South African 'alpha male' will run the world's biggest gold miner

Ivan Schwartz
September 25, 2018

Canada's Barrick Gold (ABX) is buying rival Randgold (GOLD) to create the world's biggest gold miner, the two companies announced Monday.

Randgold shares were up 4.3 percent at 0901 GMT, making it the biggest gainer in London's wider mining index.

A year ago the combined revenues of the two companies totalled US$9.7bn and adjusted earnings (EBITDA) amounted to US$4.7bn. "You might expect the reaction will be that Randgold shareholders will not like it, but Randgold (stock) is up today".

Mark Bristow will become the President and CEO of the New Barrack Group.

Under the all-share deal, Barrick shareholders will own about two-thirds of the new entity and Randgold investors the remainder, the companies said on Monday.

Bristow acknowledged that the industry has always been criticised for its "short-term focus, undisciplined growth and poor returns". That could open the way for Newmont Mining Corp., the biggest gold miner by market value, to make an offer for Barrick, Walker said. Yet, by buying Randgold, Barrick will once again become the world's biggest gold company in every metric that counts- production, market capitalization and reserves, vaulting past USA rival Newmont Mining Corp, which in recent years had surpassed the company on every level bar production.

Barrick Gold shares gained 2.7% following the news while Randgold shares are up 6.8% in London.

"By employing a strategy similar to the one that proved very successful at Randgold, but on a larger scale, the New Barrick Group will leverage some of the world's best mines and talent to create real value for all stakeholders".

The deal will also give Barrick a much bigger presence in Africa, where Randgold has mines in Mali, Senegal, Côte d'Ivoire and the Democratic Republic of Congo.

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Randgold, the smaller of the two, has seen its stock decline from more than US$103 in January to hover around US$60 earlier this month - though it was now up to US$68.42.

"The boards of Barrick and Randgold believe that the merger will create an industry-leading gold company with the greatest concentration of Tier One Gold Assets in the industry, the lowest total cash cost position among senior gold peers", the companies said in a joint statement.

"A no-premium deal", said Mr. Thornton during a conference call with analysts on Monday. The company shed non-core assets outright, or sold stakes to partners, to fix its balance sheet, after its debt peaked at $15.8bn in 2013.

The deal is targeted to close by 2019's first quarter.

In 2017, Barrick and Randgold combined produced 6.64 million ounces while the next largest gold miner, Newmont, churned out 5.27 million ounces.

"Our opinion is that the proposed merger, instead of being based on merit, strength and strategic integration, is more akin to the proverbial "two drunks supporting each other at closing time", said Kieron Hodgson from Panmure Research.

Mr. Gill sold off his holdings in Barrick Gold past year and said he had been looking at possibly getting back into the stock in recent weeks but the deal with Randgold has given him pause.

M. Klein & Co and Morgan Stanley advised Barrick on the deal, while CIBC and Barclays were the financial advisers to Randgold.

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