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Newmont Will Buy Rival Gold Firm for $2.5 Billion

March 11, 1997|From Associated Press

Three months after launching a hostile bid for Santa Fe Pacific Gold Corp., Newmont Mining Corp. on Monday had a $2.5-billion deal to buy the company and become North America's biggest gold producer.

The deal carries a somewhat higher price than Newmont's most recent offer, and it breaks up an agreement for a friendly merger between Santa Fe and San Francisco-based Homestake Mining Co. Santa Fe will become a unit of Newmont once the deal is completed.

"The auction got too expensive," Homestake President Jack Thompson said. Homestake will receive $65 million to terminate its merger agreement with Albuquerque-based Santa Fe Pacific.

"Santa Fe probably has quite a bit of gold production ahead of it, which is why it was viewed as such a prize by both Homestake and Newmont," said John Lutley, president of the Gold Institute, a Washington-based trade group.

He said the deal joins a growing number of mergers in the gold industry, a trend driven by the increasing size of mining projects.

Newmont said the deal is expected to bring cost savings of $70 million to $80 million a year.

Newmont Chairman and Chief Executive Ronald C. Cambre said the deal will create a gold producer with 55 million ounces of proven and probable reserves.

Newmont's first hostile bid for Santa Fe Pacific Gold was made Dec. 5, and its sweetened offer on Jan. 7. After Newmont made its first bid, Homestake announced its plan to combine with Santa Fe.

Denver-based Newmont operates through its subsidiary, Newmont Gold Co. Its mines are near Carlin, Nev. Santa Fe Pacific Gold explores for and develops gold properties, processes gold ore and owns three mines in Nevada.

Terms of the deal call for Santa Fe shareholders to receive 0.43 share of Newmont common stock for each Newmont share. Based on Newmont's closing price Friday, that comes to $18.97 a share, or $2.5 billion.

Santa Fe shares rose on the news Monday, gaining 50 cents to close at $17.875. Newmont lost $1.125 to close at $43, and Homestake rose $1 to $16. All stocks trade on the New York Stock Exchange.

The deal is expected to close in the second quarter, subject to shareholder approval.

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