Tuesday, March 11, 1997 | 11:59 a.m.
ALBUQUERQUE, N.M. -- Newmont Mining is the largest gold producer in North America after closing a $2.5 billion merger with Santa Fe Pacific Gold that pre-empted an earlier bidder.
"The combination of Newmont and Santa Fe will create the largest gold company in North America with 55 million ounces of proven and probable reserves and estimated gold production of 4 million equity ounces by 1998," said Ronald Cambre, Newmont chairman-chief executive.
Combining Newmont and Santa Fe will exceed production of the region's current leader, Barrick Gold Corp. of Toronto.
Newmont's winning bid was somewhat higher than a sweetened offer it announced Jan. 7. The all-stock deal will result in Santa Fe becoming a subsidiary of Newmont, and the merger is expected to bring cost savings of $70 million to $80 million a year.
John Lutley, president of The Gold Institute in Washington, D.C., said Newmont did well.
"Prospectively, 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," he said.
Lutley said the deal represents a growing trend of mergers in the gold mining industry as the size of projects that need to be financed are getting larger.
Because Santa Fe has large U.S. property holdings, Lutley said Monday's deal "could signal the U.S. is going to be the largest gold producer in the world."
The merger comes three months after Newmont first launched its hostile bid for Santa Fe Pacific Gold Corp. Denver-based Newmont operates through its subsidiary, Newmont Gold Co. Its mines are near Carlin, Nev.
Santa Fe Pacific Gold, based in Albuquerque, explores for and develops gold properties, processes gold ores and owns three Nevada mines.
Terms of the deal call for Santa Fe shareholders to receive 0.43 share of Newmont common stock for each share they own. Based on Newmont's closing price Friday, that comes to $18.97 a share, or $2.5 billion.
Both companies expect the deal to be completed in this year's second quarter, subject to shareholder approval.
"Newmont has made a compelling offer which creates the greatest value opportunity for our shareholders today and in the future," said Patrick M. James, chairman and chief executive of Santa Fe.
Homestake Mining Co. of San Francisco had announced earlier plans to merge with Santa Fe, but was knocked out of the running by Newmont. Homestake settled for a $65 million break-up fee.
"The auction got too expensive," said Homestake's president Jack Thompson on Monday.
"We are disappointed that Santa Fe has chosen an alternative transaction, but we are unwilling to penalize our shareholders by overpaying for Santa Fe," he said.
News of the merger quickly spread from Wall Street, New York, to Winnemucca, Nevada where the economy revolves around the gold mining industry.
Humboldt County administrator Kerry Hawkins said she's been watching the merger closely, and so far she's optimistic.
"We're expecting to see administrative changes, but so far there's been no indication mining operations here will be affected," she said.
Ken Pavlich, the general manager of Santa Fe's Lone Tree Complex mines near Winnemucca, said the 560 employees there have been expecting a new owner "sooner or later."
"Everyone is anxious to see what kind of changes there are going to be, although we're not expecting anything major. We're still going to run heavy equipment, we're still going to mine, we're still going to drill wells and process," he said.
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