Canada's Barrick Gold buys Randgold for $ 6.5 billion

LONDON (Reuters) – Canada's Barrick Gold Corp has agreed to buy Randgold Resources Ltd. in a $ 6.5-billion deal to create the world's largest gold producer under pressure investors use.

The new Barrick Company, which will be listed in New York and Toronto, will own five of the world's 10 cheapest gold mines and have a market value of $ 19.4 billion based on Monday's trading. . That's what would make it the world's largest gold producer in terms of market capitalization, surpassing Newmont Mining Corp, according to Reuters calculations.

This transaction has been the largest in years in the gold mining industry, where investors have criticized companies for mismanaging capital, forcing them to focus on costs while reducing their enthusiasm for acquisitions.

Randgold shares closed up 6%, making it the biggest winner of the London Mining Index and valuing it at 4.93 billion pounds ($ 6.5 billion). Shares of Barrick, the world's second largest gold producer, closed 5.8% in Toronto.

"Randgold has the agility and speed of a younger, smaller company, a bit like Barrick in his early years, while Barrick has the infrastructure and global reach of a corporation." big business, "said John Thornton, president of Barrick.

Randgold's long-term director, Mark Bristow, will become the managing director and president of the merged company, taking with him CFO Graham Shuttleworth. Thornton, a former banker of Goldman Sachs, will be executive chairman.

Bristow, a 59-year-old geologist, has headed Randgold since its inception in 1995 and is known for his direct and direct approach to managing the company.

"This brings Barrick a good operator and a freethinker to Bristow," said John Ing, president of House Investments Canada and Barrick's shareholder. "It's really a bet on the individual, the man – and what he could do at Randgold."

The agreement brings together two executives with different leadership styles and backgrounds.

Two-thirds of the directors of the new Barrick's board of directors will be appointed by Barrick and one-third by Randgold.

"BAD HAND"

The value of the transaction, at £ 48.5 per share, matched Randgold's market capitalization at Friday's close. The lack of a bonus for Randgold's shareholders sparked skepticism from some analysts, who also feared Randgold's agility could be prevented by the mammoth.

"UK shareholders are probably badly treated by the merger," said Russ Mold, director of investments at AJ Bell. "What Bristow has to prove now, is that the bigger it is and the better it is the Randgold culture that will possibly win it."

The current price of spot gold does not help the sector, having lost on traditional safe haven flows to the dollar, pushing it back 10% this year. [GOL/]

Barrick and Randgold had both lost one-third of their market capitalization in the year before Monday's win.

"We see no reason to change Randgold's approach. "If we can not deliver something bigger and better, we will not do it," Bristow said in a conference call with analysts.

Bristow said on another call that the new company would be open to weighing options for its assets in Nevada and Australia, and said the latter had expressed their interest.

The new company will have the industry's highest adjusted earnings before interest, taxes, depreciation and amortization, an EBITDA margin of almost 50% based on 2017 figures, and the lowest cash cost position among its peers.

According to the agreement, each Randgold shareholder will receive 6,1280 new Barrick shares for each share of his African rival, said the two companies.

Negotiations on the agreement, subject to regulatory approvals and to shareholders and scheduled to close in the first quarter of 2019, began more than three years ago with advisors in July, a person familiar with the negotiations.

In 2017, Barrick and Randgold together produced 6.64 million ounces, while the second largest gold producer, Newmont, produced 5.27 million ounces.

The two companies said they were aligning their strategy with Chinese investors after Barrick said he would do more to attract investors to China.

Randgold's mines also in Mali, Cote d'Ivoire and the Republic of Congo, where it faced a regulatory risk, a factor with which the Barrick Africa unit, Acacia Mining, has to deal in Tanzania.

Mr. Klein & Co and Morgan Stanley advised Barrick on the transaction, while CIBC and Barclays were Randgold's financial advisors.