Barrick/randgold: golden union sidelines London

The mooted $18bn combination of Canada’s Barrick Gold and London’s Randgold Resources has been three years in the making and will create the world’s largest gold miner, said Jon Yeomans in The Daily Telegraph. But it follows “a tough year for the sector”. Gold has slumped in price to about $1,200/ounce, and shares in miners have followed suit – raising the question of whether “this combined beast”, capable of producing 6.5 million ounces of gold a year, has “a glistening future”. Or whether it’s a case of “two drunks supporting each other at the bar”.

Randgold’s Mark Bristow, who has in effect led a reverse takeover of a larger company, is confident that he can turn “New Barrick” into a “champion for sustained profitability”. But much will depend upon management, said the Financial Times. Some analysts worry how the “pugnacious” South African miner and geologist, who single-handedly built Randgold into an industry force, will work alongside Barrick boss John Thornton – a “tough” former Goldman Sachs banker. That’s not the only issue, said Simon English in the London Evening Standard. Since the merged company will be listed in New York and Toronto, this deal means that London is forfeiting its largest and most prestigious gold-mining stock.

Bristow promised disgruntled UK investors that he would “pop by every three months [for] a cuddle”, said Lex in the FT. It will take more than that “to neutralise vitriol” among UK funds “already riled” by Unilever’s plan to relocate to the Netherlands. The two companies envisage “a global mining colossus designed to appeal to all investors and not just gold fanatics”, and Randgold investors marked the shares up 6%. But some specialist UK funds “will see this defensive merger as singularly offensive”.