The gold industry has seen significant changes over the past year. What was one a sector that lagged behind the market and underperforming analyst expectations have been shaken up thanks to a number of mega-mergers in the sector.
The $18 billion-acquisition and creation of the world’s largest gold mining company, Newmont-Goldcorp, appears to be just the beginning for the market.
Speaking at an industry event, Barrick Gold’s (TSE: ABX) CEO warned that the global economic situation has never been more turbulent, and that gold will make a major comeback in the near future.
The chief executive spoke at an industry conference on Wednesday, highlighting the need for gold companies to maximize returns, primarily through mergers.
By trimming down on excess costs by liquidating redundant assets, Barrick’s CEO went on to say this would be a key strategy for the industry going forward, especially to attract investors looking to diversify after years of avoiding gold mines due to their poor returns.
“The industry is in decline and we have put ourselves in a very a tight spot because we haven’t invested in exploration and our future…The supply side of our industry is very tight…We have to be better, we have to be more focused on returns if we are going to attract investment around our industry,” said Mark Bristow, Barrick Gold’s new CEO who took the helm in January at Barrick after its takeover of Africa’s Randgold. “The world has never been more chaotic economically than it is today…people are searching for alternative reserve currencies and gold will play a natural role as it has done
Barrick made news earlier in the year when it jumped on the opportunity to acquire Goldcorp at the time before it was gobbled up by Newmont. After withdrawing it’s $18 billion offer to instead form a joint venture in Nevada, Barrick has gone on to make other acquisition offers in the gold sector.
Yesterday, Barrick offered to purchase the remained 36.1% of shares remaining from the London-listed Acacia Mining (LON: ACA) at a discount to its market price. Overall, the offer suggests a $787 million value for the company, with Barrick providing $285 million in stock in exchange for the remaining shares of the company.
At the same time, Barrick has said that it’s been helping to settle a tax dispute between Acacia and the government of Tanzania. However, the African nation isn’t ready to enter into an agreement directly with Acacia, so the idea is that Barrick’s involvement in the affair could make the difference in negotiations with government officials.
Shares of Barrick Gold ended up dipping slightly today by 1.5 percent. Most of the coverage hasn’t been on Bristow’s comments at the conference but rather on the company’s move to purchase Acacia Mining. Shares of Barrick have remained turbulent over the past six months, rising and falling sporadically but remaining between C$16 and C$20 per share.
As for the price of gold, it remained the same for the most part today, inching up only 0.15 percent and settling at $1,283.76 per ounce.