In an era when depressed metal prices are posing an existential threat to many gold miners, especially in South Africa, perhaps the most obvious solution is consolidation.
Because the financial fate of most mining companies is very sensitive to changes in the gold price, it was only a matter of time before a mega-merger in the sector was bound to occur.
Earlier this autumn, amid widespread losses across Africa's once-dominant gold mining industry, one of the continent's biggest miners was forced to consider all of its options. Randgold Resources, a company with a market capitalization of nearly $7 billion, was looking for a way to weather the storm.
Speculation spread in September that one of Randgold's rivals could step in and offer to buy the company. After Newmont Mining passed on a possible deal, Canada's biggest multinational miner, Barrick Gold, seized the opportunity.
The deal involves a stock-for-stock merger that will cost Barrick more than $6 billion. This will reportedly make the combined company worth over $18 billion in total.
In effect, that makes the merged entity the largest gold-mining firm in the world (and, in all likelihood, the largest-ever in world history).
However, as analysis and reporting by Mining.com reveals, this also means that Randgold will be delisted from London's premier stock exchange.
Not only is London the epicenter where the shares of most of the major gold miners have historically traded, but Randgold (with the fitting ticker abbreviation GOLD) has a reputation as "the most liquid" among all of the miners. Unlike other miners whose operations include other metals like copper, Randgold has focused almost exclusively on the yellow metal—making it an attractive gold stock for investors who want exposure to precious metals.
Some analysts are worried that the already-struggling stock market in the U.K. will be hit hard by the departure.
Meanwhile, Barrick trades on the New York Stock Exchange (NYSE) as well as the Toronto Stock Exchange (TSX). The new merged corporation will likewise trade in North America rather than London.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.