Barrick Gold agrees $6bn deal to buy rival Randgold

Deal will create world’s biggest gold miner with a $18bn market capitalisation

The gold mining sector has struggled to convince mainstream investors  it can generate enough cash to grow output and also increase shareholder returns. Photograph: iStock

The gold mining sector has struggled to convince mainstream investors it can generate enough cash to grow output and also increase shareholder returns. Photograph: iStock

 

Canada’s Barrick Gold has agreed to buy rival Randgold Resources for $6 billion (€5.1 billion) as it seeks to rekindle interest in a sector that has been shunned by investors after years of overspending and poor returns.

The all-stock deal will create the world’s biggest gold miner with a $18 billion (€15.3 billion) market capitalisation, which will manage some of the most profitable operations in the United States and Africa.

It will also bring together two of the biggest personalities in gold mining: John Thornton, the former president of Goldman Sachs, who has run Barrick since 2014, and Mark Bristow, a pugnacious South African who founded Randgold in 1995.

Dismal year

The tie-up follows a dismal year for the gold mining sector, which has struggled to convince mainstream investors that it can generate enough cash to grow output and also increase shareholder returns. Barrick’s annual production has fallen from more than eight million ounces a decade ago to 5.3 million today.

While the price of gold has fallen 9 per cent this year to $1,200 (€1,020) a troy ounce, weighed down by a strong US dollar, the two companies have fared worse. Shares in Barrick have dropped 30 per cent this year, while Randgold has fallen a similar amount as it has struggled with a number of issues, including a strike at one of its biggest mines and the prospect of a tough new mining code in the Democratic Republic of Congo.

– Copyright 2018 The Financial Times Ltd