Veteran Canadian analyst John Ing says it’s only a matter of time before gold mining heavyweights Barrick Gold Corp.
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) and Newmont Mining Corp.
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) tie the knot in a blockbuster merger deal.
“It makes a lot of sense, it’s just a question of when,’’ said Ing during an interview with Stockhouse.
A fixture on Toronto's Bay Street financial district, Ing doubts that the merger will be announced before Barrick founder Peter Munk steps down as Chairman following the company’s annual meeting in Toronto next week.
But he said the reasons of a deal are so compelling that he thinks it will get done eventually.
Ing agrees with reports that a merger will result in cost savings of US$1 billion, either though synergies in Nevada, or the sale of assets in riskier jurisdictions, such as Indonesia
“Should it happen, it will spur a lot of merger and acquisition activity,’’ said Ing, adding that many companies in the mining sector are looking to reduce overheads.
In an interview with Bloomberg TV, Munk said the companies have talked several times about deal over the years and that it has ``always made sense,'' but this time could be different.
``For the first time in the last decade and a half, gold
prices are heading down, not up, so synergies percentagewise are much more relevant than they were,'' he said.
Newmont officials have so far been non-commital about the prospects of a merger.
Newmont shares rose 2.8% to $26.20 on Friday, leaving a market cap of $13 billion, basd on 497.9 million shares outstanding. The 52-week range is $35.44 and $20.78.
Barrick jumped 1.8% to $19.60, leaving a market cap of $22.8 billion, based on 1.2 billion shares outstanding. The 52-week range is $23.78 and $14.22.