Barrick, Randgold to Create Gold-Mining Giant With $18.3 Billion Merger -- 2nd Update

By Scott Patterson

Barrick Gold Corp. agreed to buy Randgold Resources Ltd. for $6 billion in an all-share merger that will create the world's largest gold company worth $18 billion, with a dominant position in Africa.

Barrick shareholders will own 67% of Randgold, and Randgold investors will own 33% of Barrick, the companies said Monday. The deal remains subject to shareholder approval.

In London morning trading, Randgold shares were up 5.1% at GBP51.76 ($67.68)

The deal will pair up two of the gold-mining industry's biggest personalities: Barrick's John Thornton, a former Goldman Sachs Group Inc. executive, and Mark Bristow, the chief executive of Randgold renowned for taking motorcycle trips through Africa.

Both executives are also known for focusing on keeping costs in line and reining in debt. Barrick reported an adjusted profit of $876 million last year, compared with a loss of more than $10 billion in 2013. Randgold posted net income of $335 million in 2017, a 14% increase from the previous year.

Based on 2017 results, the enlarged group would have generated revenue of $9.7 billion and adjusted earnings before interest, taxes, depreciation and amortization of $4.7 billion, the companies said.

The talks between the companies began in 2015, Mr. Bristow said on a conference call Monday.

"Barrick and Randgold are cut from a single cloth," Mr. Thornton said on the call. "Our two companies think and act in the same way."

Mr. Thornton will remain as executive chairman of the combined company and Mr. Bristow will be president and CEO, in charge of day-to-day operations.

Barrick and Rangold first considered a deal in 2015 and merger discussions were initiated near the beginning of the year, a person familiar with discussions said. As talks progressed this summer some of Barrick's directors traveled to Africa to visit some of Rangold's mining sites including its Kibali gold mine in the Democratic Republic of Congo, the person said.

Barrick, the world's largest gold producer, has struggled in recent years under Mr. Thornton's leadership, and its stock has lagged behind competitors such as Newmont Mining Corp., its closest rival by production. Barrick's portfolio of gold mines has shrunk under Mr. Thornton, with about a third of the 30 mines when the executive was appointed executive chairman of the gold-mining giant in 2014.

Barrick's gold production has also dwindled, falling more than 25% since 2013 to 5.3 million ounces last year. The acquisition of Randgold, whose production is focused on Africa and which produced 1.3 million ounces in 2017, will help make up the loss.

Barrick has also lost several experienced senior executives in recent years. Its president, Kelvin Dushnisky, left the company in August.

The big bet on Africa comes at a time when Barrick needs help navigating the challenges of working in the resource-rich continent. Those struggles were highlighted last year after the Toronto miner's majority-owned African subsidiary Acacia Mining PLC agreed to pay $300 million to the government of Tanzania to resolve tax and revenue sharing disputes over three gold mines. Acacia's stock price in London has sunk nearly 30% since paying the penalty.

While Mr. Bristow's career has been focused on mining, Mr. Thornton is a latecomer to the industry. He retired as president of Goldman in 2003 after a 23-year career with the firm as a deal maker and head of European and Asian expansion. He became an adviser and teacher with the business school at Tsinghua University, one of China's top schools.

Mr. Thornton's China connections attracted the attention of Barrick's founder, the late Canadian mining tycoon Peter Munk, who invited the banker in 2011 to be a member of the company's advisory board. In 2012, Mr. Thornton was promoted to co-chairman of its board of directors.

With gold prices swooning in 2013, Mr. Thornton sought to negotiate a merger with Colorado's Newmont Mining. But the talks fizzled, and Mr. Thornton, appointed executive chairman of Barrick, focused on shrinking the assets of the debt-laden mining behemoth.

Rangold, for its part, is widely seen as one of the best managers of gold assets in the world. Mr. Bristow is known for saying that he can profitably operate his company's mines even if gold prices were to fall to $1,000 an ounce, a promise few other mining companies could make.

"We will now be able to step beyond our African boundaries onto the global stage," Mr. Bristow said.

In a separate agreement, Barrick said Shandong Gold, a Chinese gold miner, would purchase $300 million of Barrick's shares, and Barrick would invest an equivalent amount into Shandong's publicly listed mining company.

Jacquie McNish contributed to this article.

Write to Scott Patterson at scott.patterson@wsj.com

(END) Dow Jones Newswires

September 24, 2018 07:00 ET (11:00 GMT)

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