Like any epic tale, the big deal between Barrick Gold Corp. and Randgold Resources Ltd. can be read in at least a couple of ways.
The cynical view is to see it as a desperation strategy. If you can’t do much to upgrade the appeal of your key commodity (and gold miners can’t) and if your recent share price performance has been brutal (and it has), then there’s nothing like a flurry of corporate re-engineering to keep investors intrigued.
But a more positive take is to view the grand alliance as the beginning of a new round of merger and acquisition activity in the sector. That’s the view of IKN, the widely read mining industry newsletter that was first to break news of the tie-up.
“A big-boy M&A deal like this should shake up the long-dormant sector,” IKN declared. It told readers to expect it “to be the start of things, not an isolated incident” and, on Tuesday, named two Canadian gold miners as likely future targets: B2Gold Corp. (“cheap as chips right now”) and Alamos Gold Inc. (“the big options volume … suggest an interloper”).
Investors with a stomach for risk and a willingness to be patient may want to pay attention. Gold miners possess at least one outstanding virtue at the moment: They’re universally loathed and therefore inexpensive.