The New Barrick Begins Trading Wednesday

Company resulting from the merger with Randgold Resources is a sector-leading gold mining company with five top-class gold assets

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Wednesday marked the first trading day of the new company, still known as Barrick, which was created from the merger between Barrick Gold Corp. (ABX, Financial)(TSX:ABX) and Randgold Resources Ltd. (GOLD, Financial).

The new Barrick will trade under the new symbol GOLD on the New York Stock Exchange and remain under the symbol ABX on the Toronto Stock Exchange. GOLD is the symbol of Randgold Resources on the Nasdaq.

The new Barrick is now a sector-leading gold mining company with five top-class gold assets. These assets are located in the most prolific gold geographical areas of the entire globe: the Cortez and Goldstrike mines in Nevada, the 45% interest stake in the Kibali mining joint venture in Congo, the 80% ownership of the Loulo-Gounkoto mine in Mali and the 60% interest stake in the Pueblo Viejo mining joint venture in the Dominican Republic.

Based on expectations of production for full-year 2018, the new company could supply the yearly gold market with a total output hitting 6.25 million ounces of gold, which will be produced at the lowest total cash cost of senior gold operators. Being the lowest cost does not necessarily mean, however, that the new Barrick will also be the world's largest producer of gold.

In fact, the focus on five tier-one mines could release the other 13 mineral deposits for sale, accounting for a total of more than 750,000 ounces of gold and 400 million pounds of copper.

Amid this hefty portfolio of smaller assets, the Lumwana copper mine in Zambia represents the largest potential deal.

It is extremely difficult to predict how much Barrick could fetch from the sale of Lumwana; however, considering a yearly copper production of around 215 million pounds and a LT price for copper of $3 per pound, a valuation of $1.2 billion to $1.3 billion appears as possible.

The new miner may also dispose of its 50% interest stake in Chile's Zaldivar copper mining joint venture, its 63.9% stake in Tanzania-focused operator Acacia Mining (ACA.L), the Tongon mine in Ivory Coast, the Morila in Mali and the Massawa mine in Senegal. Zaldivar is in joint venture with Antofagasta Plc (ANTO.L).

The list of assets to unload could also include the 50% stake in the Kalgoorlie gold mining joint venture, the Hemlo gold mine in Canada and the Lagunas Norte mine in Peru. Kalgoorlie is in joint venture with Newmont Mining Corp. (NEM, Financial).

The proceedings will strengthen the balance sheet of the combined company further and support the construction of two mines in the U.S. that have the potential to become tier-one producing assets: the Goldrush-Fourmile mine and the 75% interest stake in the Turquoise Ridge mine. If the new Barrick accomplishes its target, the gold mining giant will have seven instead of the current five of the top-10 tier-one gold assets of the entire industry.

The combined company already holds a large reserve base of over 82 million ounces of gold -- wealth to set Midas to envy.

Subsequent to the building of the two additional gold mines, the new Barrick will have a portfolio that will hardly be replicable by any other gold mining major that could result from another big merger and acquisition transaction in the mining industry.

With regard to total reserves of copper, this surpasses 11 billion pounds.

The board of directors of the new company has been reformed and is now composed of nine members, of which seven are independent executives, with John Thornton being the non-independent executive chairman. Mark Bristow, the chief executive of Randgold Resources, has become the non-independent president and CEO.

The new board, and especially Mark Bristow, is so welcomed by The Canadian Imperial Bank of Commerce (CM)’s analyst Anita Soni that the Toronto-based firm has resumed coverage of Barrick issuing an outperform rating.

More re-ratings may follow the consummation of the merger between Barrick Gold Corp. and Randgold Resources Ltd. with consequences for the share price that at the end of Wednesday stood around $13.30 on the New York Stock Exchange and at CA$ 17.81 on the Toronto Stock Exchange.

Disclosure: I have no positions in any security mentioned.

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