Australia Just Ramped Up Super-Pit Fight Between Top Gold Miners

  • Barrick, Newmont have failed to reach deal on Kalgoorlie stake
  • Higher Australia tax ‘adversely’ affects mine value: Newmont

Newmont CEO Interested in Buying Kalgoorlie Stake

A tax hike in Western Australia stands to lower the value of a massive gold deposit and further drive apart its owners: the world’s biggest producers of the metal who have spent the last two years debating what the mine is worth.

Newmont Mining Corp., the second-largest gold miner, has been interested in buying Barrick Gold Corp.’s 50 percent stake in the Kalgoorlie Super Pit since at least 2015. Newmont already owns the other half and operates the mine for Barrick, the No. 1 producer of the metal. The only reason a deal hasn’t been done, the two sides say, is price.

The Kalgoorlie Super Pit.

Photographer: Carla Gottgens/Bloomberg

Now, the royalty increase could further the gap between how much the companies think the operation is worth. The higher tax “adversely” affects the value of Kalgoorlie, said Gary Goldberg, Newmont’s chief executive officer.

Goldberg’s comments underscore the arguments over price. Rival Barrick has stressed that selling the stake is all about value, and a failure to reach a deal with Newmont has nothing to do with a culture clash.

“If it made sense economically for their shareholders and for ours, there’d be nothing that would prevent us from doing something together, a transaction,” Barrick President Kelvin Dushnisky said of a deal with its rival. “We certainly don’t take the view that we’d do something with someone first before Newmont. Absolutely not. Whatever makes the most sense.”

Both executives spoke Monday from the Denver Gold Forum, an annual quorum for the industry that draws mining companies, investors and analysts to the mountains of Colorado. This year the conference is being held in Colorado Springs.

Royalty Rise

Western Australia, which hosts four of the country’s five biggest gold mines and sites operated by Newmont as well as Newcrest Mining Ltd. and South Africa’s Gold Fields Ltd., announced this month that the royalty rate will rise to 3.75 percent from 2.5 percent, depending on moves in the metal’s price, to bolster the state’s finances.

The increase could boost operating costs by $15 million a year for Newmont, which has two operations in the region, Goldberg said. That’s about $20 per ounce of mined gold, making it “not insignificant,” he said.

Gold futures traded in New York settled at $1,311.50 an ounce on Monday.

"We’re in the process with our team on the ground talking to the Labour government that’s in now that proposed this change,” Goldberg said. “We want to follow up with them and make sure they understand what the impacts are.”

Newmont, Newcrest Lead Attack on Australia Gold Royalty Hike

Goldberg reiterated that Greenwood Village, Colorado-based Newmont remains interested in Barrick’s Kalgoorlie stake at the “right value.”

The royalty increase is another blow to Toronto-based Barrick’s aims to sell after another deal for the stake fell through this year. Shandong Tyan Home Co. in April said it ended talks to acquire Barrick’s Kalgoorlie holding because of recent tightened controls in China on outbound investment.

“For the right price, we’re sellers, but if not, we’re happy to continue owning it,” Dushnisky said Monday.

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