday, many investors had already written off the idea of a merger shortly after learning about it in the first place. Newmont Mining shares soared yesterday, and it was somewhat unclear whether the move came because of the initial merger interest, or because of its apparent failure.


Source: Barrick Gold.

Today, though, The Wall Street Journal said that even though talks had stalled, Newmont Mining and Barrick Gold were still interested in the concept of a merger. For the two companies, a combination could lead to a new critical look at new development prospects, with more realistic assessments of profitability in light of lower gold prices. Some bullish gold investors argue that the result would be positive for the entire gold market, as reining in unprofitable production opportunities would reduce gold supply and lead to a new equilibrium in the gold market that would support higher prices. In addition, by integrating strategic moves like hedging and sales decisions, Barrick Gold and Newmont Mining might bring greater confidence to the entire gold-mining industry.

Obviously, getting a deal of this size done involves substantial complications. But with some benefits to the move, it's still a possibility -- and Barrick Gold shares rose 1.5% today, in part because of that possibility, as well as an analyst upgrade that took the possibility into account.

How metals moved today
June gold futures fell $7.40 per ounce Monday, settling at $1,281.10. May silver futures managed to pick up $0.01 on the session, climbing to $19.36 per ounce. Platinum-group metals were mixed, with palladium rising even as platinum gave back ground Tuesday.


Today's Spot Price and Change From Previous Day


$1,284, down $6


$19.42, down $0.02


$1,396, down $2


$782, up $6

Source: Kitco. As of 5 p.m. EDT.

Unfortunately, it's likely to take either a stock market decline or a geopolitical event to reverse the negative sentiment toward gold. With so much attention focused on the mining-company arena, bullion could continue to ease lower if current trends in other markets continue.

Three stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information