Interview with GATA Chairman Bill Murphy


Why Barrick has most to lose
from Gold Fields-Franco-Nevada merger

By Keith Damsell
June 14, 2000

The $3.7 billion merger of Franco-Nevada and Gold
Fields is expected to send a shock wave across Canada's
mining sector with a wide mix of players feeling the
impact of the deal.

"This changes the face of the industry," said one
Toronto analyst that's working on the merger. "There's
no question other people in the industry are saying
'what the heck are we going to do?' The merger steps up
the pressure on Franco-Nevada's rivals to conceive
deals of their own, said Glenn Brown, analyst at
Haywood Securities, Toronto.

Many analysts believe Barrick Gold, arguably the
world's most powerful gold company, would have
preferred the gold market remain the status quo. The
creation of Gold Fields International creates another
blue-chip gold stock that will be chasing the much
sought after US investment dollar. "The guys that have
the most to lose from this deal are the Barrick guys,"
said a second Toronto analyst.

Barrick's string of low-cost mines and enviable hedging
program have given the company the US investment edge
on Vancouver rival Placer Dome Barrick's market
capitalization is about C$11.1 billion while Placer
Dome's stock market value has slipped to C$4.5 billion.

But the new Gold Fields International will give the US
market a third option. The merged company will produce
about 4.4-million ounces of gold annually, about 800
000 better than Barrick's 3.6-million ounces produced
last year. But the new company will trade at only one
times its net asset value, while Barrick trades for
twice as much.

Already, analysts are weighing the merits of a Barrick-
Newmont Mining combination. The Denver company is the
US's largest producer and operates nine open pit, four
underground mines and 18 processing facilities near
Barrick's sprawling Goldstrike mine in Nevada.

In addition, both companies have significant assets in
Peru. Newmont hold 51 per cent of Minera Yanacocha,
Latin America's largest producer, with 1999 production
of 1.66-million ounces at under $100 per ounce. Barrick
owns Pierina, reportedly the world's lowest cost mine.
Last year, the remote mine about 185 miles north of
Peru produced 837 407 ounces for $42 per ounce.

The future is uncertain too for Aber Resources and
Inco. To become a precious metals play, Franco Nevada
will unload its 14.3 per cent interest in Aber,
minority partner in the proposed Diavik diamond mine in
the Northwest Territories, and its 37 per cent interest
in a special class of Inco shares tied to profits from
the stalled nickel project in Voisey's Bay.

A series of delays and cost overruns have pummeled
Aber shares from C$16 in August last year to the C$8
range. Expect Seymour Schulich, Franco-Nevada's co-
founder and a savvy stock trader, to nevertheless get a
good price for the Aber stake, valued at about C$60
million. Potential bidders include South Africa's De
Beers and Dia Met Minerals of Kelowna.

The market is expecting efforts to sell the Voisey's
Bay stake, worth about C$67 million, will receive a
very cool reception. Talks between Inco and the
Newfoundland government to develop the nickel deposit
broke down in January and profits may be many years