Barrick Clears IPO Obstacle, But the $1.95 Billion Price Could Be a 'Little Too Low'

Barrick Mining (NYSE: B ) has settled its outstanding dispute with Newmont (NYSE: NEM ) regarding the Nevada Gold Mines (NGM) joint venture.

After prolonged negotiations, two leading gold miners have settled on $1.95 billion.

Newmont will pay that amount to Barrick within 30 days to bring its Fourmile project alongside Newmont’s Fiberline and Mike to form the largest gold mining complex in the world.

The morning’s share price movement indicates the shareholders have not welcomed this resolution.

Despite beating Q2 estimates, stock dropped nearly 10% before settling around 7% in the red through midday.

The reason might be a disappointment given the perceived asset value.

The deal value "looks a little too low given the quality of the asset," Bloomberg Intelligence analysts wrote.

The math places an implied resource valuation at around $325 an ounce, and the terms, they said, "arguably favor Newmont." The deal will put an end to multi-year disputes that go back to 2019 when Barrick launched a $18 billion hostile takeover bid for Newmont.

Eventually, tensions settled down, and the firms formed NGM as the middle ground to save hundreds of millions of dollars through operational synergies.

However, earlier this year, the situation re-escalated when Newmont (which holds 38.5%) accused Barrick of diversion of resources to benefit its wholly owned Fourmile project.

Bringing the project under one umbrella has now resolved the dispute.

Clearing the IPO Obstacle The dispute over NGM was a major obstacle to Barrick’s planned asset spinoff.

The gold major with operations across 17 countries has seen the offshore drag influence its share price.

However, a development delay in Pakistan and a key asset freeze in Mali triggered a departure of long-standing CEO Mark Bristow after he missed internal guidance for fourteen quarters straight.

The list of problems over the last few years was exhausting, and while smaller companies have the benefit of asset sale and nearshoring, for a mining major a spinoff is the most straightforward solution.

The firm plans to consolidate all the North American assets under one entity, and for Mark Hill, the current CEO, to become CEO of the new company following the separation.

Not Without Opposition Although sound on paper, the spinoff plan is not without opposition.

Mackenzie’s portfolio manager Benoit Gervais went a step further, publicly calling for the Chairman John Thornton to resign. "If you ask me, it would be nice to have a graceful exit of this current chairman and have someone else come in," he said, reflecting on Thornton’s 12-year tenure, during which the company underperformed its top rivals.

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