The merger with Randgold Resources “will bode well” for Barrick Gold according to Fitch Solutions Macro Research in a commentary which also forecasts an average gold price of $1,325/oz for 2019 which will “increase profit margins and support growth.”
The Fitch assessment has been issued after the proposed merger cleared its last major hurdle – approval of the scheme by the Royal Court of Jersey on December 17 – and is set to be implemented early in the New Year.
Trading in Randgold shares will be halted on the London and Nasdaq exchanges on December 31 and shares in the combined group will start trading on the New York and Toronto stock exchanges from January 2.
The assessment also comes amidst growing speculation about could happen once the two groups are joined to create the world’s biggest gold miner and also over the potential knock-on effects on the rest of the gold industry.
Randgold CEO Mark Bristow – who is the designated president and CEO of Barrick – commented “Barrick will be the world’s biggest gold miner but our focus will be on making it the industry’s most valued company.”
According to a report by Bloomberg, Bristow – described as “a South African geologist and big-game hunter” and Barrick chairman John Thornton – described as “a Goldman Sachs alumnus educated at Yale, Harvard and Oxford” make up “a corporate odd couple”.
Bloomberg reckons this poses “the classic risk of any merger, the culture clash. Thornton, (64) is unfailingly genteel and rarely makes public comments………..Bristow (59) cuts a swashbuckling figure.”
Over the years the outspoken Bristow has “put the boot in” to a range of competitors including Barrick as well as executives such as investment bankers – Thornton’s former profession.
Bloomberg quotes Joe Foster – a New York based portfolio manager at Barrick’s largest shareholder, VanEck Associates – as saying “Still, Thornton has probably realised he needs help to take the company to the next level. This is now Mark Bristow’s company and I think John knows that.”
The Fitch report highlights two key problem areas which will have to be dealt with by Bristow. The first is the Pascua Lama project situated on the border between Chile and Argentina which has been suspended on the Chilean side “due to outstanding legal, regulatory and permitting matters.”
Then there’s the difficult situation facing Barrick’s Tanzanian subsidiary – Acacia Mining – which is locked in an increasingly bitter battle with the Tanzanian government.
A separate Bloomberg article reports speculation that AngloGold Ashanti could be looking at getting out of South Africa and moving its primary listing to London commenting that, “listing in London would give AngloGold exposure to a big pool of investors with very few options to buy into gold equities.”
Speculation over AngloGold getting out of South Africa has been around for years. Former AngloGold CEO Srinivasan “Venkat” Venkatakrishnan tried split the group into separate South African and foreign arms in 2014 but was forced to drop the proposal after a shareholder rebellion over the debt that the foreign arm would have to take on.
Since then AngloGold has reduced its debt materially and sold off all its SA operations bar one – the Mponeng mine – which management says remains a “core asset.”
Asked for comment on this latest version of the speculation over AngloGold’s future in South Africa spokesperson Chris Nthite replied, “ we never comment on market speculation.”