Barrick Gold Corp. has agreed to acquire rival gold miner Randgold Resources Ltd. for roughly US$6-billion in an all-stock deal that some investors said runs counter to the Canadian gold producer’s conservative strategy and adds political risk by sharply increasing its exposure to Africa.
The combination of Barrick, one of the worst performing senior gold companies of the past decade, with Randgold, one of the best operators, was announced early on Monday, after The Globe and Mail reported on the weekend that a deal was imminent. Barrick, founded in 1983 by the late Peter Munk, was once worth in excess of $54-billion but its value plummeted after the price of gold bullion went into a tailspin in late 2011 and in the aftermath of a number of corporate blunders.
As executives at both companies extolled the virtues of the deal to investors on Monday, investors and analysts also raised concerns about Toronto-based Barrick doubling down in the very region in which it has struggled the most in recent years.
Robert Gill, Toronto-based portfolio manager with Lincluden Investment Management Ltd., called the move back into Africa hypocritical given that Barrick has been steadfast about moving away from risky regions and focusing on its core assets in the Americas, in particular Nevada.
“It does call into question the credibility of the management team, to say one thing and do the opposite,” he said. Mr. Gill sold off his holdings in Barrick Gold last year and said he had been looking at possibly getting back into the stock in recent weeks but the deal with Randgold has given him pause.
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