(Reuters) - Newmont Mining Corp (NYSE:NEM) rejected rival Barrick Gold Corp's $18 billion buyout offer on Monday, but proposed a joint venture in Nevada instead, a deal worth billions that would create a major operator in the largest U.S. gold-producing region.
Both the buyout rejection and the JV proposal were expected.
"Barrick's egocentric proposal is designed to transfer value from Newmont's shareholders to Barrick," Newmont's chief executive, Gary Goldberg, said on an investor call.
In a statement later on Monday, Barrick CEO Mark Bristow said the JV proposal was "stale and convoluted" and that both companies' Nevada assets would be better run by a single company.
"We know we can do that more efficiently than Newmont and that it will be worth a lot more to both Newmont and Barrick shareholders under that scenario," Bristow said. He did not directly respond to Newmont's rejection of the buyout offer.
The proposed Barrick deal would combine two of the biggest gold producers in the world at a time when both companies are trying to bolster shrinking gold reserves to boost growth as well as take advantage of rising prices.
Newmont said its Canadian rival's all-stock offer was not in the best interest of its shareholders as it was offered at a discount.
Barrick's offer of 2.5694 common shares for each Newmont share was equivalent to about $33 per share, which represented a discount of $3.48 to Newmont's closing price on Feb. 22, the last trading day before the offer was announced.
Newmont shares have fallen about 6 percent since Barrick's offer.
Newmont on Monday reiterated its plans to go ahead with its deal to buy smaller rival Goldcorp Inc, which it said is significantly more accretive to its shareholders compared with Barrick's proposal.
"Barrick has described their proposal as an unprecedented value-creation opportunity, yet it is inferior to the Newmont-Goldcorp transaction," Goldberg said. Bristow "has yet to prove he can successfully manage" a global mining company, he added.
Bristow joined Barrick two months ago, after it bought Africa-focused Randgold Resources (LON:RRS). That deal set off a fresh wave of bids in the mining industry, including Newmont's offer for smaller miner Goldcorp, which put the Colorado-based firm on track to become the world's biggest gold producer, ahead of Barrick.
NEVADA JOINT VENTURE
Newmont has 19 mines and processing facilities in Nevada, which are adjacent to Barrick's operations. The logic of combining the companies' Nevada assets seems clear to both sides, but the sticking point is control.
Bristow in an interview last week said he is frustrated that Barrick has to "drive trucks past ... processing plants in Nevada because Gary won't share with me," calling it a waste of money that would be saved if the assets were combined.
Under Newmont's JV proposal, Barrick would hold a 55 percent stake in the new entity, while both companies would have equal representation in the management and technical committees to make operational and financial decisions.
That proposal sets "unrealistic preconditions," Bristow said on Monday, saying that "experience has shown us that JVs only work well when the majority owner is also the operator."
Neither side seems to agree on the full value of the Nevada assets. Newmont's JV proposal uses publicly available materials to estimate value, as neither side has sat down to formally hash out how a JV could work.
Barrick's shares were up about 1 percent at C$16.55 on the Toronto Stock Exchange. Newmont's shares rose less than 1 percent to $34.06 on the New York Stock Exchange.