Barrick-Randgold Merger Good Sign For Gold Market - Analysts
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(Kitco News)- The biggest merger in the gold sector in recent years,creating the world’s largest gold company could bring some optimism back to the preciousmetals market, according to some analysts.
In premarket news Monday, Barrick Gold Corp. (NYSE, TSX: ABX) announced that it wouldacquire Randgold Resources Ltd. in a merger valued at $6 billion. The move wouldcreate the world’s largest gold producer with a market cap of more than $18billion.
Both Barrick and Randgold have seen their share prices pushhigher in reaction to the news. Randgold saw a gain of more than 5% on the London Stock Exchange; meanwhile, Barrick Shares in New York are up almost 6% on the day.
“The price action in the shares tells me that the streetthinks this is a good idea,” said Colin Cieszynski, chief market strategistat SIA Wealth Management.
Jeff Klearman, portfolio manager at GraniteShares said thatthe move is complimentary for both companies. He added it could signal apotential shift in the marketplace that as suffered from historic levels ofnegative sentiment.
“It looks like these companies are positioning themselves totake advantage of a stronger gold market in the future,” he said. “I don’tthink the market will turn around tomorrow but Barrick appears to be looking longterm.”
Klearman added that this specific merger appears toaccentuate each company’s strengths, like Mark Bristow, CEO of Randgold’sability to efficiently run gold mines with Barrick’s prolific productionpipeline. The merger also gives Barrick exposure to Africa with its NorthAmerican production hedging any potential risks.
“For the gold market it’s a deal that is better done than not,”he said.
Cieszynski also thinks that the merger bodes well for thegold market.
“Barrick wouldn’t have made this move if they thoughtprices were going to be lower a year from now,” he said. “Companies arestarting to see value in their own sector and that sends a strong message toinvestors. I think Barrick sees a strategic opportunity to grow their businessand add value.”
Cieszynski said that he thinks this is the type of newsthat will bring investors back to the marketplace. He added that the next thinginvestors need to see is higher gold prices, which have been stuck around$1,200 an ounce for the last six weeks.
By Neils ChristensenFor Kitco News
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