There would probably be investor appetite for more regionally focused companies if some of the biggest miners were to split along geographical lines, Deutsche Bank’s Beristain said. That’s partly because of heightened concern about geopolitical risk in developing countries as governments seek increased royalties, taxes and other commitments from mining companies.
Geographical Split
Barrick could improve the valuation of its shares by spinning off assets in Australia and Papua New Guinea and selling its remaining 74 percent stake in African Barrick, said Tony Lesiak, a Toronto-based analyst at Macquarie Capital Markets.
Both Barrick and Greenwood Village, Colorado-based Newmont could unlock value by splitting off assets or listing mines separately and retaining a stake as a holding company that receives dividends, said Caesar Bryan, a portfolio manager at Gabelli & Co. in Rye, New York. Newmont and Barrick could also generate savings by combining their Nevada operations, he said.
Newmont declined to comment on speculation about the sale or purchase of specific assets.
“The mantra even until probably as recently as two years ago was, get out of the U.S., get out of Canada, get out of Australia, get out of the safe geographies and chase growth in emerging markets,” Beristain said. “The pendulum is really swinging back toward people questioning the value of this kind of international, almost over-diversification that we’ve seen.”