THE GOLDEN TOUCH - BARRICK GOLD

Barrick Gold Corp. ( GOLD NYSE ) offered $17.85 billion for Newmont Mining Corp ( NEM NYSE) proposing an unsolicited, all-share deal that would combine the world’s biggest gold miners and create an industry giant that Barrick said will be better able to squeeze out costs. Tesla - Consumer Reports Downgrade - Here Is Why

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Gary Goldberg, Newmont’s chief executive, said his company would focus on completing its own big deal, a $10 billion proposed acquisition of Canadian miner Goldcorp Inc. Barrick, based in Toronto, didn’t offer a premium to Newmont’s share price.

THE NEVEDA CONNECTION

The offer sets up a showdown between management teams at two of the mining industry’s fiercest rivals. Barrick has long considered merging with Newmont, America’s largest listed miner, to pair up such properties as their large gold-mining operations in Nevada, creating what would be a behemoth worth about $42 billion at today’s valuations. But personality clashes helped put an end to past talks.

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TRADING AT DISCOUNT TO RECENT CLOSE - DEAL WEAK - BARRICK MUST SWEETEN

At this stage, they propose an 8% discount to their recent close. That doesn’t make sense,” Mr. Goldberg said in an interview. “Look at our record of good delivery and Barrick’s destruction of value.

Barrick CEO Mark Bristow criticized Newmont for rushing into a deal that would pay a 17% premium to Goldcorp shareholders for mining assets he said are inferior to Barrick’s. “It strikes me as desperate and bizarre,” he said on a conference call.

OPTIONS ON THE TABLE

As recently as last year, while Barrick was completing a $6 billion all-stock deal with Randgold Resources, Mr. Bristow and Barrick Executive Chairman John Thornton approached Mr. Goldberg about a variety of options—including a three-way merger with Newmont and a joint venture in Nevada—but talks failed, Mr. Bristow said in an interview.

We’ve tried very hard, he said.

Shares in Denver-based Newmont rose 3% after Barrick first said it was considering an all-stock, no-premium offer for the U.S. miner. But Newmont was trading 0.1% lower , while Barrick was off 2.2% and Goldcorp was up 0.3%.

POSITIVE TIE-UPS

At least one of Newmont’s largest investors said he views the potential tie-up as positive. The more we think about it the more we like it, as the synergies look like they make sense, said Simon Jäger, a fund manager at Flossback von Stroch AG, which holds about 2.7% of Newmont.

FANTASTIC SYNERGIES IF DONE SAVING MILLIONS IN COSTS

Mr. Jäger said the management of any new company would need to be able to get those synergies, but that Mr. Bristow has a good reputation for doing so.

GABELLI FUNDS GOLD FUND MANAGER SAYS

Yet Chris Mancini, an analyst with Gabelli Gold Fund, said the recent slump in Barrick’s stock would hurt its chances of success.

Barrick’s U.S.-listed stock needs to trade at a minimum of about $14 a share to offer a premium to holders of Newmont stock. Barrick’s stock has declined about 7% to $12.79 a share since news of its merger intentions broke last week, while Newmont’s shares have risen.

Barrick said it would offer 2.5694 of its shares for each Newmont share, valuing Newmont at $17.85 billion. Barrick based its offer on Newmont’s share price before a recent spike following reports that the Toronto-based company would propose this deal.

It is not getting off to a good start for Barrick, Mr. Mancini said.

REIN IN COSTS AND THE BIG THREE

Barrick’s renewed interest in its rival reflects heightened pressure to rein in costs for ore extraction and production as gold prices languish and ore reserves shrink. Barrick said Monday a tie-up would create opportunities to squeeze out more than $7 billion in cost savings.

The bid comes just months after Barrick sealed its deal with Randgold Resources, an Africa-focused miner. Mr. Bristow, Randgold’s CEO at the time, took the top job at Barrick after the combination, a deal orchestrated by Barrick’s Mr. Thornton, a former Goldman Sachs banker who has spent the past few years squeezing costs and selling assets.

That effort, though, has hobbled Barrick’s gold output, which has fallen sharply in recent years.

WHO SWALLOWS WHO !

Newmont’s proposed combination with Goldcorp would put it slightly ahead of Barrick in terms of production. A spokesman for Newmont said Sunday that a Goldcorp tie-up “will create an unmatched portfolio of world-class operations, projects, reserves, exploration opportunities and talent.”

Mr. Goldberg said Mr. Bristow’s attempt at a takeover was more about a desire to get bigger, but that Newmont would be interested in sitting down with the Barrick CEO to talk about creating synergies out of their Nevada operations.

Mr. Bristow said that combining the Nevada gold mines of both companies is “the crux of our proposal” by eliminating such overlapping operations as ore transportation and processing.

BREAKUP FEE $650 MILLION

Still, some investors pointed out that Barrick—if it succeeds in a bid for Newmont—would also have to pay a $650 million breakup fee to Goldcorp for derailing the planned Newmont-Goldcorp deal, eating into any synergies.

“This merger will be a huge winner…there are huge, multibillion-dollar synergies,” said Seymour Schulich, a Canadian entrepreneur who currently holds about 0.6% of Barrick.