Canada's Barrick Gold Corp is considering a hostile bid for Newmont Mining Corp for about $19 billion in stock, in what would potentially be one of the largest-ever mining deals, the country's Globe and Mail newspaper reported.
The paper, which also reported that Barrick would flip some of Newmont's assets to Australia's Newcrest Mining, cited industry sources familiar with the situation.
Barrick said on Friday it had reviewed the possibility of a merger with rival Newmont in an all-stock transaction, but added that no decision had been taken so far.
Shares of Newmont pared gains after Barrick's statement to trade up 1.6 percent in early trading.
Under the potential terms reported by the paper, Barrick would keep Newmont's Nevada and African mines, while Newcrest was considering taking over its Australian operations.
Barrick, which spent $6.1 billion on buying rival Randgold Resources last month, has formed new management teams and cut administrative costs as part of new Chief Executive Mark Bristow's plan to set the combined company firmly apart from peers.
Bristow had said on a post-earnings call that Barrick Gold would continue to look at opportunities for mergers or acquisitions.
Barrick and U.S. company Newmont have long been touted as a potential match, as they have plenty of overlap around their North American operations, said an Australia-based banker.
"(But) there's a danger that Barrick is biting off more than it can chew (by making another large acquisition)," he said, declining to be identified due to the sensitivity of the issue.
Without such a deal, Barrick could cede its crown as the world's largest gold producer to Newmont, which is due to close its $10 billion buyout of smaller rival Goldcorp Inc next quarter.
If Barrick were to be successful, the merger between Newmont and Goldcorp would not go ahead, and Barrick would be liable for a $650 million break fee, the newspaper reported.
Newmont declined a request from Reuters for comment.
A Newcrest spokesperson said the firm did not comment on M&A speculation. Goldcorp was not immediately available for comment.
Newmont has three gold mines in Australia, which have a net present value of $4.5 billion according to AME Group, but none of those are seen as the kind of large 'tier one' developments that Newcrest has said are a prerequisite for any major buys.
"Newcrest has a production hole in a couple of years' time with Cadia going offline," said one fund source based in Melbourne, referring to one of Australia's largest gold mines.
"It makes sense that they would be looking, but I would question the 'tier one' nature of the asset."
Any deal for the assets would hinge on price and the manner of payment, two other bankers and a fund manager said.
"I wouldn't care if they are not 'tier one' assets," said Simon Mawhinney of Allan Gray in Melbourne, which is the top shareholder in Newcrest with a stake of around 9 percent.
"But I would care if they were overpaid for, that would be a big issue."
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