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The shares of Randgold Resources Ltd. (GOLD) surged Monday in London after the Africa-focused mining company agreed to a merger of all the shares of Barrick Gold Corp. of Canada.
Toronto-based Barrick will own about two-thirds of the combined group, the two companies said in a statement Monday. Mark Bristow of Randgold was the CEO and John Thorton of Barrick retained his role as Executive Chairman. The newly created group will have a market value of approximately $ 18.3 billion, hold five of the ten largest deposits of bullion in the world and will produce approximately 5.5 million ounces of gold each year.
Barrick and Randgold Boards believe the merger will create an industry-leading gold company with the highest concentration of Tier One assets in the industry, the lowest position among other customers, said companies.
Randgold shares rose 6.1% at midday in London, a move that put the stock at £ 52.24 each, while leaving it with a decline of around 29.5% from the start of the year. Barrick shares were up 3.9% to $ 10.88, reducing its decline since the beginning of the year to around 23%.
Barrick's decision to acquire Randgold will immediately strengthen its position in Africa, where it holds a 64% stake in Acacia, blocked by a $ 200 billion tax litigation export to Tanzania. reduce costs and focus on higher quality assets over the last four years. Randgold also suffered a prejudicial strike in Ivory Coast, while a new mining code in the Democratic Republic of Congo affects the entire industry.
"The combination of Barrick and Randgold will create a new champion of value creation in the gold industry, bringing together the world's largest collection of leading gold assets," Thornton said.
"Our industry has been criticized for its short-term goal, unruly growth and low returns on invested capital," said Bristow. "The merged company will be very different and its goal will be to generate top-notch returns in the industry."
Gold spot prices, however, have followed a downward trajectory over the last four years, with cash values falling 12.5% - $ 1,369 to $ 1,198 – since May 2014. gold industry deficits have reached $ 85 billion since 2010, according to estimates by Paulson & Co.
Nevertheless, the combined group has said it wants to increase its annual dividend, from its current level of about 3 cents per share, "over time".
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