News from Reuters
Newmont Mum As Its Top Gold-Miner Rank Threatened
Friday, May 16, 2003
By Lesley Wroughton
TORONTO (Reuters) - Newmont Mining Corp.
South Africa's AngloGold said on Friday it was in talks to buy Ghana-based Ashanti, known for gold mines in four African countries, for about $1.015 billion in shares.
It would make AngloGold the world's biggest gold producer, with annual output of around 7.6 million ounces.
The Ghanaian government has a 20 percent stake in Ashanti and would have a veto on any deal. The country has been a low-profile gold producer but interest in it has grown recently since the government began pushing more flexible mining laws.
Denver-based Newmont bought Australia's Normandy Mining and Canada's Franco-Nevada gold royalty company on Feb. 15, 2002, making it the world's top producer and plumping up its output to an estimated 7.1 million to 7.3 million ounces this year.
The integration process is almost complete, with Newmont cleaning up minority stakeholdings in some assets.
"Size matters and I think the industry has been very fractured, and this helps to bring more clarity," said Newmont spokesman Doug Hock.
"Going forward, it will be important to have size in order to survive and thrive in this industry, and it's in the best interest of the industry to have large players."
In recent months, Newmont has shown keen interest in Ghana and was surprised by the potential of two gold deposits it inherited from Normandy in the West African nation.
Since then, Newmont has added Ghana to its list of five global core asset areas and plans to make a production decision later this year on the Akim and Ahafo deposits.
"Right now we're focused on these two projects that we are keen on and we're focused on growing those and pushing those forward," Hock said.
Ron Coll, an analyst at Jennings Capital, said Newmont had the financial capacity to make an offer.
"These are good assets and Newmont already has interests in Ghana so this would be a natural fit. Consolidation is the name of the game in the gold industry and the only way to get bigger quickly is through acquisitions. Newmont is certainly studying this now. It is reasonable to expect another bid will arise," he said.
A senior Canadian mining executive pointed out that the Ashanti transaction would be the first big takeover in the gold industry since the gold price moved above $300 an ounce and hit a 6-1/2-year high in February.
"I think any of the larger mining companies could make a play," he said. "I really like their asset base and I'm not surprised somebody wants it.
Vince Borg, spokesman for Toronto's Barrick Gold Corp.
Barrick chief executive Greg Wilkins recently indicated a shift in emphasis for his company, the world No. 2 gold firm, from acquisitions to exploration.
It also intends to spend nearly half of its war chest, used to fund takeovers, to buy back 35 million of its shares, or 7 percent of its public float, saying the stock price does not reflect the true value of the company.
Wilkins also noted at a recent shareholders meeting that many acquisitions in the industry had not realized their value and in some cases buyers had overpaid.
(With additional reporting by David Sinkman in New York)
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