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MELBOURNE/HOUSTON (Reuters) – Canada’s Barrick Gold Corp said on Friday it considered making an all-stock bid for U.S. rival Newmont Mining Corp, a deal that would create a monolith in the global gold sector and likely push smaller peers to start buying each other.

FILE PHOTO: Mark Bristow, chief executive officer of Barrick Gold, speaks during an interview at the Investing in African Mining Indaba conference in Cape Town, South Africa February 5, 2019. REUTERS/Mike Hutchings

Barrick, already the world’s largest gold miner, said its contemplated proposal did not offer any premium to Newmont’s shareholders and that no decision had been taken so far.

Newmont declined to comment.

Newmont’s shares were up 2.4 percent at $36.27 on Friday afternoon in New York trading. Barrick’s stock fell 2.2 percent to C$17.16 on the Toronto Stock Exchange.

Deal-making had largely been dormant in the gold sector in recent years, as companies focused on cutting costs amid investor criticism of inadequate management of capital.

But Barrick’s $6.1 billion buyout of rival Randgold Resources last month set off a fresh wave of deals, with Newmont following soon thereafter with a $10 billion offer to buy smaller rival Goldcorp Inc. That combination would make Newmont the world’s top gold miner if it closes as planned next quarter.

While Barrick said it has not considered a premium offer for Newmont shareholders, its argument for the deal would be that it would create an unrivaled gold miner with lower costs than either company has now, according to a source familiar with Barrick’s thinking.

Barrick’s acknowledgement of interest in Newmont came the day after Canadian newspaper Globe and Mail reported that Barrick was considering a $19 billion hostile bid.

The paper, which also reported that Barrick would flip some of Newmont’s assets to Australia’s Newcrest Mining, cited industry sources familiar with the situation.

Under the potential terms reported by the paper, Barrick would keep Newmont’s Nevada and African mines, while Newcrest was considering taking over its Australian operations.

The timing of the news comes ahead of next week’s BMO Capital Markets Global Metals & Mining Conference, a key meeting for industry investors and executives. The potential deal is likely to be the main topic at the conference, with Newmont shareholders talking to the company’s management about Barrick rather than Goldcorp, according to a mining industry source.

Newmont does not plan to take any defensive action now as there is no formal offer, though Barrick’s assertion that there would be no premium was met coolly at Newmont’s Denver headquarters, according to a source close to Newmont.

It was not immediately clear if such a deal would even face major regulatory scrutiny, as much of the world’s gold is already in circulation and gold miners themselves produce only a small percentage of the yellow metal available for trade.

One of Newmont’s main areas of operations is Nevada, the largest U.S. producer of gold and silver. Newmont’s 19 mines in the state abut Barrick’s own operations, making any combination enticing.

This is not the first time the pair have mulled a marriage. In 2014, a proposed tie-up collapsed after months of negotiations due in part to acrimony between management.

But Barrick has formed new management teams and cut administrative costs as part of new Chief Executive Mark Bristow’s plan to set the combined company firmly apart from peers.

Bristow had said on a post-earnings call earlier this month that Barrick Gold would continue to look at opportunities for mergers or acquisitions, though he stressed that he felt the company had plenty of internal growth opportunities.

“There’s a danger that Barrick is biting off more than it can chew (by making another large acquisition),” said an Australia-based banker, declining to be identified due to the sensitivity of the issue.

If Barrick were to be successful, the merger between Newmont and Goldcorp would not go ahead, and Barrick would be liable for a $650 million break fee, the newspaper reported.

A Newcrest spokesperson said the firm did not comment on M&A speculation. Goldcorp was not immediately available for comment.

AUSTRALIAN FIT?

Newmont has three gold mines in Australia, which have a net present value of $4.5 billion according to AME Group, but none of those are seen as the kind of large ‘tier one’ developments that Newcrest has said are a prerequisite for any major buys.

“Newcrest has a production hole in a couple of years’ time with Cadia going offline,” said one fund source based in Melbourne, referring to one of Australia’s largest gold mines.

“It makes sense that they would be looking, but I would question the ‘tier one’ nature of the asset.”

FILE PHOTO: An open pit at Barrick Gold Corp’s Veladero gold mine is seen in Argentina’s San Juan province, April 26, 2017. REUTERS/Marcos Brindicci

Any deal for the assets would hinge on price and the manner of payment, two other bankers and a fund manager said.

“I wouldn’t care if they are not ‘tier one’ assets,” said Simon Mawhinney of Allan Gray in Melbourne, which is the top shareholder in Newcrest with a stake of around 9 percent.

“But I would care if they were overpaid for, that would be a big issue.”

Additional reporting by Sanjana Shivdas and John Benny in BENGALURU, Melanie Burton in MELBOURNE, John Tilak in TORONTO and Greg Roumeliotis in NEW YORK; Editing by Joseph Radford, Saumyadeb Chakrabarty and Tom Brown

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