Could a Barrick-Newmont Merger Materialize?

Here’s why I think Barrick Gold (TSX:ABX)(NYSE:GOLD) is a great long-term pick — merger or no merger.

| More on:

Consolidation in the commodities space is generally the name of the game. In particular, gold miners are always in search of more deposits. Finding junior partners to tie up with, or even tying the knot with larger competition, is an age-old way of securing long-term cash flow growth. That’s what every investor wants after all, right?

In the case of Barrick Gold (TSX:ABX)(NYSE:GOLD), acquisitions have become the talk of this company for some time. Failed talks with Freeport-McMoRan (NYSE:FCX) were the focus of Barrick investors earlier this year. Now, speculation is abounding about a potential merger with rival Newmont Gold (TSX:NGT)(NYSE:NEM).

Can such a deal materialize? Let’s discuss.

Failed Freeport deal signals small window to close these deals

One of the big reasons the Freeport-McMoRan talks fell apart was due to what Barrick cited as a window of opportunity that closed. Copper prices surged amid initial talks, and it now appears the landscape has shifted, to say the least.

Indeed, Freeport’s market capitalization is significantly higher than Barrick’s at the time of writing. Much of this has to do with the run in copper prices, which has sent shares of Freeport soaring. While Barrick investors may bemoan the deal that never happened, this signals the difficulty of getting mega deals done.

In 2019, Barrick tried unsuccessfully to merge with Newmont. However, of late, it appears potential discussions may be on the table to reignite old conversations about merging.

Barrick’s CEO was recently quoted as saying, “Of course I’m open to things that create value.” That is to say, there’s a chance something could be brewing.

However, the notion that the companies could merge has been downplayed in recent interviews. Resistance from shareholders on the idea was cited as a reason it’s unlikely such a deal could materialize. After all, Barrick has already gone down this road before.

The Barrick-Randgold merger appears to be the template shareholders want followed. The combination of two gold producers at market value is unlikely, given the rising price of gold of late. Accordingly, it appears unlikely such a deal could materialize right now.

Bottom line

Barrick continues to be in a premium market position as far as gold miners go. The company is slightly smaller than Newmont in terms of market capitalization. However, Barrick’s reserves are world-class, and investors like Buffett have stepped into this name previously.

Accordingly, merger or no merger, this is a company I think investors should consider today. Barrick’s leverage to the price of gold is a great thing for gold bugs and investors looking to hedge. I think a small slice of every portfolio could be allocated to a high-quality miner like Barrick. In fact, in times like these, I think it’s a prudent idea.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Concept of multiple streams of income
Stocks for Beginners

Lock Up This 9.2% Dividend Yield From a Top Royalty Stock

Royalty stocks have a strong advantage when it comes to creating passive income for investors. But this one has the…

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Good Buy Right Now?

First Quantum is a TSX stock that trades 61% below all-time highs. However, the mining stock still trades at a…

Read more »

nugget gold
Metals and Mining Stocks

The Best Gold Stock to Invest $1,000 in Right Now

Here are two of the best Canadian gold stocks that can yield some eye-popping returns in the long run.

Read more »

nugget gold
Stocks for Beginners

The Ultimate Mining Stock to Buy With $1,000 Right Now

This mining stock just saw a drop, but don't let that keep you from diving in. This miner is due…

Read more »

A plant grows from coins.
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell, or Hold?

Explore 2025’s top Canadian mining stocks – gold, uranium, and base metals offer big potential in a dynamic, commodity-driven market.

Read more »

farmer holds box of leafy greens
Metals and Mining Stocks

3 Reasons to Buy Nutrien Stock Like There’s No Tomorrow

Nutrien stock has lost 34% of its value just this year alone and looks incredibly cheap today. Yet, secular trends…

Read more »

Canada national flag waving in wind on clear day
Tech Stocks

Trump Trade: Canadian Stocks to Watch

With Trump returning to the presidency, there are some sectors that could boom in Canada, and others to watch. But…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Invest $7,000 in This Dividend Stock for $672 in Passive Income

High yield can be an essential requirement when you need to start even a modestly sized passive income with a…

Read more »