The world’s largest gold miner valued at more than $US18 billion will result from a merger between Canada’s Barrick Gold Corp and African based miner Randgold Resources Ltd.
Media reports on Sunday and Monday revealed the talks and that they were at an advanced stage. They were confirmed late yesterday.
Barrick Gold had a market value of $US14.53 billion last Friday while Randgold Resources was valued at $US6.02 billion.
The new company will be led by Randgold CEO Mark Bristow, while the chairman will be Barrick’s head, John Thornton.
The new company will produce more than 6.5 million ounces of gold a year, easily eclipsing its nearest competitor Newmont Mining.
Under the deal – a recommended nil-premium merger – Barrick is offering 6.128 of its shares for each Randgold share. Barrick’s shareholders will own 64% of the merged entity, with the rest controlled by investors Randgold.
Shares in Barrick closed at $C13.52 on Friday. The deal values each Randgold share at around the closing price on Friday of £49.
The merger talks between Barrick and Randgold follow a weak year for gold miners which have struggled to attract the interest of investors as tech stocks have boomed and US interest rates have risen, along with the value of the US dollar (both of which are not helpful for gold prices).
While Comex gold prices are down just over 8% so far this year, shares in Barrick have dropped 25% while Randgold shares have lost 34% of their value has struggled with a number of operational issues, including a strike at one of its biggest mines.
Barrick is led by John Thornton, a former Goldman Sachs banker. Since he was appointed executive chairman in 2014, the Toronto-based group has sold off assets and focused on cash flow rather than expanding its gold reserves.
But that has also seen output fall, threatening its position as the world’s largest gold producer, with fellow Canadian rival Newmont Resources close to moving to Number 1.
Barrick has 50% of the super pit near Kalgoorlie (with Newmont owning the other 50%) and the Poger Mine in PNG where it has 47.5% and a Chinese group another 47.5%.
Buying Randgold, which is led by Mark Bristow, a pugnacious South African, would be one way of addressing those concerns as well as buying one of the most highly rated gold miners in the world.
Randgold was founded by Mark Bristow in 1995 and is well known for its ability to conduct business in some of the most difficult countries in the region.
Randgold operates five mines in three countries across Africa: in Mali, Côte d’Ivoire and the Democratic Republic of Congo, where the government has just introduced a controversial new mining code. It is aiming to produce 1.3 million to 1.35 million ounces of gold this year, around the same as 2017’s level.
Barrick has forecast 4.5 million to 5 million ounces after 5.32 million in 2017. The size of that decline has more and more investors concerned.
