Barrick buys Randgold to remain world’s biggest gold miner

Merger will give Toronto-based company an African portfolio to strengthen its position

Barrick Gold Corp. has agreed to take over Randgold Resources in an all-share deal worth about $7.9 billion that will solidify its position as the world’s biggest gold producer after years of cutbacks.

Randgold investors will receive 6.128 Barrick shares for each of their shares to own about a third of a new Barrick group with some $12.5 billion in revenue and an expected $23.7-billion market capitalization.

The deal brings together two companies focused on efficient operations and returns to shareholders as measured by growth in free cash flow, Barrick executive chair John Thornton said on a conference call on Monday.

“We are both committed to financial prudence, particularly in maintaining a strong balance sheet. Perhaps most im- portant, we are of one mind about the true source of shareholder value in the gold industry: per share returns over the long term.”

The merger, expected to close in the first quarter next year, brings together Toronto-based Barrick’s global portfolio heavily focused on the Americas and Randgold’s African focused operations.

Randgold’s assets, which produced 1.32 million ounces of gold last year, will see Barrick retain its status as the world’s largest gold producer.

Newmont Mining Corp. was expected to eclipse Barrick this year with an upwards guidance of 5.4 million ounces to Barrick’s five million ounces, after Barrick narrowly kept its status as the biggest producer last year.

Thornton will keep his spot as executive chair, while Randgold chief executive Mark Bristow will become president and chief executive officer.

The combined company will follow Thornton and Bristow’s shared focus on high-quality assets and focus on cash flow. Management has committed to identify assets that don’t meet their investment criteria for potential sale within a year of the merger.

“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,” Bristow said in a statement.

“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.”