Canada’s Barrick Gold (TSX, 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) in a $18.3 billion share deal, the biggest in the gold sector in the past three years.
The new Barrick, valued at $24 billion 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, but it will own five of the world’s 10 lowest cost gold mines, producing more than 6.5 million ounces of the precious metal a year.
Randgold’s shareholders will own 33.4 percent of the combined firm, with the rest controlled by Barrick’s investors.
The merger will also bring together two of the biggest names in the global gold sector: John Thornton, former president of Goldman Sachs who’s been at the helm of Barrick since 2014, and Mark Bristow, an outspoken South African geologistwho founded Randgold in 1995, growing it into a $4.8-billion company and the UK’s top gold producer.
Thornton will remain as executive chairman, directing strategy and Bristow will be president and chief executive of the merged company, running day-to-day operations. Randgold chief financial officer, Graham Shuttleworth, will become CFO of the enlarged company.
“Our industry has been criticized for its short-term focus, undisciplined growth and poor returns on invested capital,” Bristow said in the statement. “The merged company will be very different. Its goal will be to deliver sector leading returns.”
“Our overriding measure of success will be the returns we generate and not the number of ounces we produce,” Thornton added.
China ties
As part of the deal, China’s Shandong Gold, one of the country’s biggest gold producers, has agreed to buy $300 million 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 first 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.
Source: Mining.com
