The companies are said to be in advanced talks to coalesce with African based rival Randgold Resources Ltd., guarding the Toronto-based sapper’s designation as the world’s largest producer of the metal.
According to one of the three people familiar with the talks, a deal is in the cards. Should the parties fail to agree on the terms, the negotiations could still fall apart. Officials from and Barrick are in Colorado Springs for the Denver Gold Forum.
A blog specifying in mining news earlier reported that an announcement regarding the merger is imminent and may come on Sunday further adding, “multiple sources have told the desk the deal is on.”
The strategies of both the companies are similar in many ways. The two companies are highly fixated on manufacturing costs, intending to build portfolios that will produce free cash flow even if the gold prices drop to as low as $1,000 per ounce. Furthermore, they have extraordinary internal “hurdle” rates for investment; in Randgold’s case, they must produce 20 % and in Barrick’s 15%. On the Friday’s spot market, the metal settled at $1,200.04.
Both the companies are commanded by opinionated leaders with strong visions: Randgold’s Chief Executive Officer Mark Bristow and Barrick Executive Chairman John Thornton.
In the case of the Canadian miner, a merger deal would boost its output even when the company’s stagnant pipeline results in crashing stocks. In 2017, Barrick’s gold production fell to 5.3 million ounces, more than 8 million ounces a decade earlier. The company sold stakes to partners or shed non-core assets outright to fix its balance sheets as its debt reached $15.8 billion in 2013.
Barrick can also reap the benefits from Randgold’s experience in cutting through the tough environment in Africa. Often the mining companies have found themselves stuck in a wave of resource nationalism around the world, with the tide being particularly strong in many parts of Africa where statesmen threaten to turn turtle age-old agreements to extract surplus economic rewards from local resources.
Acacia Mining Plc, a company majorly-owned by Barrick, has been stuck in halfway house as Tanzania banned exports of mineral concentrates in 2017 and imposed a $190 billion tax on the African company.
The only thing that remains to be uncertain is the dynamics between the two top executives of the companies. It was only last year when Mr Bristow, the executive of Randgold made a blistering comment on Barrick’s history in Tanzania, citing Acacia’s troubles were prompted by Barrick’s failure to deliver value to the country.
However, the comments ruffled a few furs of Barrick executives at that time, Mr Thornton recently appreciated Randgold’s performance in its interview with Canada’s Globe and Mail. Thornton also clarified that the Acacia mines have never paid income tax to the Tanzanian Government.
Mr Thornton who seldomly speaks to media is the driving force behind all of Barrick’s abiding strategies, including its investment in introducing the company’s mining operations into the digital age.
He has played a vital role in negotiating long-term partnerships for Barrick, especially with Chinese partners, and has parachuted into tough negotiations at operations around the world, including Tanzania and Argentina.
Contrastingly, Randgold’s Bristow is well known for behaving unrestrainedly. Frequently he has excoriated the gold industry for failing to invest in exploration and has claimed that most of the gold coming out of the world’s mines are extracted at a loss.