Barrick buying Randgold in all stock deal to create global mining giant [UPDATED]

Toronto—Barrick Gold Corp. has agreed to take over Randgold Resources in an all-share deal worth about $7.9 billion that will reinforce its status as the world’s largest gold miner.

Randgold investors will receive 6.128 Barrick shares for each of their shares to own about a third of a new Barrick group with some $12.5 billion in revenue.

“The combination of Barrick and Randgold will create a new champion for value creation in the gold mining industry, bringing together the world’s largest collection of Tier One gold assets, with a proven management team,” John Thornton, Barrick’s executive chairman, said in a statement Monday.

“There are no premiums in the merger because we strongly believe in the opportunity to add significant value for our shareholders from the disciplined management of our combined asset base and a focus on truly profitable growth.”

The merger, expected to close in the first quarter next year, brings together Toronto-based Barrick’s global portfolio heavily focused on the Americas and Randgold’s African focused operations.

Barrick spun out its African assets into its 64-per-cent owned Acacia Mining eight years ago. The company is embroiled in a taxation dispute with Tanzania that has led to significant production cuts.

Randgold’s assets, which produced 1.32 million ounces of gold last year, will see Barrick retain its status as the world’s largest gold producer. Newmont Mining Corp. was expected to eclipse Barrick this year with a upwards guidance of 5.4 million ounces to Barrick’s five million ounces, after Barrick narrowly kept its status as the biggest producer last year.

Thornton will keep his spot as executive chairman, while Randgold chief executive Mark Bristow will become president and chief executive officer.

The combined company will follow Thornton and Bristow’s shared focus on high-quality assets and focus on cash flow. Management has committed to identify assets that don’t meet their investment criteria for potential sale within a year of the merger.

“Our industry has been criticized for its short-term focus, undisciplined growth and poor returns on invested capital. The merged company will be very different,” said Bristow in a statement.

“Its goal will be to deliver sector-leading returns, and in order to achieve this, we will need to take a very critical view of our asset base and how we run our business, and be prepared to make tough decisions.”

Thornton has worked to streamline the company since taking the top job in 2013. He has also looked to increase partnerships with Chinese companies.

On Monday, the company announced a deepening of its ties with Shandong Gold Group Co. Ltd. that will see each company buy up to US$300 million of each other’s shares. The two companies are jointly developing the Veladero project in Argentina and evaluating options for the nearby Lama project.

Following the close of the Randgold deal, Barrick will keep its corporate office in Toronto but said it would move its province of incorporation to British Columbia because of its more modern corporate statutes that provides more flexibility, especially in capital management and board composition.

The deal is subject to approval by the shareholders of both companies, regulatory approvals and other customary closing conditions. Barrick has agreed to a US$300 million break fee.

Barrick shares gained nearly six per cent or 80 cents at $14.32 in morning trading on the Toronto Stock Exchange.