The ge­ol­o­gist and the banker blaze a trail

Randgold Re­sources and Barrick Gold are hop­ing to cap­i­talise on each other’s strengths in their block­buster merger.

Finweek English Edition - - Contents - By David McKay

mark Bris­tow, the found­ing CEO of Randgold Re­sources, in­sists align­ment on busi­ness prin­ci­ples will be the uni­fy­ing force that smooths over the ob­vi­ous dif­fer­ences be­tween him­self and John Thorn­ton, ex­ec­u­tive chair­man of Barrick Gold. The $13bn Cana­dian gold-min­ing com­pany un­veiled a block­buster merger with Randgold on 24 Septem­ber.

De­scribed by the Fi­nan­cial Times as “the odd cou­ple”, Bris­tow and Thorn­ton strike dif­fer­ent per­sonal notes. Thorn­ton, a for­mer Gold­man Sachs Group chair­man, and with a dis­af­fec­tion for com­mer­cial flights, moves be­tween ap­point­ments in Barrick’s Gulf­stream V jet, ac­cord­ing to the Wall Street Jour­nal.

In an ob­vi­ous ef­fort to seed the mar­ket be­fore the merger, Thorn­ton con­ducted an in­ter­view with the pa­per, 10 days prior to the trans­ac­tion an­nounce­ment at the Den­ver Gold

Fo­rum. It took place in the su­per ex­clu­sive Pasley-Tyler club on Berke­ley Square in Lon­don’s May­fair, one of the cap­i­tal’s plusher dis­tricts.

At the time of fin­week’s in­ter­view with Bris­tow – an ex­ec­u­tive who claims not to have an of­fice – he was mak­ing his way back to his New York ho­tel room where he’d left his other mo­bile phone. You could hear him mut­ter­ing to ho­tel staff: “Room num­ber…?” Pause. “I’ll have to phone you back,” he said.

The two have com­pletely dif­fer­ent styles. Bris­tow is rough and ready, off-hand and rarely checks him­self in in­ter­views. Thorn­ton is me­dia shy. To Thorn­ton’s old-tie bank­ing pedi­gree, Bris­tow, a ge­ol­o­gist, is on-site and tends to no tie. Randgold is largely no frills whereas Barrick has long since left be­hind the en­trepreneurial esprit of its late founder, the Hun­gar­i­anCana­dian Peter Munk – an ethic to which Thorn­ton is hop­ing to re­turn the com­pany, hence the pro­posed merger with Randgold which he has de­scribed as a “back to the fu­ture” mo­ment for Barrick.

The sell­ing point of the pro­posed merger – which Bris­tow said was briefly run past largely sup­port­ive share­hold­ers dur­ing the week­end prior to its an­nounce­ment – is that Randgold will bring its know-how of al­ready op­er­at­ing a highly tuned cash flow-gen­er­at­ing busi­ness. In re­turn, Barrick con­trib­utes three of five over­all “tier one” as­sets the merged com­pany will con­tain.

Barrick also brings a re­la­tion­ship with Chi­nese com­pa­nies Zi­jin and Shan­dong, in­vestors in­ter­ested in pro­vid­ing cap­i­tal that Thorn­ton in­sists will help de-risk the com­bined en­tity, es­pe­cially given its African ex­po­sure. Randgold’s mines are ex­clu­sively in Africa (all of which Bris­tow and Team scoped out and de­vel­oped in-house). Barrick con­trib­utes its 64% Aca­cia Min­ing, a busi­ness listed in Lon­don.

“One of the things I mod­elled Randgold on when we started was the early Barrick,” says Bris­tow. “That Barrick was fast-run­ning, had an owner­op­er­a­tor struc­ture and fo­cused on prof­itabil­ity.”

Fol­low­ing a se­ries of dis­cus­sions with Thorn­ton, that in­ten­si­fied from the be­gin­ning of this year as the no­tion of a merger took shape, Bris­tow learned of the Amer­i­can’s “shock” at how poorly run Barrick had be­come.

As a re­sult, Thorn­ton’s trail-blaz­ing re­forms at Barrick, and a ret­i­cence to pre­serve sa­cred cows, mir­rors Bris­tow’s own ap­proach. The two had pre­vi­ously been in­tro­duced through a mu­tual friend. “He called me up and said there was a guy I should meet,” says Bris­tow.

Bris­tow landed up in New York. “Ev­ery­one was sweat­ing at the time,” he says, re­fer­ring to the then gold price of just

The merger with Randgold is an at­tempt to forge a new type of in­vest­ment case, com­bin­ing the scale of the two en­ti­ties with a fo­cus on free cash flow.

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