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Now that Barrick Gold Corp. has completed its merger with Randgold Resources Ltd., investors will need to see evidence that the combined company can navigate a thorny issue: Does Barrick’s shift toward African-based mines raise the geopolitical risks for a company that used to be defined by its stable locales?
The deal between Barrick and Randgold, announced last September and finalized on Jan. 1, comes amid a much-needed jolt for the gold sector.
Gold producers had fallen out of favour in recent years, as the price of gold declined 32 per cent since 2011 amid paltry new discoveries and rising production costs. And with interest rates on the rise in the United States over the past two years, gold’s attractiveness as a haven next to yield-bearing fixed income investments, including ultrasafe U.S. Treasury bonds, had been sidelined.
Now, things seem to be moving in the right direction. As of Tuesday, Barrick shares were up 27 per cent from lows in September, prior to the deal. And the NYSE Arca Gold Bugs Index, which tracks the broader gold-mining sector, has risen more than 19 per cent over the same period.
Even gold has regained some of its lustre, rising to six-month highs before a slight decline to US$1,286.10 an ounce on Tuesday, down US$3.80. According to Reuters, gold-backed exchange traded funds registered a net inflow of US$3.4-billion in 2018, up 3 per cent.
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