208 (28.02.19)


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NEWS WRAP

Good Week for Andrew Forrest, founder of iron ore group Fortescue, who is due to collect a bumper payout after the company tripled its dividend thanks to rising prices, higher volumes and a drop in shipping costs. With 35 per cent of the company and 1.1bn shares, Forrest is due to collect $327m

Bad Week for the Australian dollar, which wobbled on news that Chinese ports have been turning away Australian coal cargoes, escalating tensions between Beijing and Canberra and compounding problems for coal giant Glencore, which was also walloped with a $680m tax fine in the UK. Australia exported $64bn of coal last year; China is its biggest market

Barrick Gold’s $42bn Move

Only 8 weeks after ringing the bell on their new company at the New York Stock Exchange, Barrick Gold's chairman John Thornton and CEO Mark Bristow have launched the boldest deal that gold has ever seen. “It's so obvious and compelling,” Bristow said, unveiling a $42bn merger proposal over rival Newmont this week. “The reason for not doing it escapes me.”
Priced at an 8 per cent discount to Newmont' shares, the all-stock deal will generate $7bn of overlaps and savings, on offer for both sets of investors, Bristow said, pitching the proposal a few hours before Newmont's CEO Gary Goldberg was due to give a speech in Florida. “I've never seen a premium as high as this.”
Goldberg quickly dismissed the idea as “ego-driven”, hitting out at Barrick's “behaviour this morning” and pointing to its “shocking” share price, down 22 per cent since they last talked in 2014. Barrick seems to be “throwing smoke bombs left, right and centre,” Newmont's former chairman Pierre Lassonde told Kitco News. Having just merged Barrick and Randgold, “I think Bristow has his hands full.”
Whilst Newmont's staid, gentlemanly culture was clearly shaken, Bristow's big-swinging bluster promised investors a rejuvenated gold sector, creating a $42bn gold colossus with “unmatched cash flow.”
Barrick recently folded all its assets in Nevada into one operation, but has also modelled Newmont's neighbouring mines; instead of trucks “passing each other”, Barrick could treat “the whole of Nevada as one orebody”, Bristow said, tearing down fences, flattening the corporate structure, combining fleets and stripping out G&A, coupling Barrick's high-grade reserves with Newmont's facilities. “What is intriguing about this proposal is that it's actually quite simple... A combination would really make our job easier.”
“Incidentally, I have shared all of this

with Newmont already, but to no avail.”
Despite calling Barrick “inferior on many fronts”, Goldberg has refused to rule out a counter-bid. “I think at this stage all options are open,” he told Bloomberg. But by high-balling the savings, and low-balling its offer, Barrick has room to manoeuvre. Chairman John Thornton could add 15 per cent to the price and still emerge with more than half the company, Scotiabank analyst Tanya Jakusconek told clients.
Either way, Newmont's own $10bn bid for Goldcorp, announced last month, has unwittingly bounced Newmont into play, whilst Barrick's savings easily justify paying the $650m break-fee, according to Bank of America. “Newmont and Barrick is the deal that should have always happened,” one corporate adviser told Reuters.

Ticket to Cape Town

“We no longer want to meet you in court,” South Africa's president Cyril Ramaphosa told investors earlier this month, nodding to his mining minister. “We want to meet you in the boardroom,” writes MiningMX, “and in Minister Mantashe’s office.”
That at least was the message coming from Mining Indaba, a mini-Davos for funds and heads of state, held for the mining industry in Cape Town every February. Flitting between cocktail parties and a white sandy beach, investors were courted aggressively: “Mining has been an important undertaking throughout the history of mankind,” Ghana's president said, having recently lobbed a $259m tax break at AngloGold. “Everyday life is dependent on minerals extracted.”
Politicians are right to be mindful, said gold boss Dan Betts. “If you look at a map of Africa, the mines are not necessarily built where the best geology is.” And profits can be “pretty slim”, said Anglo American's CEO Mark Cutifani. “We are committed to the mining industry,” Ramaphosa assured investors. “This is a sunrise industry.”

 

QUOTE OF THE WEEK

“We were enemies. Now we are friends.”

Under a deal brokered by former French president Nicolas Sarkozy, diamond tycoon Beny Steinmetz has settled a 7-year corruption dispute in Guinea


CONTENTS

Going Green: Mining Money’s Big Flip

Every trend in the market is being driven by one theme, says royalty boss Brian Dalton. “There aren't twenty different things going on; it’s one theme”

Every Day in China

A daily snapshot of how life has changed in the 20 years since China was invited to join the World Trade Organization

“Clunk”: $89bn of Iron Locked Out of Car Market

From Tesla to Toyota, auto groups are using new materials that will edge 100m tonnes of steel and iron ore out of the global car market

20 Critical Trade Routes

Ambassadors’ cars in the EU are made using high-purity Canadian iron ore. “We’ve sold out for this year and orders are coming in fast for 2020”



UPS & DOWNS

$3,388

The price couples are splashing out for an engagement ring in the US; consumers are cutting the cost of their weddings to under $25,000, according to Rapaport, the lowest level since 2009, weighing on diamond prices