Barrick Gold’s purchase of Randgold Resources will create the world’s biggest gold miner with a value of approximately $18bn.
The announcement that Canada’s Barrick Gold will purchase Randgold Resources will resound throughout the gold mining industry amid a period of falling gold prices and wider uncertainty.
The firms own some of the world’s most valuable gold fields, extracting more than 6.6 million ounces of gold a year between them.
Yet shares of both firms have fallen almost 30% this year, amid falling gold prices and questions over their strategy.
“Our industry has been criticized for its short-term focus, undisciplined growth and poor returns on invested capital. The merged company will be very different,” Mark Bristow, Chief Executive of Randgold, told the BBC.
“Its goal will be to deliver sector leading returns, and in order to achieve this, we will need to take a very critical view of our asset base and how we run our business, and be prepared to make tough decisions,” he added.
The price of gold has fallen more than 8% this year, putting all gold producers under pressure.
Barrick and Randgold will be hoping that their combination will allow them to cut costs and drive up profit margins.
Under the terms of the deal, Barrick shareholders will end up owning two-thirds of the combined firm and Randgold will own the remaining third.
Industry analysts also believe that Barrick’s mines which are in relatively stable countries will complement Randgold’s assets, which are in riskier locations, such as West and Central Africa.
“Randgold has a proven ability to operate successfully in some of the most challenging environments in the world,” Barrick Executive Chairman John Thornton said on a conference call. “The combined company will have five of the world’s top 10 tier-one gold assets.”
The new company will keep the Barrick name and be listed in New York and Toronto, while Randgold’s London listing will be cancelled.
Thornton will retain his position in the enlarged company, while Bristow becomes president and CEO. Randgold Chief Financial Officer Graham Shuttleworth will become CFO of the new company.