Toronto’s Barrick Gold always wanted to team up with Newmont Mining of Colorado. Merging the two giants, which have adjoining operations in gold-rich Nevada, would have created an unassailable industry leader and reduced costs by an estimated US$1-billion a year. On paper, it looked like a dream deal. But it never got off the ground, in good part because Barrick founder Peter Munk wanted the new company to stay in Toronto, not move to Denver.
Were he alive today, Mr. Munk – a Canadian patriot who believed in the value of head offices – would be distraught. In the autumn, Barrick bought Randgold Resources but handed management control to Randgold’s executives, who promptly gutted Barrick’s Toronto headquarters, leaving the world’s top producer with a mere 65 employees in its echo-chamber offices on Bay Street. The deal was, in effect, a reverse takeover. The new Barrick will be run from the Channel Islands.
On Monday, it was Newmont’s turn to accelerate what appears to be the second wave of the great hollowing-out story, a decade after Inco, Falconbridge, Alcan, Dofasco, Stelco and dozens of other industrial powerhouses were eradicated from the Canadian map.
It agreed to buy Vancouver’s Goldcorp for $10-billion in an all-stock deal, plus 2 cents a share in cash. Together, Newmont and Goldcorp would displace Barrick-Randgold as the world’s top gold producer, and Canada will lose another big head office. Goldcorp was Canada’s second-biggest gold producer and third-largest by market value.
To be sure, Goldcorp was vulnerable because its share price was so low. In the early part of this decade, the company was worth more than Barrick, even though its output was far less. A series of missteps under a series of uninspiring CEOs – falling production, rising costs, dubious acquisitions, overestimated reserves – clobbered the share price, sending it down from $54 in 2011 to just under $13 on Friday, the last day of trading before Newmont surfaced.