🔒 Barrick/Randgold deal creates gold giant – The Wall Street Journal

DUBLIN – The $6 billion, all-share merger between Barrick Gold and Randgold Resources will create a global gold giant that will dominate the African gold industry. Gold prices have been fairly range-bound for the last few years, making cost management a top priority for global gold-diggers. By merging, Barrick and Randgold are clearly hoping to capture cost savings and efficiencies to drive bottom-line growth. More importantly, the deal will give Barrick access to Randgold’s Africa expertise and experience – Barrick has struggled on the continent. It’s hard to say what the implications of the deal are for South Africa. Randgold is focused on west and central Africa, while Barrick has primarily north and south American assets. But the merger activity may be a sign of renewed activity in the gold sector, which has languished over the last few years. – Felicity Duncan

Gold Giant Barrick Agrees to Buy Rival Randgold for $6 Billion

By Scott Patterson

(The Wall Street Journal) Barrick Gold Corp.agreed to buy Randgold Resources Ltd.for $6 billion in an all-share merger that will solidify Barrick as the world’s largest gold company by production, with a dominant position in Africa.
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Barrick shareholders will own 67% of the combined company, and Randgold investors will own 33%, the companies said Monday. The deal remains subject to shareholder approval.

In London, Randgold shares were last up 5.6% at £52.00 ($67.99). Barrick shares were up 4.3% at $10.96 in New York early trading.

The deal will pair up two of the gold-mining industry’s biggest personalities: Barrick’s John Thornton, a former Goldman Sachs Group Inc. executive, and Mark Bristow, the chief executive of Randgold renowned for taking motorcycle trips through Africa. 

Both executives are also known for focusing on keeping costs in line and reining in debt. Barrick reported an adjusted profit of $876 million last year, compared with a loss of more than $10 billion in 2013. Randgold posted net income of $335 million in 2017, a 14% increase from the previous year.

Based on 2017 results, the enlarged group would have generated revenue of $9.7 billion and adjusted earnings before interest, taxes, depreciation and amortization of $4.7 billion, the companies said. 

The talks between the companies began in 2015, Mr Bristow said on a conference call Monday. 

“Barrick and Randgold are cut from a single cloth,” Mr Thornton said on the call. “Our two companies think and act in the same way.”

Mr Thornton will remain as executive chairman of the combined company and Mr Bristow will be president and CEO, in charge of day-to-day operations.

Barrick, the world’s largest gold producer, has struggled in recent years under Mr Thornton’s leadership, and its stock has lagged behind competitors such as Newmont Mining Corp., its closest rival by production. Barrick’s portfolio of gold mines has shrunk under Mr Thornton, with about a third of the 30 mines when the executive was appointed executive chairman of the gold-mining giant in 2014.

Barrick’s gold production has also dwindled, falling more than 25% since 2013 to 5.3 million ounces last year. The acquisition of Randgold, whose production is focused on Africa and which produced 1.3 million ounces in 2017, will help make up the loss.

Barrick has also lost several experienced senior executives in recent years. Its president, Kelvin Dushnisky, left the company in August.

The big bet on Africa comes at a time when Barrick needs help navigating the challenges of working in the resource-rich continent. Those struggles were highlighted last year after the Toronto miner’s majority-owned African subsidiary Acacia Mining PLC agreed to pay $300 million to the government of Tanzania to resolve tax and revenue sharing disputes over three gold mines. Acacia’s stock price in London has sunk nearly 30% since paying the penalty. 

While Mr Bristow’s career has been focused on mining, Mr Thornton is a latecomer to the industry. He retired as president of Goldman in 2003 after a 23-year career with the firm as a deal maker and head of European and Asian expansion. He became an adviser and teacher with the business school at Tsinghua University, one of China’s top schools.

Mr Thornton’s China connections attracted the attention of Barrick’s founder, the late Canadian mining tycoon Peter Munk, who invited the banker in 2011 to be a member of the company’s advisory board. In 2012, Mr Thornton was promoted to co-chairman of its board of directors.

With gold prices swooning in 2013, Mr Thornton sought to negotiate a merger with Colorado’s Newmont Mining. But the talks fizzled, and Mr Thornton, appointed executive chairman of Barrick, focused on shrinking the assets of the debt-laden mining behemoth.

Randgold, for its part, is widely seen as one of the best managers of gold assets in the world. Mr Bristow is known for saying that he can profitably operate his company’s mines even if gold prices were to fall to $1,000 an ounce, a promise few other mining companies could make. 

“We will now be able to step beyond our African boundaries onto the global stage,” Mr Bristow said.

In a separate agreement, Barrick said Shandong Gold, a Chinese gold miner, would purchase $300 million of Barrick’s shares, and Barrick would invest an equivalent amount into Shandong’s publicly listed mining company. 

Write to Scott Patterson at [email protected]

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