Barrick Gold Corp. and Randgold Resources Ltd. are close to agreement on a major deal, with an announcement expected Monday, according to sources familiar with the situation.
An acquisition of Randgold by Barrick would restore the Toronto-based company as the largest gold miner by stock-market capitalization. It has a market cap of $15.8-billion, about twice Randgold’s value of $7.9-billion.
Barrick executive chairman John Thornton has expressed skepticism about doing large-scale mergers and acquisitions, because big gold deals have tended to work out badly for investors. But he is also under pressure to revive Barrick’s growth prospects and turn around its share price, which has dropped by one-third in the past year.
It was not clear as of Sunday night whether the deal will be structured as a straight corporate acquisition or will instead involve a merger of parts of the two companies. Under Mr. Thornton’s watch, Barrick has done no large acquisitions, although it has struck a number of joint ventures with foreign players to develop mining properties as well as agreements to sell mines. Barrick is the world’s largest gold-mining company by production, although the number of ounces it is generating each year is on the decline.
Randgold does have a number of things Barrick would want – in particular, expertise operating in Africa. Randgold, which is listed in London, has interests in mines in Mali, Ivory Coast, Senegal and the Democratic Republic of Congo.
Barrick, on the other hand, has faced enormous difficulties with its African subsidiary, Acacia Mining PLC, in which it owns a 64-per-cent stake.
Acacia has been involved in a protracted dispute with the Tanzanian government. In 2017, the government accused Barrick of defrauding it out of US$200-billion in taxes. Acacia has been subject to a government ban on exports of gold concentrate for more than a year. Unusually, Barrick is negotiating on behalf of Acacia, with Acacia’s own management locked out of the talks.
In a note Sunday evening, RBC Dominion Securities analyst Stephen Walker said a deal that is done at current market prices “would not be well-received by Barrick shareholders, given the direct exposure to further African operating and geopolitical risks within the Randgold mine portfolio.”
Mr. Walker said an alternative for Barrick would be to sell some of its assets to Randgold in return for a stake in the London-listed company − including, possibly, its Acacia stake.
Word of a potential tie-up between Randgold and Barrick was first reported by mining blog IKN.
In an interview with The Globe and Mail earlier this month in London, Mr. Thornton said he was a great admirer of Randgold and its South African chief executive, Mark Bristow, because of his ability to navigate the challenging environment in Africa. “The only guy who I can find who has done it successfully is Mark Bristow of Randgold,” he said. “Randgold is the only company that is the exception that proves the rule. They have managed to be very successful in Africa in difficult jurisdictions. No one else has managed to do it.”
In the interview, Mr. Thornton acknowledged that Acacia had done “a poor job in their relationship with the Tanzanian government.”
Barrick spokesperson Andy Lloyd declined to comment. Kathy du Plessis, spokesperson with Randgold, said the company doesn’t comment on speculation.
Niall McGee
Eric Reguly