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Barrick-Randgold Merger Will 'Shake-Up' The Gold Mining Industry - Market Participants

Kitco News

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(Kitco News) - After the initial shock to the Barrick Gold and Randgold merger announcement, market participants wondered whether “bigger is better” and how this new mining conglomerate could shake-up the industry.

Kitco News surveyed experts on the sidelines of the Denver Gold Forum to get their thoughts on the mega news that hit the industry in the early morning hours.

For the most part, shock and surprise rang through the hallways of the Broadmoor Hall, the site of the conference. Then came excitement about the future possibilities, with many attendees wondering whether the merger of two senior producers could bring about the “oomph” the mining industry is so sorely missing.

Monday’s announcement said that Barrick Gold Corp. (NYSE, TSX: ABX) will acquire Randgold Resources Ltd. (Nasdaq: GOLD) in an all-stock merger, creating the largest gold-mining company in the world.

The merger is still subject to approval by shareholders of both companies as well as regulatory approvals and other customary closing conditions, the two companies said. Closing is expected by the first quarter of 2019.

Randgold’s chief executive officer, Mark Bristow will become president and CEO of what many are now dubbing the “New” Barrick Group.

For many surveyed, this seemed to be one of the biggest positives of the transaction.

“Time will tell of the genius —Mark Bristow demonstrated himself to be a very strong leader in the sector, especially in how he created the value and how he has defined the resources and developed production throughout Africa,” said Rock Elm Capital Management partner Karr McCurdy.

Caledonia Mining CEO Steve Curtis echoed more of the same, “Randgold’s senior management are very good, proven operators. Now, they’ve got a whole raft of new assets to do something with. A big player is becoming even bigger,” he noted.

The combination is a very interesting one, McCurdy pointed out, noting that Barrick has the scale and a lot of internal expertise with a sophisticated processing power, while Randgold is great when it comes to more difficult jurisdictions.

“It’s a win-win on many fronts and hopefully provides a fresh catalyst for gold-related value to improve across the board,” McCurdy said.

The news should ultimately benefit the shareholders, said Atlantic House Fund Management head of multi-asset, Charlie Morris.

“Randgold is up 5% on the London market and Barrick is up 4.5% in the German market. I guess it’s one plus one equals three,” Morris said on the sidelines of the Denver Gold Forum.

More mergers could be on the horizon and provide a much-needed boost to the mining sector, some of the experts noted.

“When you see M&A activity in the precious metals sector at the senior level it's good for the industry and we would expect more M&A activity to filter through the industry,” said Bonterra Resources Director Allan Folk.

Others surveyed were still processing the news and hoping to get more background information on the merger, especially when it comes to long-term plans.

“It’s totally confusing. There has been no clarification. The merger reflects the whole state of the industry being influx, with very little leadership in the gold industry anymore. Barrick is certainly not the leader it once was,” said Potomac Asset Management senior project advisor John King Burns.

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