In hindsight, it seems like Mark Bristow used the opening provided by the Newmont (NEM)-Goldcorp (GG) merger, to force a Barrick (GOLD) controlled Joint-Venture. The last couple of months have been heated in the gold industry (GLD), with the Barrick-Rangold merger taking the spotlight, followed by the Newmont-Goldcorp deal.
Once the Newmont-Goldcorp deal was announced, Barrick took no time and made a counterbid for Newmont. However, now it seems like the Barrick controlled joint-venture in Nevada was the real target for Barrick. The deal implies a net present value of $5 billion in savings during a 20 year period. Barrick will hold a 61.5% share and Newmont the rest.
This seems like a good deal for both parties, but it appears that Barrick got some edge due to its tactics. Nevertheless, consolidation in the gold industry was long overdue, and the joint operation of one of the top mines in the world will be more efficient.
I am keeping the gold sector under watch. Mainly, because of the macro picture. This late cycle will provide good opportunities for gold. Actually, since the Fed announced the pause on the balance sheet runoff, we can see that the gold price gained some momentum.
Graph 1 – SPDR GLD Price performance
Therefore, I am very interested in keeping gold, and even a couple of gold miners, under watch. The current macro scenario seems appropriate to start accumulating some gold. And down the road, if a surge in gold prices materialize, gold miners will enjoy the ride. And, the last few deals seem like a good step to keep those companies in good shape.