The tie-up between Barrick Gold Corp. and Randgold Resources Ltd. may mark the start of a wave of needed consolidation in the gold industry, says the head of Canada’s third-largest gold mining company.
The sector is struggling with a mismatch between the large number of companies vying for growth and the industry’s narrow pipeline of attractive mine developments, says Sean Boyd, chief executive officer of Agnico Eagle Mines Ltd.
“The industry needs M&A,” Mr. Boyd said in an interview at the company’s Toronto headquarters. “There’s just too few high-quality opportunities left and far too many players.”
The shortage of enviable assets is because many gold companies underinvested during what Mr. Boyd terms the “dark period” from 2012 to 2015, reducing headcounts and cutting back on exploration. After the price of gold went into freefall in late 2011, many industry players were forced to take large writedowns on expensive acquisitions and M&A largely ground to a halt.
But last month, Toronto-based Barrick Gold announced it was buying African operator Randgold for US$6-billion, the biggest acquisition in the gold sector in seven years. By buying Randgold, Barrick, which had been perilously close to losing its title as the world’s biggest gold producer, will remain on top for the foreseeable future.
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