Newmont Escalates Dispute with Barrick Over Nevada Gold Operations
In a significant escalation of tensions between two mining giants, Newmont Corp. has formally sent Barrick Mining Corp. a notice of default regarding their Nevada joint venture. The Denver-based company alleges evidence of mismanagement at the Nevada Gold Mines operation, which represents a crucial mining region in the United States.
Allegations of Resource Diversion and Performance Concerns
According to a filing submitted to the U.S. Securities and Exchange Commission on Thursday, Newmont claims Barrick diverted resources from the Nevada Gold Mines venture to benefit its wholly owned Fourmile project. This alleged action forms the basis of Newmont's formal complaint against its joint venture partner.
The notice follows Newmont's initial communication with Barrick about these concerns last month, with the formal default notice being delivered in early February. Under the terms of the companies' 2019 joint-venture agreement, a partner accused of breaching the pact typically has 30 days to remedy the issue or begin corrective action. Should the dispute remain unresolved, it could potentially proceed to court in Nevada.
Market Reaction and Executive Responses
The announcement has already impacted both companies' stock performance. Newmont shares declined by 2.7 percent as of Friday afternoon in New York trading, while Barrick shares fell by 1.8 percent during the same period.
Barrick chief executive Mark Hill responded to the allegations with a carefully worded statement: "While we disagree with Newmont's claims, we are limited by the terms of the joint venture agreement in what we can say. We are committed to constructive engagement and to working together with Newmont to deliver shareholder value."
Newmont chief executive Natascha Viljoen emphasized the company's focus on improving Nevada operations during an earnings call with analysts, stating: "Discussions have been predominantly around the improvement of the performance of Nevada, and, I think, a very constructive relationship to work together to improve that performance — which we believe would be in the best interest of all of our shareholders."
Potential Impact on Barrick's Strategic Plans
The dispute could significantly complicate Barrick's strategic initiatives, particularly its plans to separate North American assets and sell a 10 to 15 percent stake in the new company later this year. This proposed spinoff would include Barrick's 61.5 percent interest in the Nevada venture (with Newmont holding 38.5 percent), along with the Fourmile project and a mine in the Dominican Republic that represents another collaboration between the two companies.
According to industry analysts, Newmont wants Barrick to address what it perceives as underperformance at the Nevada assets before proceeding with the planned initial public offering. The mining company has reportedly been critical of Barrick's management following output declines and rising costs at the joint venture operations.
Analyst Perspectives and Future Implications
Citigroup Inc. analyst Alexander Hacking noted in a research report: "The terms for resolving such disputes are laid out in the JV agreement. But we believe this will likely be viewed by investors as part of ongoing negotiation and positioning over the future of Nevada Gold Mines."
In its official 10-K filing with the SEC, Newmont stated: "Although we continue to work with Barrick to improve the performance of NGM and will take appropriate steps to address this matter, any such disagreements could have a material adverse effect on our interest in NGM, the business of NGM or the portion of our growth strategy related to NGM."
The dispute highlights the complex dynamics between major mining corporations operating joint ventures and the potential for strategic disagreements to impact significant business decisions, including public offerings and asset management strategies in the competitive gold mining sector.
