Barrick Gold Corporation

https://www.theglobeandmail.com/

Peter Munk, the late founder and chairman of Toronto’s Barrick Gold Corp., the world’s biggest gold producer, was born in Hungary and evolved into a passionate Canadian patriot.

At one point during the Great Hollowing Out of Corporate Canada – in the middle part of the last decade, when Inco, Falconbridge, Dofasco, Stelco and dozens of other resources and industrial companies were picked off like candy by foreign buyers – he charged into The Globe and Mail’s offices in Toronto to tell the editorial board that the greed-driven sell-off had gone too far.

He was right. Companies that had taken decades, or even a century, to build were vanishing at alarming rates, their offices downgraded to branch-plant status or closed. After the Great Hollowing Out, Canada was left with one truly Canadian and global resources company – his very own Barrick.

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The biggest gold-mining takeover in seven years got its start with an arranged meeting. A mutual friend introduced John Thornton, Barrick Gold Corp.’s executive chairman, to Randgold Resources Ltd.’s founder and chief executive officer Mark Bristow, and in late 2015 they sat down together.

Mr. Thornton hosted Mr. Bristow at his villa in Palm Beach, Fla., a limestone mansion on the oceanfront. Barrick, the world’s biggest gold producer, was in rough shape at the time. The Canadian company was mired in debt after a disastrous foray into copper in Africa and a painful decision to abandon construction of a South American mountaintop mine after spending US$8.5-billion.

Barrick had lost the confidence of investors. Barrick’s stock hit a 26-year low, trading for less than $9 a share. Mr. Thornton was working to stabilize the company by selling assets and paring debt.

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In an example of the new political risks Toronto-based Barrick Gold Corp. would face under its proposed merger with Africa-focused Randgold Resources Ltd., on Friday, a state-owned miner in the Democratic Republic of Congo took issue with the combination.

The proposed US$6 billion merger, announced Monday, would convert London-listed Randgold shares into Barrick stock and create the world’s largest gold miner. Randgold’s chief executive Mark Bristow would retain his role and title at the new company, which would continue to be called Barrick Gold.

In a statement translated from French, the DRC-state owned miner, Sokimo SA, which shares ownership of Randgold’s Kibali mine, said the deal would introduce a new partner to the mine, and yet it only learned about the deal from press reports.

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https://www.thestar.com/

So we’re all clear then on the proposed merger between Barrick Gold and Randgold Resources. Should the no-premium deal be approved as planned in the first quarter of next year, we will see a Barrick-branded entity run by Randgold’s Mark Bristow as CEO and his number two, Graham Shuttleworth, in the CFO’s chair.

Two-thirds of the board will be “initially” appointed by Barrick and one-third “initially” by Randgold. Randgold’s listing on the London Stock Exchange (the company is included in the FTSE 100 index) will be dumped in favour of Barrick’s share trading jurisdictions of New York and Toronto.

And Barrick shareholders, who have come through slaughter these past years, will be left to wonder: who are these new guys so suddenly in charge?

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Both men are known for outsized personalities and are used to being in charge

This summer, Barrick Gold Corp.’s executive chairman John Thornton visited the Democratic Republic of Congo, spending a week in the destitute but resource-rich country, visiting mines and meeting with Mark Bristow, chief executive of Randgold Resources Ltd.

Now, the company is pointing to the trip as evidence that Thornton and Bristow — who would hold respective roles as executive chairman and CEO under a proposed merger — have thoroughly tested their working relationship.

Still, analysts and others in the sector have flagged the two executives’ dynamic together as one of the key risks of the merger, given that their stated plan is to work as equals and split leadership responsibilities: Bristow would manage mines, and Thornton would handle strategy.

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The already difficult relationship between Barrick Gold Corp. and its African arm, Acacia Mining, has taken another blow over claims and counterclaims about Acacia’s tax payments – or lack thereof – to the Tanzanian government.

The spat comes at a tense time for Acacia, whose fate is uncertain as Barrick and African gold producer Randgold Resources merge under a deal announced this week. A new executive team will review the portfolio of the enlarged company and possibly sell, close or restructure mining projects, a process that was already well under way at Barrick.

In an interview earlier this month with The Globe and Mail, Barrick executive chairman John Thornton said Barrick’s Tanzanian mines, which have been housed in 64-per-cent-owned Acacia since 2010, “had not paid corporate income taxes” in Tanzania, although it had made other payments such as royalties and payroll taxes.

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It’s a US$6-billion gold mining deal with seemingly no synergies. Usually when a large takeover is unveiled, the acquirer will try to sell the deal to its shareholder base by talking up “synergies” – management speak for cost-cutting.

But such talk was absent from both the regulatory documents released with the announcement and presentations of both Barrick Gold Corp. and Randgold Resources Ltd. during two separate, hour-long conference calls on Monday.

So where’s the fat with the Barrick takeover of Randgold, a combination one analyst dubbed “Brandgold?” Part of the answer is there’s not that much fat to trim.

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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.

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Barrick Gold Corp. has agreed to acquire rival gold miner Randgold Resources Ltd. for roughly US$6-billion in an all-stock deal that some investors said runs counter to the Canadian gold producer’s conservative strategy and adds political risk by sharply increasing its exposure to Africa.

The combination of Barrick, one of the worst performing senior gold companies of the past decade, with Randgold, one of the best operators, was announced early on Monday, after The Globe and Mail reported on the weekend that a deal was imminent. Barrick, founded in 1983 by the late Peter Munk, was once worth in excess of $54-billion but its value plummeted after the price of gold bullion went into a tailspin in late 2011 and in the aftermath of a number of corporate blunders.

As executives at both companies extolled the virtues of the deal to investors on Monday, investors and analysts also raised concerns about Toronto-based Barrick doubling down in the very region in which it has struggled the most in recent years.

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Barrick Gold Corp.’s proposed new chief executive officer, Mark Bristow, is a larger-than-life character: a former conscript soldier in South Africa’s apartheid army whose hobby is riding motorcycles across the most dangerous and remote corners of the African continent.

Mr. Bristow has a long record of success in some of Africa’s toughest mining regions, but he could be an odd fit in Barrick’s buttoned-down corporate environment. He is notoriously outspoken, often making blunt pronouncements on the perceived errors of investors, politicians and other mining companies.

The 59-year-old miner has manoeuvred shrewdly through Africa’s challenges, building his Randgold Resources Ltd. into a multibillion-dollar empire with major projects in Mali, Ivory Coast and the Democratic Republic of the Congo.

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Barrick Gold Corp. executive chairman John Thornton has been a great admirer of Randgold Resources Ltd. CEO Mark Bristow and has circled him for years. On Monday, the bromance triggered Barrick’s US$6-billion takeover of Randgold.

It was an effective – though expensive – way for Mr. Thornton to fill the vacant chief executive position at Barrick; Mr. Bristow is to become the head of the enlarged company. Now we know why Mr. Thornton was tempted to leave that position open for four years. As far as he was concerned, there was only one candidate for the job, and that candidate was Mr. Bristow.

It’s a safe bet to assume that both men see eye to eye on many levels. If they had not, the deal to create a gold-mining colossus with a market value of more than US$18-billion surely would have fizzled.

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But Randgold the company faces a wave of potential disruptions

In a move that would allow Barrick Gold Corp. to regain its crown as the world’s largest gold producer and tie the company’s future more closely to Africa, the Toronto-based miner on Monday announced a US$6 billion plan to purchase Randgold Resources Ltd.

If the all-share, no-premium deal closes as expected in 2019, Barrick shareholders would control two-thirds of the company while Randgold would control the rest.

In a conference call on Monday afternoon, John Thornton, executive chairman of Barrick Gold Corp. said Randgold has a track record of success in the “most challenging environments in the world,” namely Africa, where Barrick’s subsidiary Acacia Mining Inc. has been struggling through a years-long tax dispute with the Tanzanian government.

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