Some industries are just ripe for consolidation with more mergers and acquisitions. There may be more consolidation in the world of gold miners and processors in 2019 and beyond. One huge merger has been put on the books, but it likely would interfere with a merger already on the books. And to complicate matters further, the target company is already suggesting it doesn’t want to be acquired.

Barrick Gold Corp. (NYSE: ABX) of Canada has offered to buy Newmont Mining Corp. (NYSE: NEM) for nearly $18 billion. Before getting too deep into the proposed merger, most investors should understand from the get-go that this merger would seem to be unlikely from a shareholder voting and regulatory stance. The reaction in the shares also seems to reflect some doubt about the merger.

The rise in gold has been seen in recent months. If the gold miners can keep their costs of mining and producing gold in check, the price of gold should support these and other companies looking for smaller bolt-on acquisitions. Gold was last seen at $1,331 per ounce. That may be down from a recent peak of about $1,345, but it is about $50 per ounce higher than at the end of December, and gold was trading under $1,200 per ounce in parts of October and November of 2018.

This acquisition offer is being viewed as a hostile all-stock-offering, and it might have serious problems with regulators considering that this would effectively combine the world’s top two gold producers. Barrick proposed a stock offering of 2.5694 common shares of its stock for each common shares of Newmont. That would have come to a purchase price of $33 per share, before including market reactions and price changes, and Newmont’s value would represent roughly 44.1% of the representation in the combined company.

Newmont already has responded by saying that it has reviewed and rejected possible deals with Barrick Gold, noting that the Newmont acquisition of Goldcorp Inc. (NYSE: GG) is a significantly superior option for the existing shareholders. That said, the press release indicated that Newmont would evaluate and respond to the Barrick proposal.

The press release from Barrick refuted the value over the already existing merger of Newmont and Goldcorp. It said:

The Barrick proposal constitutes a significantly superior alternative to Newmont’s previously announced agreement to acquire Goldcorp. In addition to the strategic benefits of the proposal, the combination of Barrick and Newmont would be materially more accretive on all key financial metrics for Newmont shareholders than Newmont’s proposed acquisition of Goldcorp, including NAV per share and cash flow per share accretion estimated to be approximately 14 percent and 9 percent, respectively.

Barrick is suggesting that the merger would allow for the Nevada assets to be viewed as one complex and could unlock more than $7 billion net present value. Newmont, which has nearly 20 mines in Nevada, believes a joint venture would be the better way of extracting value in Nevada. Joint venture talks had previously fallen apart, according to a note from Reuters.

Merger mania in gold has followed the sector’s efforts to cut the cost of mining and extracting gold. Barrick already paid more than $6 billion to acquire Randgold Resources.

Barrick President and CEO Mark Bristow said:

The combination of Barrick and Newmont will create what is clearly the world’s best gold company, with the largest portfolio of Tier One gold assets2 and the highest level of free cash flow to drive future growth and support sustainable shareholder returns, run by a management team with an unparalleled record of delivering value.

Newmont’s representation in its own press release suggests that Barrick’s proposed combination ignores the risks and overstates the rewards. That release said:

Newmont has analyzed a potential combination with Barrick, whose asset portfolio has changed significantly since 2014, including as a result of the merger with Randgold seven weeks ago and its ongoing integration process. Newmont has previously determined that Barrick’s risk and return profile is inferior on many fronts, including factoring Barrick’s comparatively ineffective operating model, poor track record on delivering shareholder returns and unfavorable jurisdictional risk.

American depositary shares of Barrick Gold were last seen trading up 3.2% at $13.54, in a 52-week trading range of $9.53 to $14.18.

Newmont Mining’s traded down by 0.4% at $36.34 a share, and it has a 52-week range of $29.06 to $41.98. Shares of Goldcorp were down 0.2% at $11.11.

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