Barrick and Newmont: A Mining Romcom | Neil Adshead

Key Concepts

• Convertible Notes: Debt securities that can be converted into equity (stock) at a predetermined rate.
• TC/RC (Treatment and Refining Charges): Fees paid by miners to smelters for processing concentrates into refined metal.
• Impact Benefit Agreement (IBA): Agreements between mining companies and Indigenous communities outlining benefits and mitigation measures related to a project.
• Veto Rights: The power of a First Nation to block a project from proceeding on their traditional territory.
• Security of Supply: Ensuring a reliable and consistent source of critical minerals.
• Capex: Capital expenditure – funds used by a company to acquire, upgrade, and maintain physical assets.
• PHP (Physical Hardcopy Premium): A premium paid for physical metal over the spot price, indicating strong demand.

Silver Financing & Investor Appetite

Silver companies – First Majestic Silver, Endeavor Silver, and Vizler Silver – recently raised approximately $1 billion USD through convertible notes. First Majestic priced notes at 0.125% interest with a 42.5% conversion premium, Endeavor at 0.25% with a 32.5% premium, and Vizler (a non-cash flowing developer) at 5% with a 25% premium. Neil Ads noted the surprisingly low coupon rates, particularly Endeavor’s 0.25% rate, questioning who would purchase such paper given the availability of higher returns from instruments like T-bills or GICs. The $300 million (upsized to $350 million for Endeavor) was quickly subscribed, indicating strong investor demand. This suggests investors anticipate a significant increase in the silver price, exceeding the current record of $60 per ounce, and are willing to accept low returns on the debt in exchange for potential stock appreciation. The Vizler deal, offering 5% debt for a development project, is considered almost unheard of, highlighting the market’s bullish sentiment.

Barrick Mining – Potential Split & Newmont Dynamics

Barrick Mining is exploring a potential split, separating its lower-risk North American assets (Nevada Gold Mines joint venture, Fourmile development project, Pueblo Viejo mine) into a new company. This move is reportedly driven by activist investor Elliot Investment Management, who has taken a significant stake in Barrick. Neil Ads believes a split could unlock value, potentially creating a “monster gold company” focused on North America with a substantial valuation. The North American assets could produce 3-4 million ounces of gold annually.

A complex dynamic exists with Newmont, Barrick’s partner in Nevada Gold Mines (NGM). Barrick has a put option to sell its Fourmile asset into NGM, potentially forcing Newmont to pay billions or dilute its stake. The potential spin-out of Barrick’s assets introduces another layer of complexity, potentially allowing Newmont to vend its NGM and Pueblo Viejo interests into the new company for stock. Neil Ads doubts either company would willingly sell their significant NGM stake (Barrick 61.5%, Newmont remainder) given its importance as a flagship asset. He anticipates significant activity from investment bankers navigating these potential scenarios. Newmont’s substantial cash reserves, generated through strong production, could facilitate a purchase of Fourmile.

Romcom Analogy & Potential for Consolidation

The situation between Barrick and Newmont was playfully described as a “romcom” due to their decades-long history of potential mergers and acquisitions. The possibility of Barrick vending Fourmile into NGM creates a challenging decision for Newmont. Neil Ads highlighted the potential for further consolidation in the gold sector, suggesting that splitting Barrick could realize more value than keeping the company intact.

Glenore – Copper Expansion & Smelting Capacity

Glencore plans to expand copper output to 1.66 million tons per year by 2035, aiming to reverse a multi-year production slump. The company is also implementing $1 billion in cost savings, including 1,000 job cuts. Despite a record high copper price of over $5 USD per pound, Neil Ads notes a reluctance among major miners to invest in large-scale, capital-intensive copper projects due to long payback periods and project execution risks (e.g., QB2, Panama). Glenore is building a new smelter in Chile with a capacity of 1.5 million tons per year, with Codelco committing to process 800,000 tons. While smelting is typically low-margin, the project benefits from Chile’s lower power costs (due to solar energy) and potential government incentives. The current negative TCRC (Treatment and Refining Charges) environment makes this investment particularly noteworthy.

Soul Gold & Chinese Investment – Geopolitical Considerations

Soul Gold rejected two acquisition proposals from shareholder Shangshi Copper, despite the company actively seeking a transaction. The rejection occurred amidst a US government statement emphasizing the importance of securing critical mineral supply chains within the Western Hemisphere. Neil Ads suggests potential geopolitical factors influenced the decision, with the US potentially discouraging Chinese investment in strategic assets. This could signal a trend of increased US investment in Latin American copper developers.

Skina Resources & First Nations Consent – A New Paradigm

Skina Resources is facing a vote by the Talan Nation on its SK Creek gold mine project. The Talan Nation has been offered $10,000 CAD per member and a broader impact benefit agreement (IBA) totaling $1.2 billion in cash payments and $570 million in contracts and wages. This represents a new precedent, with a significant upfront cash payment alongside traditional IBA benefits. Neil Ads views the Talan Nation as effectively acting as a regulator with veto power over the project. He draws parallels to the oil sector in the Middle East, where host countries eventually secured a 50/50 profit split with oil companies, suggesting a potential shift towards increased benefits for host communities in the mining sector. This is expected to lead to inflationary pressures and higher commodity prices. The constitutional obligation to obtain consent from First Nations gives them effective veto power, potentially increasing the cost of doing business in Canada.

Key Takeaways & 2026 Outlook

The discussion highlighted a strong bullish sentiment towards silver, evidenced by the low-cost debt financing secured by silver companies. The potential restructuring of Barrick Mining and the complex dynamics with Newmont suggest a period of significant change in the gold sector. Despite a high copper price, major miners remain hesitant to invest in new projects due to capital costs and execution risks. The increasing influence of First Nations and the potential for increased government intervention in strategic mineral supply chains are reshaping the mining landscape.

Looking ahead to 2026, Neil Ads is particularly focused on whether a major miner will finally commit to building a large-scale copper mine. He also highlighted Tether’s significant gold purchases as a new source of demand in the precious metals market. The overall theme is one of increasing costs, geopolitical considerations, and a potential shift in power dynamics towards host communities and governments.