Dallas, Texas 04/25/2014 (FINANCIALSTRENDS) – Even as Newmont Mining Corp (NYSE:NEM) reported a steep 63 percent dip in its net income from its first quarter operations yesterday, the speculation in the financial press about the progress being made by the ongoing merger talks between Barrick Gold Corporation (USA) (NYSE:ABX) which is world’s largest producer of gold and Newmont Mining Corp (NYSE:NEM) which is second biggest producer of yellow metal in the world reached fever pitch.
These speculations were fuelled by comments from Barrick Gold Corporation (USA) (NYSE:ABX) Peter Munk who is the Non-Independent Chairman of the Board on the future course of action the combined entity can take to cut down the risks associated with such a large merger and realize economies of scale.
Chairman Munk has been quoted to have advocated the hiving off of standalone assets once the merger is accomplished to cut down drastically the risks associated with being invested in countries which have proven to be politically volatile over the past decade and which in turn are leading to business uncertainty. He felt that in the event of such a spin off, the combined firm’s profitability would zoom upwards and render the combined stock as an investor favourite, as the merger entity brings to bear the economies of scale and cut down duplication in efforts.
Comments from Chairman Munk issues yesterday gains added importance, since the financial press had reported over the weekend that the two gold mining firms had ended their inconclusive talks last week. The sticking point in the negotiations is said to have been the list of assets which need to be spun off once the merger is consummated, as per people in the know, but who do not want to be identified publically at this stage.
Neither of the firms want to completely walk away from the deal just yet, since a successful merger would mean a whooping $1 billion combined cost savings per year.