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Gold/Mining/Energy : Barrick Gold (ABX) -- Ignore unavailable to you. Want to Upgrade?

To: nickel61 who wrote (2523)	5/7/2002 7:53:44 AM
From: nickel61	Respond to of 3558

Maybe Barrick will get unhedged after all? Gold Fields raid talk persists By: Tim Wood Posted: 2002/05/06 Mon 17:52 \| © Miningweb 1997-2002 PRINCETON, New Jersey -- There has been no let up in market talk that Gold Fields [GFI; GOLD] is about to be taken out. Barrick [ABX] and AngloGold [AU] are the usual suspects and not without good reason. Rumours have escalated to the point where the involvement of Barrick and AngloGold is regarded as a fait accompli; all that remains is to confirm out the details of the transaction. Trade in Gold Fields's Nasdaq depository receipt has rocketed with recent daily volumes more than double those at the start of the year. Deal in a nutshell It is thought that recent UBS Warburg dealing in Gold Fields stock points to an exchange of Anglo American's [AAUK] 17 per cent holding in the company for Barrick stock. Anglo acquired the stake in a 2001 share swap with Afrikaner conglomerate Rembrandt which has lost heavily by selling out at the bottom of the cycle. Barrick has a history of cooperating with AngloGold; most recently in its failed bid for Normandy. Learning from Newmont's [NEM] advantage in having nearly one-fifth of Normandy's stock pledged to it by Franco-Nevada, it is assumed that Barrick would pledge its Gold Fields stock to AngloGold as the point player in the deal. Anglo American and AngloGold have probably been buying additional Gold Fields stock in the market so, combined with the Barrick pledge, they would be almost certain of victory if an unsolicited offer was made. The logic for such an arrangement is compelling. Anglo American can retain its diffident aura whilst securing additional gold exposure outside SA. No less important is the fact that in a rising price environment hedge book dilution is essential. Gold Fields's mammoth, unencumbered reserves are exactly the right medicine for leading hedgers Barrick and AngloGold. Barrick has long been testing market reaction to its possible entry to SA, most notably in direct comments at the January Cape Town mining indaba. Chief executive Randall Oliphant gabbed with SA president Thabo Mbeki at the World Economic Summit in 2001 and sources say he had follow-up discussions in SA. Adding to the speculation are reports that Barrick executives bought residential property in Cape Town when the rand was at its weakest. An important consideration in any deal will be skin colour. Anglo American has, for its entire life, been remarkably astute at aligning its interests with the government of the day. The present government craves respect and tribute to its affirmative action ideology, something Anglo has copiously delivered through judicious consultation over its London move and the privatisation of De Beers. Likewise, AngloGold has conspicuously indigenous names for its mines bolstered by meaningful empowerment delivery. Nuts and bolts The thinking is that AngloGold is targeting long-coveted East Driefontein, which is the key to unlocking its ultra deep aspirations around Western Deep Levels. Beyond that things get a little murky. Barrick is poorly regarded when it comes to deep level mining so Kloof could be a tricky proposition – unless Placer Dome [PDG] just happened to lend its SA operational experience in a joint venture at the mine. The Free State assets would probably be sacrificed to a black empowerment operation, along with mothballed Libanon. There has been considerable speculation that Barrick wants to participate in Geita, but AngloGold has no intention of surrendering its share given its contribution to operational diversity. However, control of Gold Field's Ghana assets could spur Barrick to take out Ashanti [ASL] thereby getting a half share in Geita. The problem is Ashanti's increasingly toxic hedge book. Wild card The wilder card is a mega merger of Barrick, AngloGold and Gold Fields. The combined group would leap into focus for large cap institutional investors with a value exceeding $20 billion and double the production of nearest rival Newmont. If you're the betting sort, a merger probably has better odds. It would have unrivalled diversity, but most importantly would dominate SA's deep reserves which are gaining in importance given the depletion of shallow ore bodies and paucity of new discoveries. Operationally, the mix would be excellent with Barrick's scrape and load skills complementing Anglo-Fields blast and haul expertise. From a cost point of view, there can be no question that combining rather than divvying up will be vastly cheaper. Head office cuts would be painful, but hugely profitable in the long run. Likewise, the SA government would surely be amenable to a dual-listed structure along the lines of BHP Billiton. It's the sort of Fortune 500 publicity that any emerging market would crave. The Franco factor Uppermost in the mind of Gold Fields's stalker is the Franco-Nevada debacle. The SA government never provided a formal reason for blocking the proposed merger and transfer of Gold Fields's primary listing to Toronto. Indeed, there is a good deal of bitterness about the discourteousness of the whole affair. The most obvious reason was nervousness about SA gold assets falling into foreign hands. With hindsight the finance ministry now looks exceptionally smart for preventing an opportunistic deal. At $3.7 billion, the proposed deal valued Gold Fields at half the price it had ascribed itself a year earlier. Today it carries a price tag of $6 billion, still way off internal valuations given the higher gold price, but which would go a long way to boosting SA's beleaguered capital account if any deal eventuates. Another, less quoted, reason for the stymie is that Finance boss Trevor Manuel took exception to a letter penned by financier-philanthropist George Soros praising Franco's deal to President Mbeki. Manuel is said to have been peeved at the attempt to bypass him and the patronising tone of the letter.