It’s now April, Kinross now owns Dixie and we also know its cash cow Kupol is gone (to Highland Gold), thanks to Vladimir Putin and all that. All’s fair in love and war, I suppose. Meanwhile, GBR underbidder Barrick has seen its share price improve and beat the sector average in Q1, the market’s new perception of GOLD as a financially prudent entity scoring Brownie points for Bristow & Co.
So, it’s asset-rich Kinross now sucking air instead of cash from Kupol, trading under book and with a damaged share price, and it’s cash-rich Barrick with buoyant equity looking for assets. You cannot tell me GOLD doesn’t have the paper with which to act, so what would Special K do for the bigger company?
Easy enough, it would give GOLD some nice assets. North American operations (we know they like those), African expansion projects (ditto) and the one that recently got away, now at a significant discount. Here’s a list:
- Tasiast: Yup, big enough and compared to the amount of cash embedded into that thing since the Red Back days, GOLD would pick it up for a song.
- Dixie: We know Barrick likes it, no matter what Bristow said afterwards. They wouldn’t have bid on it otherwise.
- Fort Knox/Round Mountain/Battle Mountain: The point here is that GOLD now has a North American blueprint on how to cut costs at its operations, thanks to the improvements made at the Nevada Gold Mines JV. Synergies are not difficult to imagine and the political risk factor would be a positive.
- Paracatu: Maybe not world class in size, but it never seems to get much radar when lists of South American gold mines are drawn up. That’s unfair, as Paractu is a real under-the-radar cash cow and a proven moneyspinner.
- La Coipa: Small at the moment, but it and K’s other Chilean properties would fit nicely into Barrick’s Andean strategy
- Chirano: Mature and high cash cost, GOLD could flip it out. No M&A is a perfect fit, after all.
With 1296.5m shares out and this evening’s U$5.86 share price Special K has a market cap is U$7.6Bn, that compares to an asset book of U$8.6Bn. So yes, Barrick could pay up (shares with a cash component, no problem), the asking price wouldn’t even get to 20% of the eventual newco and once complete, those assets would be accretive to Barrick’s balance sheet. No Kupol to cause geopolitical strife, plenty of assets with which to work and nobody’s going to lament the loss of the Kinross board. There’s both logic and mathematical room for this to happen, plus a window of opportunity while K’s share price lags the field.