Newmont flags mismanagement at NGM, sends default notice to Barrick

Newmont disclosed this week that on January 26, it informed Barrick and the board of NGM that it had identified evidence of mismanagement at the JV, including the alleged diversion of resources from NGM to benefit Barrick’s wholly owned Fourmile project and Barrick itself.

Newmont said it was exercising its contractual inspection and audit rights, and on February 3 sent Barrick a formal notice of default under the Nevada JV agreement in relation to the conduct.

Under the July 1, 2019 operating agreement, Newmont holds a 38.5% economic interest in NGM and Barrick 61.5%. Barrick operates the JV and appoints three of the five board managers, with Newmont appointing two. Decisions are generally determined by majority vote, with voting power proportionate to economic interest.

Because Newmont owns less than a majority interest, it has limited operational control and depends on Barrick as operator.

Speaking during an earnings call, CEO Natascha Viljoen confirmed the dispute but declined to provide further detail, citing confidentiality provisions.

“As disclosed in our 10-K, we have issued a notice of default to our joint venture partner related to operational performance and management of Nevada Gold Mines. We do not have any additional information to share at this time and confidentiality provisions in the joint venture agreement prevent further comment on the notice of default,” she said.

Viljoen indicated that Newmont’s immediate priority remained improving performance at the Nevada complex.

“Our primary focus remains on working with a managing partner to improve performance of these assets and generate long-term value for Newmont shareholders,” she said.

Asked about discussions regarding the potential inclusion of Fourmile into the JV, Viljoen said engagement with Barrick had centred on operational performance.

“Our current discussions have been predominantly around the improvement of the performance of Nevada. And I think a very constructive relationship to work together to improve that performance and — which we believe would be in the best interest of all of our shareholders,” she said.

The dispute comes as Barrick advances preparations for a potential initial public offering of a new vehicle, referred to as “NewCo”, that would house its interests in NGM, Pueblo Viejo in the Dominican Republic and the wholly owned Fourmile project.

On February 9, Newmont publicly called on Barrick to improve NGM’s operational performance before proceeding with any such transaction.

“Any transaction implicating Newmont’s JVs must respect the protections that are contained in those agreements, including, but not limited to, the transfer restriction requirements,” Newmont said at the time.

The company added that its primary concern was the management and performance of NGM, which it said had deteriorated over the past six years.

It said it was engaging with Barrick to “reverse the decline in performance and ensure these assets generate the value they are capable of delivering”.

“Newmont remains focused on generating and protecting long-term value through operational excellence and will act in the best interests of its shareholders,” the company said.

Barrick has appointed interim CEO Mark Hill as president and CEO and elevated him to its board as a nonexecutive director, moves aimed at supporting preparations for a possible listing.