Barrick Gold and Randgold shareholders agree to merger

The merger between South African mining company Randgold and Canadian mining company Barrick Gold has been overwhelmingly accepted by the shareholders of both firms, while the future looks bright for the new entity.

Shareholders of Canadian mining company Barrick Gold (TSX : ABX) and South African gold miner Randgold Resources each held meetings on November 5 and 7 to vote on the September announcement of the merger between the two entities. The merger was accepted at 99% by Barrick’s shareholders and at 95% by Randgold’s shareholders, showing their optimism about the future of the new entity. The market also welcomed the news with a sharp rise of both company’s stocks. As of November 8, 2018, the Barrick Gold stock was up 27.34% since the beginning of September 2018, while Randgold had increased by 24.65%.

When the merger will be formalized in January 2019, the new entity will have a market capitalization of more than 18B $US and will have 5 of the 10 mines with the best production potential in the world.

With the vast majority of Barrick’s operations in America, it has had great difficulty developing its mining projects in Africa, the continent where RandGold has excelled in the past years. The Canadian mining company hopes that the merger will provide the necessary expertise to unlock some of its African projects, such as the Acacia gold mine in Tanzania. Indeed, it has been paralyzed since the summer of 2017, when the local government accused the Canadian mining company of tax evasion and forced it to pay a fine of 190B $US, which represents two centuries of net income for the mining company.

It remains to be seen whether the synergies promised between the two gold miners will materialize in 2019, as the socio-political climate and the current growth of the US economy are both bringing the price of gold down.

Bibliography

Junior Mining Network. (2018).Barrick Gold: Shareholders Overwhelmingly Approve Randgold Merger. [Online]. Available : https://www.juniorminingnetwork.com/junior-miner-news/press-releases/315-nyse/abx/54399-barrick-shareholders-overwhelmingly-approve-randgold-merger.html

Reuters. (2018). Randgold Ressources shareholders greenlight takeover by Barrick. [Online]. Available : https://www.reuters.com/article/us-randgoldresources-m-a-barrickgold-sha/randgold-resources-shareholders-greenlight-takeover-by-barrick-idUSKCN1NC24Q

Mining. (2018). Canadian miners’ performance in Q3 hit by lower metal prices. [Online]. Available: http://www.mining.com/canadian-miners-performance-q3-hit-lower-metal-prices/

Financial Post. (2018). Barrick-owned miner slapped with $190 billion tax bill that would take centuries to pay. [Online]. Available: https://business.financialpost.com/commodities/acacias-190-billion-tax-bill-would-take-centuries-to-pay-2

 

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