BARRICK Gold Corporation is to unveil a proposal aimed at merging some of its gold mining operations with those of UK-listed Randgold Resources, according to Bloomberg News which cited people “familiar with the discussions”.
Bloomberg News produced an earlier report citing a mining news blog, known as IKN, which was the first to report on the news.
Andy Lloyd, a spokesman for Barrick, and Kathy du Plessis from Randgold Resources declined to comment, said the newswire service.
“In many ways, the strategies of the two companies are similar. Both aim to generate free cash flow even if gold prices drop to as low as $1,000 an ounce,” said Bloomberg News.
“They also have high internal ‘hurdle’ rates for investment; in Barrick’s case they must generate an internal rate of return of 15% and in Randgold’s 20%. Barrick, with a market cap of $12.2bn has twice the market value of Randgold,” said Bloomberg News.
Writing on John Thornton, chairman of Barrick Gold, on September, 14, the Globe & Mail observed that: “Mr. Thornton greatly admires Randgold and wants to emulate its superior returns. Randgold has earned a 93% total return for shareholders in 10 years; Barrick, a 61% loss,” it said.
In one sense, both Mark Bristow, the CEO of Randgold whose career in synonymous with the founding and development of Randgold Resources, and Thornton, are market outsiders. Bristow has long criticised the volume over value approach of gold mining companies whilst Thornton – a former banker with Goldman Sachs Group – has espoused a strategy that seeks to recapture the entrepreneurial spirit of Barrick founder, Peter Munk, whlle adopting modern day investment morés in respect of the company retaining its truly world class gold deposits whilst freeing itself of the balance.
Speculation of a tie-up between the two companies comes as this year’s Denver Gold Group conference, is about to kick into gear.
