LONDON — The biggest gold miners, weighed down by record debt and with prices near a five-year low, will have to merge with others to survive, according to Randgold Resources, the best-performing producer of the metal in the past 10 years.
“The big producers have the biggest challenges of all,” Randgold CEO Mark Bristow said on Thursday. “Eventually, you’re going to see survival mergers.”
Gold’s 42% price slump from a record set four years ago is cutting profits and stressing balance sheets for mining companies, with the largest producers weighed down by debt totalling almost $35bn.
In September, the benchmark 30-member Philadelphia Stock Exchange gold and silver index, which includes Barrick Gold and Newmont Mining, fell to the lowest level since 2000.
Barrick and Newmont have discussed combining their operations several times in the past two decades. The latest merger talks ended in April last year, when both companies blamed each other for the breakdown.
Randgold, which has advanced more than fourfold in London trading over the past 10 years, has so far avoided the worst of the turmoil that has forced producers to reduce asset values and raise cash.
The company says all its mines make a profit at $1,000/oz. The metal has fallen 4.1% this year to about $1,110.
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