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Barrick-Newmont Goldcorp Joint Venture Leads to 'Cornucopia of Opportunities'

Streetwise Reports, Streetwise Reports
0 Comments| September 27, 2019

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The synergies, potential and realized, that resulted from combining these two companies' Nevada assets are discussed in a BMO Capital Markets report.


In a Sept. 23 research note, BMO Capital Markets analyst Andrew Kaip reported his impressions from 2.5 days spent with the management of both Nevada Gold Mines and Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) "reviewing integration efforts at the Nevada operations."

Nevada Gold Mines is the joint venture (JV) between Barrick, the operator and 61.5% owner, and Newmont Goldcorp Corp. (NEM:NYSE), which owns 38.5%. The JV forecasts H2/19 production of 3.5–3.8 million ounces (3.5–3.8 Moz) of gold annually over the next five years.

Kaip highlighted the various synergies Nevada Gold Mines already made or identified since the JV transaction closed earlier this year.

To date, the "easy wins," as Kaip calls them, amounted to about $240 million. They came primarily from consolidating regional general and administrative expenses, integrating Turquoise Ridge into Twin Creeks and eliminating the toll milling agreement. Already the JV attained $70 million in savings from supply chain cost reductions, and another $28 million are expected to be achieved soon.

Also, management started seeking ways to improve efficiencies within each segment of the business, expecting to ultimately realize about $450–500 million worth of synergies and do so in the specific time frame.

Nevada Gold Mines is realizing synergies, too, much faster and easier than anticipated, Kaip noted, from having optimized the routing of ore. For instance, "at Carlin, roaster feed has been realigned with ore from the north mines going to Goldstrike and ore from the southern area and from Cortez going to Mill 6," he explained.

Finally, another effort to yield savings is relocation of the collective mining fleet. For instance, larger equipment from Goldstrike is being moved to Gold Quarry to accelerate mining at lower costs. "In our view, this will lead to reserve increases at the 4.5 Moz ounce deposit," Kaip indicated.

In the underground, Nevada Gold Mines is considering increasing stope sizing and switching to long hole stoping where feasible. The aim in doing so is to reduce costs and more rapidly advance new production areas such as Rita K at Leeville, to ultimately boost mine flexibility.

Kaip pointed out that the JV having made or planning to make some of these changes presented new opportunities for exploration. For instance, removing the Carlin property boundaries opened the margins along the Goldstrike open pit for identifying more ore. The same is happening underground.

"One of the biggest surprises from our perspective was the Little Boulder basin target lying between Leeville to the east and Genesis and Goldstrike to the west," wrote Kaip. Historically, the area was largely ignored because it was near the previous property boundary and the mineralization there was considered deep.

However, after the boundary was erased, the JV's geological team reassessed the basin area, determining that mineralization is likely closer to surface in the southern part, Thus, Nevada Gold Mines launched a drill program there. "It is early days, but the Little Boulder basin could easily be hiding the next discovery," the analyst commented.

1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this interview, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Newmont Goldcorp, a company mentioned in this article.

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