Barrick (ABX) Buying Randgold (GOLD) for $18.3-B Forming Giant Global Gold Miner
Barrick Gold (NYSE:ABX), the world’s largest Bullion producer by value, is about to become even bigger as it has agreed to buy Randgold Resources (LON:RRS, OTCMKT:GOLD) in a $18.3-B share deal, the biggest in the gold sector in the past 3 years.
The new Barrick, valued at $24-B including debt, would be now the world’s Top gold miner by value and output, with a dominant position in Africa.
The company will be listed in New York and Toronto, which means that London will lose its biggest gold stock, the new firm will own 5 of the world’s 10 lowest cost gold mines, producing more than 6.5 ozs of the precious Yellow metal a year.
Randgold’s shareholders will own 33.4% of the combined firm, with the balance controlled by Barrick’s investors.
The merger will also bring together 2 of the biggest names in the global gold sector: John Thornton, former President of Goldman Sachs who has been at the helm of Barrick since 2014, and Mark Bristow, an outspoken South African geologist who founded Randgold in Y 1995, growing it into a $4.8-B company and the UK’s Top gold producer.
Mr. Thornton will remain as Executive Chairman, directing strategy and Mr. Bristow will be President and CEO of the merged company, running day-to-day operations. Randgold CFO, Graham Shuttleworth, will become CFO of the company.
“Our overriding measure of success will be the returns we generate and not the number of ounces we produce,” Chairman Thornton said.
As part of the deal, China’s Shandong Gold, 1 of the country’s biggest gold producers, has agreed to buy $300-M of shares in Barrick.
The Toronto-based miner will also buy the equivalent amount of shares in Shandong Mining, a listed subsidiary of Shandong Gold, it said in a separate statement.
Barrick and Shandong Gold tied up for the 1st time last year, creating a 50-50 joint venture at the Veladero mine in Argentina. As part of their partnership, the Chinese miner is currently carrying out an independent evaluation of Barrick’s Lama project, including an analysis of potential synergies between that asset and the nearby Veladero operation.
Barrick and Shandong Gold have also created internal working groups that are sharing technical expertise and best practices focused on best-in-class mining practices and innovation.
The announcement comes at a time gold producers are under increased pressure.
Gold prices have fallen more than 8% this year as a stronger USD and expanding global economy diminished demand for the precious Yellow metal as a safe-haven.
Miners have fared even worse, with the Philadelphia Stock Exchange Gold and Silver Index of 30 companies down about 23% in Y 2018.
Gold miners fell to the cheapest relative to the metal since Y 2016 this month.
Last week billionaire hedge-fund manager John Paulson formed a council with 15 other founding members. The Key goal of the group is curbing years of what Mr. Paulson’s hedge fund has called value destruction in the gold sector.
The merger between Barrick and Randgold is subject to shareholder approval.