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Merger to create global gold mining leader

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The global gold mining industry has received a shake-up with the news that Canada’s Barrick Gold Corp has agreed to buy Randgold Resources Ltd in a deal valued at $6.5 billion. On completion, the deal will create the world’s largest gold producer.

The two companies currently own gold and copper assets across five continents and following the merger will hold the greatest concentration of Tier One Gold Assets in the industry.
On completion of the deal the New Barrick Group will hold the world's largest collection of Tier One Assets.
The merger comes at a time when mining companies are coming under fire from investors for poorly managing capital, however it’s expected that the management team of the new entity will be able to buck this trend, placing a major emphasis on returns rather than sheer number of ounces produced, a point outlined in a statement by John L. Thornton, Executive Chairman of Barrick:

“The combination of Barrick and Randgold will create a new champion for value creation in the gold mining industry, bringing together the world’s largest collection of Tier One Assets, with a proven management team that has consistently delivered among the best shareholder returns in the gold sector over the past decade. Our overriding measure of success will be the returns we generate and not the number of ounces we produced, balancing boldness and prudence to deliver consistent and growing returns to our fellow owners, a truly simple but radical and achievable concept. There are no premiums in the merger because we strongly believe in the opportunity to add significant value for our shareholders from the disciplined management of our combined asset base and a focus on truly profitable growth”.
The combined portfolio of Barrick and Randgold.
(The combined portfolio of the two companies. Image via Barrick / Randgold).

Following completion of the merger, which is expected to close in the first quarter of 2019, once all conditions have been met, Randgold’s long-term boss Mark Bristow will become the chief executive and president of the merged company.

Commenting on the merger, Bristow said:

“Our industry has been criticised for its short-term focus, undisciplined growth and poor returns on invested capital. The merged company will be very different. Its goal will be to deliver sector leading returns, and in order to achieve this, we will need to take a very critical view of our asset base and how we run our business, and be prepared to make tough decisions. 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 merger is subject to approval by both sets of shareholders, regulatory approvals and other customary closing conditions, but should all this be successful, the world of gold mining could be about to change radically…

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Merger to create global gold mining leader - Time to read 3 min
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