When two of the worlds largest gold miners merge you know the mines are getting thin. We have been reporting for close to a decade these mining operations are on their last leg. The GFMS of the U.S. stated, then scrubbed from the internet, that silver wold be the first element to go extinct from the periodic table. We have known that gold is close behind as most, if not all, the really large deposit have been discovered. At this point if a geologist discovers a potential 10million ounce mine that’s a big deal. A couple or three decades back that was the norm all over the world, today no so much.
As reported by ZeroHedge
As gold prices cling stubbornly to the lowest levels in a year as US stocks continue their record-breaking tear, two of the world’s biggest gold miners are sensing an opportunity. As the Financial Times reports, Canada’s Barrick Gold (the world’s largest miner) is preparing to merge with Randgold Resources (its UK-listed rival) in an all-share deal that will create the world’s biggest gold miner, with an $18 billion valuation and a dominant mining position in Africa.
Per the Wall Street Journal, Barrick shareholders will own 67% of Randgold, and Randgold investors will own 33% of Barrick. Put another way, Randgold shareholders will own 33.4% of the combined company, with the rest controlled by investors in Toronto-based Barrick. The deal still needs to be approved by shareholders.
More than the mining synergies (Barrick runs massive mines in Nevada and throughout South American while Randgold ha extensive operations in Mali and the Democratic Republic of Congo), WSJ and FT points out that the merger will bring together two outsize personalities in Barrick’s John Thornton, a former Goldman Sachs executive, and Randgold’s Mark Bristow. Bristow and Thornton reportedly recently spent a month together hashing out the terms of the deal, though talks began all the way back in 2015. Should the deal close, Thornton will serve as chairman of the combined company while Bristow will take over as CEO.
If you’ve got gold, you better hold on to it. If you don’t have any physical gold, well, it may be a good time to reconsider that position. Deals like this don’t happen out-of-the-blue and they don’t happen because the climate is favorable. They happen in order to eliminate the competition and consolidate power. The search for and mining of gold doesn’t need any more competition as the junior research mining companies are struggling and will continue to struggle as gold deposits become increasingly scarce.
What about China? Are they playing role as we have continually reported how China is buying gold mines all around the planet to secure gold for their future.
Well, it turns out that China has a hand in this deal as well – we are so-not surprised.
Toward the bottom of its story, the FT revealed that China-based Shandong Gold was essentially acting as a silent partner in the deal, buying $300 million of shares in Barrick, while Barrick will also buy the equivalent amount of shares in Shandong Mining.
For their part, analysts complained about the absence of a premium for Randgold investors, though they acknowledged that the deal offered important synergies.
“While this does not offer a premium, the production upside of the combined group under the leadership of Mr Bristow (who is likely to be relentless in terms of cost reductions), is likely to create arguably the go-to gold businesses globally,” said Michael Stoner, analyst at Berenberg.
“For the London gold space, this is a disappointment, and takes away one of two large-cap, liquid names in the market (the other being Fresnillo),” he added.
Analysts at Numis said: “In our view, Barrick has a number of world-class assets but has acquired the reputation of being a poor steward of those assets, while Randgold has the reputation for delivering strong shareholder value in difficult operating jurisdictions.”
Still, as performance in the shares of both companies has lagged behind gold itself, investors will be expecting the combined management to make significant strides in boosting value for shareholders. But given the reputation of each company’s chief executive, the potential for a power struggle at the top could prove to be an unfortunate distraction. Source
I would guess that China will own company within the next 5 years. It may take as long as 10 years, but then we run into the issues that help bring about this merger – high demand and low inventory. You can not bring to market that which you can not mine. Got physical?
