Barrick in $6B deal to become world’s largest public gold producer

Updated September 24, 2018 - 6:59 pm

Nevada’s largest mining employer, Barrick Gold, is purchasing African peer Randgold Resources for$6.05 billion in stock to form the world’s largest publicly traded producer of the precious metal.

The acquisition, announced Monday, would create an $18 billion mining company with combined annual production of 6.5 million ounces of gold, about a fifth more than its closest competitor, Newmont Mining Corp. The companies had a combined net income of $1.85 billion last year.

Randgold CEO Mark Bristow would take the reins of the combined company, which would be called New Barrick Group. Bristow said it plans to expand production in Nevada, which “comes with enormous potential.” The state is home to gold mines with some of the world’s lowest production costs, an online company presentation showed.

Barrick shareholders would own 67 percent of the combined company, with Randgold shareholders owing the rest. The transaction is expected to close in the first quarter of 2019.

Investors cheered the acquisition Monday. Randgold shares rose 6.6 percent to close at $68.14, while Barrick jumped 5.4 percent to $11.04.

Largest reserves

New Barrick would possess 78 million ounces of gold reserves, the largest among publicly traded companies, across mines in North America, South America, Africa and the Australia Pacific.

Its average cost of producing one ounce of gold would be $611, among the lowest levels for large-scale, publicly traded miners. With gold prices currently hovering around $1,200, that implies an earnings margin of just under 50 percent.

Barrick Gold Executive Chairman John Thornton said last month that it is boosting investment at its mines in Nevada, where the company’s average production cost is just $426 an ounce.

“There’s a lot of interesting geology still around those assets, and that’s why in the last 18 months you’ve seen us pivot more towards Nevada,” Thornton said at a town hall meeting in August. “As we have looked at it more carefully, we have realized there is a lot there still.”

About one-third of New Barrick’s gold production would come from Nevada, while a quarter would be generated in Africa. The acquisition would not generate much in costs savings, said Jefferies mining analyst Alan Spence.

“While direct operational synergies are unlikely to be significant and increased Africa exposure is a clear risk, the addition of Mark Bristow as president and CEO is a positive,” Spence said in a note Monday. “All things considered, this transformational deal should be good for Barrick shareholders.”

Asset sales

The deal comes amid tough times at Barrick Gold — which employs 3,000 people in Nevada — as its global gold output declines amid depressed mine sales, and as its stock price sinks.

From November 2008 to September 2011, the price of gold rose nearly threefold to $1,875 an ounce as investors bought the metal as a safe haven during the financial crisis and a hedge against surging global money supply. The price frenzy pushed Barrick to scoop up more mines.

However, the precious metal has tumbled by more than a third since then as the global economy has recovered and inflation has remained tame. By 2014, Barrick had a $13 billion debt burden. Thornton has aggressively sold off assets over the past few years to reduce that figure to about $5 billion.

Barrick’s production has fallen from a high of 8 million ounces to 5.3 million ounces last year. It forecast gold production to decline further this year to 5 million or 4.5 million.

Newmont, which also operates in Nevada, was set to overtake Barrick as the largest publicly traded gold producer in 2018 with a projected output of 4.9 million to 5.4 million ounces.

New Barrick would continue to sell off less attractive assets, Thornton and Bristow said on a conference call. The enlarged company would concentrate investment on the best-performing mines, like Cortez in Northern Nevada, and return more money to shareholders, they said.

Barrick and Randgold’s share prices have each fallen 37 percent over the past 12 months through Friday’s close, compared with a 20 percent gain for the Dow Jones Industrial Average, as gold prices have continued to falter and political turmoil in Africa had stymied production.

Contact Todd Prince at 702-383-0386 or tprince@reviewjournal.com. Follow @toddprincetv on Twitter.

Business Videos
Faraday puts Las Vegas land on the market
Nearly two years after Faraday Future bailed on its North Las Vegas auto factory, the company has put its land up for sale. (Michael Quine/Las Vegas Review-Journal)
El Cortez owner Kenny Epstein on running the iconic property
Kenny Epstein, owner of the El Cortez Hotel in downtown Las Vegas, talks about Jackie Gaughan mentorship and answers rumors about bodies in the basement at the mob-era casino. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
LVCVA recommends construction of underground people mover
The Las Vegas Convention and Visitors Authority announced the recommendation for an underground people mover for the convention center. The system would have the potential to expand and connect Downtown and the resort corridor all the way to McCarran. (Michael Quine/ Las Vegas Review-Journal)
LVCVA/Boring Company Press Conference
The Las Vegas Convention and Visitors Authority announced a collaboration with Elon Musk's The Boring Company to develop and operate an autonomous people mover system for the Las Vegas Convention Center District.
International Pizza Expo includes green and gluten free
The International Pizza Expo at Las Vegas Convention Center included companies focused on vegan and gluten free, and plant-based pizza boxes. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
International Pizza Expo kicks off in Las Vegas
The first day of the International Pizza Expo at Las Vegas Convention Center is everything Pizza. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
T-Mobile program aids guests with sensory needs
A program at T-Mobile Arena is designed to provide a more sensory friendly experience for guests.
Photo Booth Expo
Danielle May talks about how Simple Booth transformed her Volkswagen bus into a business.
Nevada Gaming Commission's highest fines
The highest fines assessed by the Nevada Gaming Commission, according to commission Chairman Tony Alamo: 1) Wynn Resorts Ltd., $20 million, 2019 2) CG Technology (then known as Cantor G&W Holdings), $5.5 million, 2014 3) The Mirage, $5 million ($3 million fine, $2 million compensatory payment), 2003 4) Stardust, $3 million, 1985 5) Santa Fe Station, $2.2 million ($1.5 million fine, $700,000 compensatory payment), 2005 6) Las Vegas Sands, $2 million, 2016 7) CG Technology, $1.75 million, 2018 8) CG Technology, $1.5 million (also $25,000 in escrow for underpaid patrons), 2016 9) Caesars Entertainment, $1.5 million, 2015 10) Imperial Palace, $1.5 million, 1989 11) Peppermill Casinos, $1 million, 2014
Tiny Pipe Home vs Shipping Crate
A Tiny pipe home was displayed at the International Builders Show this week in Las Vegas.
Auto repair shortage affects Las Vegas
The auto repair industry is facing a national shortage of workers.
Franchising industry booming
Experts say Las Vegas is a hotbed for the franchise industry.
Africa Love owner talks about his store in Las Vegas
Mara Diakhate, owner of Africa Love, gift and decor store, talks about his store in Las Vegas. (Bizuayehu Tesfaye/ Las Vegas Review-Journal) @bizutesfaye
Developer gets approval to build homes at Bonnie Springs
The Clark County Planning Commission has approved a plan to build 20 homes on the site of Bonnie Springs Ranch. (Michael Quine/Las Vegas Review-Journal)
Dig This opens new location In Las Vegas
Remember when you were a kid and played with construction toys in the sand box? Dig This Las Vegas has the same idea, except instead of toy bulldozers, you get to play with the real thing. (Mat Luschek/Review-Journal)
Town Square developer Jim Stuart building again in Las Vegas
Las Vegas’ real estate bubble took developers on a wild ride, something Jim Stuart knows all too well. (Las Vegas Review-Journal)
Salon opens at Veterans Village
T.H.E. Salon, owned by Nicole Christie, celebrated their opening at the Veterans Village with a ribbon cutting ceremony.
Southwest Airlines considering Las Vegas-Hawaii flights
Southwest Airlines CEO Gary Kelly says the airline is "very focused" on Hawaii. Hawaiians have a strong presence in Las Vegas.The city’s unofficial status is “Hawaii’s ninth island.” In 2018, at least 2,958 people from Hawaii moved to Nevada. Of those, 88.7 percent moved into Clark County, according to driver license surrender data. According to the Las Vegas Convention and Visitors Authority, 310,249 people came to Las Vegas from Hawaii in 2018.
Fewer Nevadans are celebrating Valentine's Day
Fewer Nevadans are celebrating Valentine's Day. About 1.2 million Nevadans are expected to celebrate this year, a 5 percent drop from 2018. A growing number of people consider Valentine’s Day over-commercialized. Others weren’t interested in the holiday or had nobody to celebrate with. But spending is expected to rise. Those who do celebrate are buying for more people. The average American is expected to spend about $162 this year for Valentine’s Day, a 57 percent jump from a decade prior. Katherine Cullen, director of industry and consumer insights at NRF
Foreclosures of mansions in Las Vegas
Las Vegas was ground zero for America's foreclosure crisis after the housing bubble burst. (Eli Segall/Las Vegas Review-Journal)
Rick Helfenbein talks about the impact of tariffs on the clothing industry
MAGIC fashion convention showcases men's clothing trends
The MAGIC fashion convention has come to Las Vegas at the Mandalay Bay Convention Center to showcase some of the hottest clothing trends for men. (Nathan Asselin/Las Vegas Review-Journal)
Allegiant Air flight attendants learn how to handle a water landing
Field instructor Ashleigh Markel talks about training prospective flight attendants for Allegiant Air getting live training with a raft for a water landing at the Heritage Park Aquatic Complex in Henderson on Monday. (John Hornberg/Las Vegas Review-Journal)
Smith & Wollensky CEO Michael Feighery speaks
Smith & Wollensky CEO Michael Feighery speaks about the new Smith & Wollensky restaurant coming to the Grand Canal Shoppes at The Venetian in Las Vegas.
Smith & Wollensky CEO Michael Feighery speaks
Smith & Wollensky CEO Michael Feighery speaks about the new Smith & Wollensky restaurant coming to the Grand Canal Shoppes at The Venetian in Las Vegas.
Smith & Wollensky CEO Michael Feighery talks about Las Vegas return
Michael Feighery, CEO of Smith & Wollensky Restaurant Group, discusses the restaurant's upcoming return to the Las Vegas Strip.
Apartments to Come to Hughes Center
Developer Eric Cohen discusses his current building project at the Hughes Center office park in Las Vegas, Thursday, Jan. 31, 2019. Caroline Brehman/Las Vegas Review-Journal
Stratosphere to rebrand to The STRAT
The Stratosphere, a 1,150-foot-tall property in Las Vegas will be renamed The STRAT Hotel, Casino and Skypod.
Local designers’ picks for the Las Vegas Market
The trends that local interior designers are noticing at the Las Vegas Market this year. (Rachel Aston/Las Vegas Review-Journal)
Trends in bath products at Las Vegas Market
Camille Herd, the showroom manager for European Bath Kitchen Tile & Stone, talks about the popularity of free-standing bath tubs. (Rachel Aston/Las Vegas Review-Journal) @rookie__rae
ad-high_impact_4
TOP NEWS
Home Front Page Footer Listing