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Richard Russell: The big money is dumping equities, so get into cash and gold
By Nicole Mordant
http://biz.yahoo.com/rc/040329/minerals_barrick_newmont_2.html
VANCOUVER, British Columbia, March 29 (Reuters) -- Barrick
Gold Corp. termed "wild speculation" Monday a report over the
weekend that Newmont Mining Corp. was getting set to make a
takeover offer for it, but added it would vigorously defend itself
against any hostile bid.
Britain's Sunday Telegraph newspaper reported that world No.
3 gold producer Barrick was on a "high state of bid alert" amid
suggestions that Newmont, the world's No. 1 gold producer, was
readying to pounce on the Canadian-based company.
The paper gave no source for its report, which was picked up
by Canadian newspapers and television and initially boosted
Barrick's stock listed in both Toronto and New York.
Speculation that Newmont is on the takeover trail is not new,
with Canada's Placer Dome Inc. and Australia's Newcrest Mining
Ltd. also tipped as possible targets.
But the rumor mill has gotten fresh grist in recent months from a
$1 billion cash-raising by Newmont, a share price surge last year
that has made its stock a strong acquisition currency, and a threat
to its No. 1 producer status from rival AngloGold Ltd.
The Sunday Telegraph report said that Newmont and Barrick were
believed to have held informal discussions on a merger in 1999
and when these talks collapsed, agreed to a "secret five-year
standstill arrangement." That agreement comes to an end within
the next few weeks, the paper said.
"We have a policy of not commenting on speculation, especially
wild speculation," Barrick spokesman Vince Borg said. "On the
five-year agreement, I have no idea what the individual reporter
is talking about," he said.
Industry sources said five years was an unusually long period
for a confidentiality agreement.
Denver-based Newmont said it did not comment on speculation.
Merrill Lynch analyst Michael Jalonen questioned in a research
note the rationale for a Barrick-Newmont tie-up now.
"From our point of view, a merger of Barrick and Newmont
should have been completed years ago (at least five) before
both companies invested more capital on their adjoining o
perations in the Carlin trend of Nevada," he said.
Borg said Barrick would "vigorously defend" itself against
any hostile bid. "It is a function of our view that our shares
are undervalued," he said.
According to analysts' valuations, Barrick's stock is cheaper
than Placer Dome's, mostly because of some investors' dislike
of Barrick's now-discarded hedging strategy. Under this
strategy the Toronto-based firm sold forward unmined gold
at prices that are now below market levels.
Against the backdrop of recurring merger speculation, National
Bank Financial earlier this month weighed up the relative
merits of a Newmont-Barrick merger against a
Newmont-Placer union. The bank concluded that a
Newmont-Barrick combination could achieve cost savings that
were three times bigger, or $300 million a year.
Barrick's stock was 11 Canadian cents higher at C$30.20 on
Monday, but off an earlier high of C$30.70. In New York the
share was 33 cents firmer at $23.09, but off its morning peak
of $23.43.
Newmont's U.S.-listed stock was 63 cents weaker at $45.52.
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