The Strategist

Barrick Gold, Randgold to create the world’s largest gold mining company

09/24/2018 - 15:31

On Monday, Canadian Barrick Gold announced purchase of London-based Randgold Resources for $ 6.04 billion with payment in the form of securities. The transaction will create the world's largest gold mining company.

According to a joint report of Barrick and Randgold, the total capitalization after the merger will amount to $ 18.3 billion, while the company will own maximum concentration of tier 1 gold assets in the industry.

Also, if we combine their financial indicators for 2017, together they received revenues of $ 9.7 billion and adjusted EBITDA of about $ 4.7 billion.

The new company will continue to operate under the name Barrick Gold.

Randgold shareholders will receive 6,128 shares of the new company for each Randgold share owned by them. This ratio was established based on the weighted average share price of Barrick on the NYSE and ADS Randgold on the Nasdaq for 20 trading sessions on September 21 inclusive.

After the transaction is completed, Barrick shareholders will control 66.6% of the new company, Randgold shareholders - 33.4%.

Barrick and Randgold also expect that, upon completion of the transaction, the merged company will become the world leader in terms of the cost of gold production.

Chairman of the Board of Directors of Barrick John Thornton, who previously worked for Goldman Sachs, will head the board of directors of the merged company. Randgold CEO Mark Bristow will take the position of CEO.

Barrick Gold is the world's largest gold mining company in terms of production, and Randgold is in the top 20. In 2017, Barrick Gold produced 5.32 million ounces of gold, Randgold - 1.32 million ounces.

The current year was difficult for gold mining companies that failed to convince investors of their attractiveness, the Financial Times writes. Barrick’s shares have fallen down by 25% since the beginning of the year amid criticism of its long-term strategy, while Randgold has lost more than a third of its capitalization due to a number of operational problems, including a strike at one of the largest mines.

At the same time, the price of gold fell by more than 9% against the background of a strong dollar, to $ 1,199 per troy ounce.