The $18-billion hostile takeover bid by Canadian-listed Barrick Gold Corporation for US-listed Newmont Mining Corporation is a classic takeover battle, complete with huge egos (by people claiming to have none), even bigger speculative financial assumptions (by people who claim they are stating “facts”) and enormous enmity (between people who know each other well and always claim to get along fabulously).

You know when they start releasing each other’s private emails that the gloves are definitively off.

This is the grand theatre of corporate warfare, and there is no industry where it is more swashbuckling, more cavalier and more prone to great triumphs or embarrassing failures than the gold industry.

Consider these facts:

The takeover battle is to be the biggest gold miners in the world, and not just by a little bit. Both parties are already worth a little less than twice as much as their nearest rivals. If the bid succeeds, together they will be just over three times the size of their nearest rival. From a gold production point of view, they would be roughly four times larger than the third largest gold company, JSE-listed AngloGold.

Barrick’s hostile bid takes place just eight weeks after the takeover of big African player Randgold Resources by Barrick. The new South African CEO of Barrick, Mark Bristow, has barely got his feet under the table of the new company (not that he has a desk) and he is off on the takeover trail again. This deal made Barrick the biggest gold company in the world.

Barrick’s offer is something virtually unheard of in corporate takeover lore; it’s a nil-premium offer. In other words, Barrick is offering to buy Newmont at its value, no more. The share price of Newmont actually went down when the bid was made, by 6%, because investors were hoping Barrick would offer a price incentive for Newmont shareholders to vote in favour of the deal. They didn’t.

Newmont itself is currently involved in an agreed deal to buy Goldcorp, the fourth most valuable gold company in the world. That would make them the biggest, leapfrogging the Barrick/Randgold tie-up. In this deal, there was a premium offered, a big one: 17% higher than share price of Goldcorp prior to the offer, even though there are only around $100-million a year in claimed synergies and the company has mostly second-tier gold mines. This deal would fall away if Barrick wins, resulting in a lot of very upset Goldcorp shareholders.

Do we know what angry Canadian shareholders look like? We might find out.

Barrick is basing its bid on the claim that there are “massive synergies” to be had in joining the two companies because both companies have big mines in Nevada in the US, some of which are separated by nothing more than a farm fence. Nobody doubts there are savings to be had, but the claim that $7-billion of savings is on the table is hotly contested.

What has happened so far is that Barrick has made the offer, and it’s been formally rejected by the Newmont board. But Newmont has also done something quite clever: it has offered a fig-leaf by suggesting Barrick and Newmont set up a joint venture for their Nevada mines on terms that slightly favour Barrick. That idea has been more or less rejected by Barrick, who are sticking to their original proposals.

And then there is that little issue of the emails.

According to gold industry insiders, what happened here is that Newmont, which has been a stellar performer from production and operational point of view, in many ways outperforming Barrick over the years, exposed its flank by making such a generous offer for Goldcorp. Goldcorp shareholders were delighted, and the boards of both companies have agreed, but Newmont shareholders have still to vote on the deal in a few weeks, and they may be a bit queasy.

Sensing blood in the water, Barrick struck, even though the timing wasn’t fabulous because it has just completed its merger with Randgold. Now Bristow only has a few weeks to convince Newmont shareholders he has the better deal.

It’s relevant to know the characters involved because to describe them as larger than life would be an understatement. Since they both mine in Nevada, the idea of a Newmont/Barrick merger has been mooted plenty of times before. The immediate past occasion was only four years ago, and the squabbling couple almost made it to the church.

But then, at the last minute, it spectacularly fell apart in an acrimonious war of words.

The key negotiator in that deal was current Barrick chairman John Thornton; and why the deal fell apart is a matter of conjecture. Thornton was due to be the chairman of the joint entity, but they argued about board positions and where the headquarters should be. You know, the important stuff … not.

Thornton is the most docksider-wearing, cardigan over the shoulder-drooping, master of the universe you could possibly imagine. He flips between meetings on Barrick’s corporate jet and is a previous president of the most glittery of merchant banks, Goldman Sachs, once holding the second highest position in the bank.

In the way of this uber-rich class, he is also brilliant; a fluent Mandarin speaker and former professor at a Chinese university. Masters of the universe like to be close to where the power is.

Bristow is cut from a very different cloth; he reputedly has no office, he loves motorbikes and bikes around Africa. He has biked east-to-west across Africa five times for charity. He has never willingly been seen in a tie. If you were to imagine an African nature-loving, straight-talking, wild-hearted character out of a Wilbur Smith book, you would be in the ballpark. He, in fact, got his start as an independent operator at Randgold by offering to go and start mine in Mali. Nobody believed it possible, but somehow he managed it.

The Financial Times described the duo as “the odd couple” of gold mining, except they intersect when it comes to some aspects of the operational side of gold mining. Bristow is famous for his philosophy, not unlike some other SA miners, of tiny head-offices, decentralised operations and the belief that mines should be run from the mine and not from an office in a city.

Thornton just loves the idea of ruthless cost-cutting, as masters of the universe tend to, and has fired dozens of middle managers in his focus on returns rather than scale as head of Barrick. He told the Globe and Mail, “At Goldman Sachs, [cutting] 10% was like breathing. We did it every year.”

Bristow denied the difference, telling the FT, “There’s no difference in his outlook and philosophy and mine — the difference is I’ve done it.” Ouch.

So, on to the crazy stuff. One of Bristow’s arguments is a Barrick/Newmont merger would be better than a Newmont/Goldcorp merger because the former has better mines overall. The only problem is that when Bristow was trying to woo Goldcorp in 2017 (this stuff goes on all the time) he emailed the company’s chairman Ian Telfer and said:

“In Goldcorp, you have assembled a strong portfolio of assets located in world-class districts.”

Well, he was trying to win them over at the time, so, whatever. The rest of the email said, “I believe that you and I have the opportunity to create a true leader in the gold sector.”

Leaking emails wasn’t the only knife Newmont tried to stick in. In its presentation, it compliments Bristow in a backhanded sort of way. But the presentation includes a table which tallies the number of gold mines Bristow has actually run. It was five “assets” (mines) in four countries on one continent in Randgold; now after the merger with Barrick, it has 24 assets, in five continents and 15 countries. A Barrick/Newmont merger would see Bristow running 37 assets, on five continents in 18 countries. This, you are supposed to infer, will be just too much for this upstart from, what is that place called, South Africa?

The presentation also has a bit of a focus on Thornton, who was both chairman and CEO before the merger with Randgold, noting that in just four years he had “pocketed over $65-million from Barrick shareholders”. They have something of a point. Barrick, in its drive for production value over production ounces, did lose out to Newmont.

Some gold shareholders, bless them, actually prefer increasing production rather than nitpicking too much about production value, because doing so provides the company with a runway of new projects. Mines deplete, so finding and developing new mines is critical to the long-term sustainability of the company. This is contrary to the “slash-and-burn” tactics that masters of the universe tend to believe will work.

Bristow himself was no slouch in the verbal sparring department. He noted in his presentation that the merger between Newmont and Goldcorp was “desperate and bizarre”.

So how does this affect SA? Well, it doesn’t really – which in itself is a something of a footnote. SA used to mine two-thirds of the world’s gold, but the local industry has imploded over the past decade, a consequence of absurdly deep mines, terrible labour relations, a hostile mining dispensation, and thumping new electricity costs. A mine consumes as much electricity as a medium-sized town, so treble the cost of electricity and horrible things happen to the income statement.

But once this all goes down, however it does, these mega-miners will quickly run out of places to dig. Then, in all likelihood, they will be back, knocking on African doors.

Brace yourself. DM