The world’s biggest gold miners have done a 180. After the failure of past blockbuster mining deals, such as Barrick Gold Corp.’s $7.3-billion purchase of copper producer Equinox Minerals Ltd. in 2011, the industry mostly abandoned size as a measure of success, in favour of profitability.
Over the past seven years, Barrick and others preached the gospel of the need to generate free cash flow, rather than increase production. But all of a sudden, the “bigger is better” mantra is back.
This time around, deal making among the world’s biggest gold companies is being spurred at least in part by the need to be as big, liquid and as geographically diversified as possible, to appeal to a wider investor base.
Just last week, Barrick announced it was going after Colorado-based Newmont Mining Corp. with a “once in a lifetime” US$17.8-billion hostile offer. Barrick said the creation of a megaminer with a projected market value of US$42-billion will help bring generalist money managers back into the gold sector.
The move on Newmont comes not long after Barrick closed its own US$6-billion acquisition of Africa-focused miner Randgold Resources Ltd. Newmont on Monday rejected Barrick’s offer, recommending that its shareholders instead support Newmont’s agreement to acquire Vancouver’s Goldcorp Inc. for US$10-billion.
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