‘We were expecting better from Barrick,’ analyst says after Newmont calls to fix Nevada Gold Mines

Martin Pradier, materials analyst for Veritas Investment Research, joins BNN Bloomberg to discuss Barrick Mining as production hits the lowest levels in decades

Newmont Corporation has asked Toronto-based Barrick Gold to improve operations at its joint venture before Barrick moves ahead with a planned initial public offering (IPO) later this year.

The world’s largest gold miner released a statement on Monday responding to Barrick’s IPO announcement issued two months ago, which outlined plans to list a new company holding assets including Nevada Gold Mines, Pueblo Viejo and Fourmile.

Newmont said in the release, its primary concern is the operation and management of Nevada Gold Mines, “which has suffered a degradation in performance and subsequent asset value over the past six years.”

• Barrick Mining evaluating initial public offering of North American gold assets

Barrick and Newmont formed the Nevada Gold Mines joint venture in 2019, pooling their operations and assets in the region. Barrick holds a 61.5 per cent stake and oversees day-to-day operations, while Newmont owns 38.5 per cent and manages broader structural decisions.

Nevada Gold Mines’ fourth-quarter results from last year showed a 23 per cent decline in gold production.

The results were surprising, Martin Pradier, a materials analyst at Veritas Investment Research, told BNN Bloomberg

“The guidance shows increasing cost and lower production from Nevada than what they had previously communicated,” he said.

“There is no doubt that we were expecting better from Barrick,” Pradier said.

He said Newmont holds the right of first refusal, which gives it leverage to push for changes ahead of the IPO.

Newmont’s interest in Nevada assets

Pradier believes Newmont is interested in acquiring Barrick’s entire stake in the Nevada assets. He said listing a portion of the business would establish a public market valuation, potentially allowing Newmont to bid for the remainder.

“I think that Newmont would be interested only in these assets that are in the new company, not in the rest of the assets,” Pradier said.

Less bullish on Barrick’s outlook

Pradier said his research team is now less bullish on Barrick following the company’s latest outlook.

“It was a very big increase in cost, 20 per cent for gold, about 10 per cent for copper, compared to the previous year.”

Barrick has also faced challenges outside Nevada, including a two-year standoff with Mali’s military government involving the Loulo-Gounkoto complex, for which Barrick paid a hefty settlement.

“Barrick has to pay a lot of money, and now the mine is not a low cost producer anymore,” Pradier said.

“It used to be one of the lowest cost producing mines in their portfolio and now is going to be the most expensive, about US$3,000 per ounce in the coming year, according to their estimates.”