EX-99.1 2 d616847dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

 

LOGO

A NEW CHAMPION FOR LONG-TERM VALUE CREATION
Notice of Special Meeting of Shareholders November 5, 2018
Shareholders are reminded to vote their proxy by 5:00 p.m. (Toronto time) on November 1, 2018.


Inside this Circular

 

Letter from the Executive Chairman

     iii  

Notice of Special Meeting

     1  

Key Terms

     3  

Questions and Answers Relating to the Merger and the Continuance

     7  

Expected Timetable of Key Events

     13  

Information in this Circular

     14  

Notice to Shareholders in the United States

     17  

Forward-Looking Information

     18  

Executive Summary

     21  

Meeting and Voting Information

     33  

Proxy Solicitation and Meeting Materials

     33  

Meeting Procedures

     33  

Voting Procedures

     34  

Other Important Information

     36  

Business of the Meeting

     37  

Share Issuance Resolution

     37  

Continuance Resolution

     37  

Other Business

     38  

The Merger

     39  

Details of the Merger

     39  

Background to the Merger

     39  

Fairness Opinions

     40  

Recommendation of the Board

     41  

Reasons for the Recommendation of the Board

     42  

The Merger Announcement and the Scheme

     44  

Confidentiality Agreement

     46  

Expenses

     46  

Cooperation Agreement

     46  

Irrevocable Undertakings and Voting and Support Agreements

     53  

Acacia

     53  

Listing of the Merger Shares

     53  

Information Concerning Randgold and Barrick

     55  

Barrick Following the Merger

     58  

The Continuance

     65  

Risk Factors

     72  

Other Information

     76  

Consents of Experts

     81  

Directors’ Approval

     83  

 

Barrick Gold Corporation | Special Meeting Circular      i  


SCHEDULE A: Share Issuance Resolution

     A-1  

SCHEDULE B: Continuance Resolution

     B-1  

SCHEDULE C: Dissent Procedures

     C-1  

SCHEDULE D: Section 185 – Business Corporations Act (Ontario)

     D-1  

SCHEDULE E: M. Klein and Co. Fairness Opinion

     E-1  

SCHEDULE F: Morgan Stanley Fairness Opinion

     F-1  

SCHEDULE G: Additional Information Concerning Randgold

     G-1  

SCHEDULE H: Randgold Historical Financial Statements

     H-1  

SCHEDULE I: Pro Forma Financial Information

     I-1  

SCHEDULE J: Cooperation Agreement

     J-1  

SCHEDULE K: Proposed Articles

     K-1  

 

ii   Barrick Gold Corporation | Special Meeting Circular


LOGO

 

   

    

  

 

October 4, 2018

 

Dear Fellow Shareholders,

 

Together we are taking an important step in taking Barrick “back to the future,” as we combine with Randgold Resources to create an industry-leading gold company through the recommended all-share merger of our two companies.

 

Barrick and Randgold are cut from a single cloth. Mark Bristow has said Randgold was modeled on Barrick as it existed in its early years under the leadership of Peter Munk and Bob Smith – the very culture we at Barrick have spent the past several years working to recover. It is no accident, then, that we believe our two companies now think and act in the same way. We share a deep commitment to a partnership culture, both within our companies and in our relationships with our external partners. We both employ a decentralized business model: a small, high-quality corporate office focused on the disciplined allocation of human and financial capital. We are both obsessed with talent and relentless in our pursuit of operational excellence. We are both committed to financial prudence, particularly in maintaining a strong balance sheet. Perhaps most important, we are of one mind about the true source of share-holder value in the gold industry: per-share returns over the long-term as measured by growth in free cash flow per share.

 

While we share the same culture, we also combine different strengths that are perfectly complementary. Randgold has the agility and swift-footedness of a younger and smaller company – much like Barrick in its early years – while Barrick has the infrastructure and global reach of a large public company. Most important is this: Randgold has a proven ability to operate successfully in some of the most challenging environments in the world, while Barrick has been building relationships of depth and trust with China, which we believe offers financial and political risk mitigation. In a world of declining gold reserves, the combination of these two strengths is a competitive advantage.

 

There will be several other distinctive advantages. The combined company will have five of the world’s top ten tier one gold assets by total cash cost, with two more potential tier one gold mines under development. We will have the lowest total cash cost position among the senior gold peers, with robust free cash flow to allocate toward development, dividends, and debt reduction. We will have the potential to add additional tier one assets with extensive land positions in many of the world’s most prolific gold districts. We will be able to redeploy top talent across both organizations to create new value immediately in our most important regions. And our continuance to British Columbia will allow us to operate within a more modern corporate framework. That includes the flexibility to attract a truly international Board with the expertise required by our global business, which will operate in a diverse range of jurisdictions across five continents.

 

   
 

 

Letter from

the Executive

Chairman

 

   

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

 

Barrick Gold Corporation | Special Meeting Circular      iii  


LOGO

 

    

 

At Barrick, our merger with Randgold fulfills our vision of becoming one of the leading companies in any industry or region. Both companies are contributing assets and talent to create a truly distinctive new business. Together we begin a new journey to deliver superior long-term value for our shareholders, and the countries and communities with which we partner.

 

We look forward to your participation in the Special Meeting on November 5, 2018.

 

Sincerely,

 

LOGO

 

John L. Thornton

Executive Chairman

 

LOGO

   

 

iv   Barrick Gold Corporation | Special Meeting Circular


LOGO

Notice of Special Meeting

 

 
Meeting Information   
   
Date:    November 5, 2018   
   
Time:    10:00 a.m., Toronto time   
   
Location:   

Niagara Room at the InterContinental Toronto Centre located at 225 Front Street West, Toronto, Ontario, Canada

 

  

Fellow Shareholders:

You are invited to attend Barrick’s Special Meeting of Shareholders at which you will be asked to:

 

   

consider and, if deemed advisable, pass, with or without amendment, an ordinary resolution (Share Issuance Resolution), the text of which is set out in Schedule A to the Circular accompanying this Notice, authorizing Barrick to issue such number of common shares of Barrick (Common Shares) as are required to be issued in connection with the acquisition of the issued and to be issued ordinary shares of Randgold Resources Limited, currently anticipated to be 586,609,277 Common Shares, subject to a maximum of 616,000,000 Common Shares; and

 

   

consider and, if deemed advisable, pass, with or without amendment, a special resolution (Continuance Resolution), the text of which is set out in Schedule B to the Circular accompanying this Notice, to approve the continuance of Barrick to the Province of British Columbia under the Business Corporations Act (British Columbia).

Shareholders will also transact any other business properly brought before the Meeting.

Barrick’s Board of Directors has approved the contents of this Notice and Circular and the sending of this Notice and Circular to our shareholders, each of our directors, and our auditor.

If you plan to attend the Meeting in person, you will need to register with our transfer agent, AST Trust Company (Canada), at the registration desk to obtain an admission card before entering the Meeting. Please see page 34 for further instructions.

Your vote is important. As a shareholder, it is very important that you read this material carefully and then vote your Common Shares. You are eligible to vote your Common Shares if you were a shareholder of record at the close of business on October 4, 2018. You may vote in person or by proxy. Please see page 34 for further instructions on how you can vote.

Pursuant to Section 185 of the Business Corporations Act (Ontario) (OBCA), a registered shareholder may dissent in respect of the Continuance Resolution. If the continuance becomes effective, dissenting Shareholders who have complied with the dissent procedures set forth in the OBCA will be entitled to be paid the fair value of their Common Shares. A summary of the dissent procedure is set forth in Schedule C, and the text of Section 185 of the OBCA is set forth in Schedule D, to the Circular. If you fail to comply strictly with the requirements in Section 185 of the OBCA, you may not be able to exercise your right of dissent.

 

Barrick Gold Corporation | Special Meeting Circular

     1  


If you have any questions or require assistance with voting your proxy, please contact our proxy solicitation agent, Laurel Hill Advisory Group, at 1.877.452.7184 toll free in North America, or call collect outside North America at 416.304.0211 or by e-mail at assistance@laurelhill.com.

By Order of the Board of Directors,

 

 

LOGO

Dana W. Stringer

Vice President, Corporate Secretary and Associate General Counsel

October 4, 2018

 

General Information

In this Circular, “you”, “your”, and “shareholder” refer to Common Shareholders of Barrick. “We”, “us”, “our”, the “Company”, and “Barrick” refer to Barrick Gold Corporation, unless otherwise indicated. Information in this Circular is as of October 4, 2018, unless otherwise indicated. All references to US $ or $ are to US dollars, all references to Cdn $ are to Canadian dollars, all references to GBP are to pounds sterling and all references to A$ are to Australian dollars.

 

2       Barrick Gold Corporation | Special Meeting Circular


Key Terms

 

Acacia    Acacia Mining plc
Acknowledgment    Undertaking and acknowledgment dated September 24, 2018 delivered by Shandong Gold to Barrick in connection with the Strategic Investment Agreement
Announcement Date    September 24, 2018, the date of issuance of the Merger Announcement
API    Annual Performance Incentive Plan
AST    AST Trust Company (Canada), Barrick’s transfer agent
Barrick Board Adverse Recommendation Change    See definition under “The Merger – Cooperation Agreement – Termination
Barrick Group    Barrick and its subsidiary undertakings
Barrick Permitted Dividend    See definition under “Executive Summary – Merger Announcement and the Scheme – Dividends
Barrick Superior Proposal    See definition under “The Merger – Cooperation Agreement – Barrick Non-Solicit, Randgold Right to Match and Other Barrick Covenants”
BC Registrar    Registrar of Companies under the BCBCA
BCBCA    Business Corporations Act (British Columbia)
Board or Board of Directors    Board of Directors of Barrick
Break Payment    See definition under “The Merger – Cooperation Agreement – Break Payment
Broadridge    Broadridge Investor Communication Corporation
CIM    Canadian Institute of Mining, Metallurgy and Petroleum Standards
Circular    2018 Special Meeting Information Circular
Closing    Closing of the Merger
COMESA    The Common Market for Eastern and Southern Africa, which includes the following member states: Burundi, the Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Swaziland, Tunisia, Uganda, Zambia and Zimbabwe
Common Shares    Barrick Common Shares
Competing Proposal for Barrick    See definition under “The Merger – Cooperation Agreement – Termination
Competing Proposal for Randgold    See definition under “The Merger – Cooperation Agreement – Termination
complainant    See definition under “The Continuance – Corporate Law Differences – Oppression Remedies
Confidentiality Agreement    Confidentiality agreement dated April 28, 2018 between Barrick and Randgold
Continuance    The continuance of the Company from under the OBCA to the BCBCA
Continuance Resolution    Special resolution approving the Continuance to be voted on by Shareholders at the Meeting
Cooperation Agreement    Cooperation agreement entered into between Barrick and Randgold on September 24, 2018 in respect of the conduct of the Merger
Copper Business    Consists of Barrick’s Lumwana mine, and Zaldívar and Jabal Sayid copper joint ventures
CREST    The operator’s system (as defined in the Companies (Uncertificated Securities) (Jersey) Order 1999) in respect of which Euroclear UK & Ireland Limited is the authorised operator (as defined in such Order) in accordance with which securities may be held and transferred in uncertificated form
DRC    Democratic Republic of Congo
EDGAR    Electronic Document Gathering and Retrieval System of the SEC
Effective Date    The date on which the Scheme becomes effective in accordance with its terms, or if Barrick elects to implement the Merger by means of a Takeover Offer in accordance with the terms of the Cooperation Agreement, the date that the Takeover Offer becomes or is declared unconditional in all respects
Exchange Act    United States Securities Exchange Act of 1934, as amended
Exchange Ratio    The exchange ratio of 6.1280 Common Shares for each Randgold Share payable in connection with the Merger
Excluded Shares    Any Randgold Shares registered in the name of or beneficially owned by Barrick or any other member of the Barrick Group and any Randgold Shares held in treasury by Randgold
IFRS    International Financial Reporting Standards
IRR    Internal rate of return
Jersey Companies Law    Companies (Jersey) Law 1991
Jersey Court    Royal Court of Jersey
Jersey Court Meeting    The meeting(s) of the Randgold Shareholders to be convened by order of the Jersey Court pursuant to Article 125 of the Jersey Companies Law, notice of which will be set out in the Scheme Document, for the purpose of approving the Scheme, including any adjournment thereof
JORC Code    Australasian Code for Reporting of Exploration Results adopted by the Joint Ore Reserves Committee
Laurel Hill Advisory Group    Laurel Hill Advisory Group, our proxy solicitation agent for the Meeting

 

Barrick Gold Corporation | Special Meeting Circular

     3  


Longstop Date    February 28, 2019, or such later date as may be agreed in writing by Barrick and Randgold (with the Panel’s consent and (if such approval is required) as the Jersey Court may approve)
LSE    London Stock Exchange plc
LTI    Long Term Incentive
M. Klein and Co.    M. Klein and Company, LLC which provides investment banking services through The Klein Group, LLC, a registered broker dealer in the United States
Meeting    Special meeting of Barrick, to be held on November 5, 2018 or such later date to which the meeting may be adjourned or postponed
Merger    The acquisition by Barrick of the entire issued, and to be issued, ordinary share capital of Randgold (other than the Excluded Shares) to be effected by way of a Scheme or, should Barrick so elect, a Takeover Offer, as the case may be
Merger Announcement    The announcement of the Merger dated September 24, 2018 and made pursuant to Rule 2.7 of the Takeover Code, a copy of which is attached as Schedule 1 of the Cooperation Agreement
Merger Document    If the Scheme is (or is to be) implemented, the Scheme Document, or if the Takeover Offer is (or is to be) implemented, the Offer Document
Merger Shares    The Common Shares issuable in connection with Merger
Morgan Stanley    Morgan Stanley & Co. International plc, acting together with its affiliate, Morgan Stanley Canada Limited
NASDAQ    NASDAQ Global Select Market
NI 43-101    National Instrument 43-101 – Standards of Disclosure for Mineral Projects
NI 54-101    National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer
Non-Core Assets    Assets that are neither Tier One Gold Assets nor Strategic Assets, nor form part of the strategic Copper Business
Non-Permitted Barrick Dividend    See definition under “Executive Summary – Merger Announcement and the Scheme – Dividends
NYSE    New York Stock Exchange
OBCA    Business Corporations Act (Ontario)
Offer Document    If Barrick elects to implement the Merger by way of the Takeover Offer, the document to be sent to (among others) Randgold Shareholders setting out, among other things, the full terms and conditions of the Takeover Offer
Official List    Official List maintained by the UK Listing Authority
Panel    United Kingdom Panel on Takeovers and Mergers
PGSUs    Performance Granted Share Units
Pre-emption Right    The right of pre-emption in favour of Acacia under the Relationship Agreement in the event that Barrick proposes to acquire any business or interest having more than 50% of its overall mining resources both located in Africa and in gold and/or silver
Qualified Person    An individual who is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these, has experience relevant to the subject matter of the mineral project, and is a member in good standing of a professional association
Randgold    Randgold Resources Limited, a company incorporated under the laws of Jersey with registered number 62686
Randgold 20-F    Form 20-F filed by Randgold with the SEC on March 29, 2018, which is incorporated herein by reference and reproduced in part in“Schedule H: Randgold Historical Financial Statements”
Randgold ADSs    Randgold American Depositary Shares, each of which represents one Randgold Share
Randgold Articles    The memorandum and articles of association of Randgold
Randgold Board Adverse Recommendation Change    See definition under “The Merger – Cooperation Agreement – Termination
Randgold CEO Award    One-off award of performance shares granted by Randgold to Mark Bristow in 2013
Randgold Equalization Dividend    See definition under “Executive Summary – Merger Announcement and the Scheme – Dividends
Randgold Extraordinary General Meeting    The extraordinary general meeting of Randgold to be convened in connection with the Scheme, notice of which will be set out in the Scheme Document, including any adjournment thereof
Randgold Group    Randgold and its subsidiary undertakings and, in the context of the Cooperation Agreement, Randgold and its subsidiary undertakings and any undertakings in which it controls, directly or indirectly, 20% of the voting rights
Randgold Interim Report    Interim financial report of Randgold for the six-month period ended June 30, 2018, filed with the SEC on August 9, 2018, which is incorporated herein by reference, and the special purpose interim financial report of Randgold for the six-month period ended June 30, 2018 reproduced in “Schedule H: Randgold Historical Financial Statements”
Randgold Permitted Dividend    See definition under “Executive Summary – Merger Announcement and the Scheme – Dividends
Randgold Return of Capital    See definition under “Executive Summary – Merger Announcement and the Scheme – Dividends
Randgold Shareholders    Shareholders of Randgold

 

4       Barrick Gold Corporation | Special Meeting Circular


Randgold Share Plans    Randgold CEO Award, the Randgold Restricted Share Scheme, the Randgold Co-Investment Plan, the Randgold Long-Term Incentive Plan, and the Randgold Annual Bonus Plan (to the extent it relates to the deferred bonus shares)
Randgold Shares    Ordinary shares of $0.05 each in the capital of Randgold
Randgold Special Resolution    The special resolution to be proposed by Randgold at the Randgold Extraordinary General Meeting in connection with, among other things, the approval of the Scheme and the alteration of the Randgold Articles and such other matters as may be necessary to implement the Scheme
Registered Shareholders    Registered holders of Common Shares
Registrar of Companies    Registrar of Companies in Jersey
Relationship Agreement    Amended and restated relationship agreement dated November 16, 2014 entered into between Barrick and Acacia
Remedies    Any conditions, measures, commitments, undertakings, remedies (including disposal and any pre-divestiture reorganizations by a party) or assurance (financial or otherwise) offered, imposed or required in connection with the obtaining of any regulatory clearance required in connection with the Merger and that is to come into effect after or conditional on completion of the Merger
Scheme    The scheme of arrangement proposed to be made under Article 125 of the Jersey Companies Law between Randgold and the Randgold Shareholders, with or subject to any modification, addition or condition approved or imposed by the Jersey Court and agreed to by Randgold and Barrick
Scheme Document    The document to be sent to (among others) Randgold Shareholders containing and setting out, among other things, the full terms and conditions of the Scheme and containing the notices convening the Jersey Court Meeting and Randgold Extraordinary General Meeting
SEC    US Securities and Exchange Commission
Securities Act    United States Securities Act of 1933, as amended
SEDAR    System for Electronic Document Analysis and Retrieval of the Canadian Securities Administrators
Senior Gold Peers    Agnico Eagle Mines Limited, Goldcorp Inc., Newcrest Mining Limited and Newmont Mining Corporation
Shandong Gold    Shandong Gold Group Co., Ltd.
Shandong Mining    Shandong Gold Mining Co., Ltd.
Share Issuance Resolution    Ordinary resolution approving the issuance of the Merger Shares in connection with the Merger to be voted on by Shareholders at the Meeting
Shareholders    Shareholders of Barrick
SOKIMO    Société de Miniere de Kilo-Moto SA
Strategic Assets    Assets which, in the opinion of Barrick and Randgold, have the potential to deliver significant unrealized value in the future
Strategic Investment Agreement    Strategic investment agreement entered into between Barrick and Shandong Gold on September 24, 2018, which provides for cross-investments of up to $300 million through the acquisition of shares of Shandong Mining and Barrick, respectively, through the facilities of the stock exchanges on which such shares are listed
subsidiary undertaking    Has the meaning given to such term by the UK Companies Act 2006, as amended
Takeover Code    UK City Code on Takeovers and Mergers
Takeover Offer    A takeover offer (within the meaning of Article 116 of the Jersey Companies Law) to be made by or on behalf of Barrick to acquire the entire issued and to be issued share capital of Randgold on the terms and conditions to be set out in the Offer Document
Tier One Gold Asset    A mine with a stated mine life in excess of ten years with 2017 production of at least 500,000 ounces of gold, 2017 total cash costs per ounce in the bottom half of all gold mines contained in Wood Mackenzie’s Metals Cost Curves Tool (<$748/oz total cash costs),(1) excluding state-owned and privately-owned mines.
TSX    Toronto Stock Exchange
TSX Manual    TSX Company Manual
UK or United Kingdom    United Kingdom of Great Britain and Northern Ireland
UK Financial Conduct Authority    United Kingdom Financial Conduct Authority
UK Listing Authority    UK Financial Conduct Authority acting as the authority for listing in the United Kingdom
US or United States    United States of America, its territories and possessions
US Securities Laws    Federal and state securities legislation of the United States and all rules, regulations and orders promulgated thereunder
VAT    Value-added tax and any similar sales or turnover tax (including goods and services tax)

 

(1) 

Total cash costs per ounce is a non-GAAP financial performance measure with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers, as well as comparisons between Tier One Gold Assets, are made on the basis of the data presented by Wood Mackenzie which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. For further information, see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77 and “Other Information – Comparative Measures Based on Third Party Data” on page 79.

 

Barrick Gold Corporation | Special Meeting Circular

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Wider Barrick Group    Barrick and the subsidiaries and subsidiary undertakings of Barrick and associated undertakings (including any joint venture, partnership, firm or company in which any member of the Barrick Group is interested or any undertaking in which Barrick and such undertakings (aggregating their interests) have a direct or indirect interest in 20% or more of the voting equity capital)
Wider Randgold Group    Randgold and the subsidiaries and subsidiary undertakings of Randgold and associated undertakings (including any joint venture, partnership, firm or company in which any member of the Randgold Group is interested or any undertaking in respect of which Randgold and such undertakings (aggregating their interests) have a direct or indirect interest in 20% or more of the voting equity capital)

 

6       Barrick Gold Corporation | Special Meeting Circular


Questions and Answers Relating to the Merger and the Continuance

The following is intended to answer certain key questions concerning the Meeting, the Merger and the Continuance and is qualified in its entirety by the more detailed information appearing elsewhere in this Circular. Capitalized terms used in this summary and elsewhere in this Circular and not otherwise defined have the meanings given to them under “Key Terms” starting on page 3 of this Circular.

What is the Merger?

On September 24, 2018, Barrick announced that it had agreed to acquire all of the issued and to be issued Randgold Shares pursuant to a court-sanctioned scheme of arrangement under Jersey Companies Law. If completed, the Merger will result in Barrick becoming the owner of all of the Randgold Shares on the Effective Date. Randgold Shareholders will receive 6.1280 Common Shares for each Randgold Share held on the Effective Date. At that time, our existing Shareholders will own approximately 66.6% of the Common Shares and Randgold Shareholders will own approximately 33.4% of the Common Shares.

Why did I receive this Circular?

You received this Circular because you and our other Shareholders will be asked at the Meeting to:

 

   

approve, by a majority vote, the issuance of Common Shares in connection with the proposed Merger. See “Business of the Meeting – Share Issuance Resolution” on page 37; and

 

   

approve by a special majority vote, the continuance of Barrick to British Columbia under the BCBCA. See “Business of the Meeting – Continuance Resolution” on page 37.

Why am I being asked to approve the issuance of Common Shares for the Merger?

The TSX requires an acquiring company to obtain shareholder approval if the number of shares to be issued as purchase price consideration for an acquisition exceeds 25% of its outstanding shares. The Common Shares to be issued by Barrick as consideration for the Merger are expected to represent approximately 50% of its currently outstanding Common Shares on a non-diluted basis. If Shareholder approval is not obtained, Barrick will not be able to complete the Merger on the terms currently proposed.

 

LOGO

 

The Board recommends a vote FOR the Share Issuance Resolution.

Why am I being asked to approve the Continuance?

The Business Corporations Act (Ontario) (OBCA) requires a corporation that wishes to continue out of Ontario into another jurisdiction of organization to obtain, among other consents and approvals, the approval of its shareholders by special resolution passed by at least two-thirds of the votes cast by shareholders, voting in person or represented by proxy. Completion of the Merger is not conditional on approval of the Continuance Resolution. If Shareholder approval for the Continuance is not obtained, Barrick will remain an Ontario corporation. If the Continuance Resolution is approved at the Meeting, the Continuance is expected to be effected on or prior to completion of the Merger; however, Barrick may nevertheless elect not to complete the Continuance. Similarly, even if the Merger is not completed, Barrick may complete the Continuance. Registered Shareholders have certain rights of dissent in respect of the Continuance. See “The Continuance – Dissent Right of Shareholders” and “Schedule C: Dissent Procedures”. Barrick is asking you to approve the Continuance for the reasons set out on page 65.

 

LOGO

 

The Board recommends a vote FOR the Continuance Resolution.

Why should I vote FOR the Share Issuance Resolution?

In reaching its conclusions and formulating its recommendation of the Merger to Shareholders, the Board considered a number of factors, including those listed below, with the benefit of input from Barrick’s management and financial and legal advisors.

 

Barrick Gold Corporation | Special Meeting Circular

     7  


The following is a summary of the principal reasons for the recommendation that Shareholders vote FOR the Share Issuance Resolution and the Continuance Resolution:

 

   

Creation of industry-leading gold company. The Board believes that the Merger will create an industry-leading gold company with the greatest concentration of Tier One Gold Assets in the industry, the lowest total cash cost position among Senior Gold Peers,(2) and a diversified asset portfolio positioned for growth in many of the world’s most prolific gold districts.

 

   

Superior size and scale. Based on Barrick and Randgold’s respective closing prices on the NYSE and NASDAQ as of September 21, 2018 (being the last business day prior to the Announcement Date), Barrick would have an aggregate market capitalization of $18.3 billion. In addition, based on the 2017 financial results for both companies, Barrick would have generated aggregate revenue of approximately $9.7 billion, aggregate net income of approximately $1.9 billion, and aggregate Adjusted EBITDA(3) of approximately $4.7 billion.

 

   

Ownership of five of the world’s top ten Tier One Gold Assets, with two potential Tier One Gold Assets. Barrick will, on completion of the Merger, own the following:

 

   

Tier One Gold Assets: Cortez, Goldstrike, Kibali (45%), Loulo-Gounkoto (80%) and Pueblo Viejo (60%); and

 

   

potential to become Tier One Gold Assets: Goldrush/Fourmile and Turquoise Ridge (75%).

 

   

Strong financial position. Based on the 2017 financial results of Barrick and Randgold, Barrick would have had on a combined basis the highest Adjusted EBITDA,(2) the highest Adjusted EBITDA margin(2) and the lowest total cash cost position among Senior Gold Peers:(2)

 

   

combined Adjusted EBITDA margin(3) of 48% (for the financial year ended December 31, 2017); and

 

   

combined cost of sales related to gold production of $798 per ounce and total cash costs(3) of $538 per ounce (for the financial year ended December 31, 2017).

 

   

Proven management team. Proven management team of owners with the ability to operate successfully in complex jurisdictions:

 

   

continuation of Barrick’s strong partnership-ownership culture and deep experience operating across a range of geographies, mining methods and ore types; and

 

   

from January 1, 2008 to August 31, 2018, Randgold achieved the highest return on capital among Senior Gold Peers.(2) Randgold’s share price has also risen by 76% over the same period, while Senior Gold Peers’ share prices have declined by an average of 48%.

 

   

Strong cash flow generation to support robust investment and a greater ability to return cash to Shareholders.

 

   

Established partnerships with leading Chinese mining companies.

 

   

Superior scale and the largest gold reserves among Senior Gold Peers. Potential combined 78 million ounces of proven and probable gold reserves on an attributable basis (as at December 31, 2017).(4)

 

   

Strong balance sheet with expected investment grade ratings:

 

   

the lowest ratio of gross debt (as of June 30, 2018) to Adjusted EBITDA (for the financial year ended December 31, 2017) of any Senior Gold Peer;(2)

 

   

on an aggregate basis as at June 30, 2018, Barrick and Randgold had a combined cash position of $2.7 billion and debt net of cash of $3.7 billion; and

 

 

(2) 

Lowest total cash cost, highest Adjusted EBITDA, highest Adjusted EBITDA margin, highest return on capital and lowest ratio of gross debt to Adjusted EBITDA are non-GAAP financial performance measures based on data from Bloomberg, Factset or Wood Mackenzie with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Bloomberg, Factset or Wood Mackenzie which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures on page 77 and “Other Information – Comparative Measures Based on Third Party Data” on page 79.

 

(3) 

Adjusted EBITDA, Adjusted EBITDA margin and total cash costs are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. These financial metrics are presented on a combined or aggregate basis and do not include any pro forma adjustments. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77.

 

(4) 

See “Information in this Circular – Mineral Reserve and Mineral Resource Information” on page 16 and “Barrick Following the Merger – Combined Mineral Reserves” on page 61 for details regarding qualifications, assumptions, tonnage, grade and a breakdown of proven gold reserves and probable gold reserves.

 

8       Barrick Gold Corporation | Special Meeting Circular


   

Barrick currently has an investment grade rating of BBB and Baa2 from S&P and Moody’s, respectively. As at June 30, 2018, Randgold had a net cash balance of $604 million and strong cash generation from its underlying operations. This would provide additional flexibility to Barrick to service existing Barrick debt and may positively impact Barrick’s current credit ratings.

 

   

Continued exposure to copper. Continued ownership of a strategic Copper Business that produced 413 million pounds of copper in 2017.

 

   

Significant re-rating potential. Given the quality of the combined asset base and the proven management team, with the highest Adjusted EBITDA margin (5) and the lowest total cash cost for 2017 relative to the Senior Gold Peers,(5) there is significant potential for Barrick to re-rate over time.

 

   

Fairness opinions. The Board has received a fairness opinion from each of M. Klein and Co. and Morgan Stanley to the effect that as of September 23, 2018, and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of review undertaken by each financial advisor as described in such opinions, the Exchange Ratio was fair, from a financial point of view, to Barrick. See “The Merger – Fairness Opinions”.

 

   

Support of Barrick directors. All of the directors of Barrick have entered into voting and support agreements pursuant to which they have agreed, among other things, to vote their Common Shares in favour of the Share Issuance Resolution and the Continuance Resolution. As of the Announcement Date, these directors collectively beneficially owned or exercised control or direction over an aggregate of 2,780,622 Common Shares, representing approximately 0.238% of the issued and outstanding Common Shares.

 

   

Other factors. The Board also considered the Merger with reference to current economics, industry and market trends affecting each of Barrick and Randgold in the gold market, information concerning mineral reserves and mineral resources, business, operations, properties, assets, financial condition, operating results and management’s assessment of the prospects of each of Barrick and Randgold and the then historical trading prices of the Common Shares and the Randgold Shares.

See “The Merger – Reasons for the Recommendation of the Board.

Why should I vote FOR the Continuance Resolution?

Barrick believes it is appropriate at this time to continue to British Columbia, which has a more modern corporate statute that provides additional flexibility to Barrick in a number of areas, including increased flexibility with respect to capital management and in the composition of the Board of Barrick. In British Columbia, Barrick will have greater flexibility to attract the most qualified and experienced directors from a global talent pool, who have the expertise and skills required by Barrick’s global business, that will operate in a diverse range of jurisdictions across five continents. For these reasons, Shareholders should vote FOR the Continuance. See “The Continuance”.

How was the Exchange Ratio determined?

The Exchange Ratio has been agreed based on the volume-weighted average prices of the Common Shares and Randgold ADSs traded on the NYSE and NASDAQ, respectively, over the 20 trading days ended on September 21, 2018 (being the last business day before the Announcement Date) of $10.30 and $63.13, respectively.

What is required to complete the Merger?

Completion of the Merger is conditional upon, among other things, the satisfaction or waiver of the following closing conditions (assuming that the Merger is effected by means of the Scheme):

 

   

the Scheme becoming unconditional and effective, subject to the provisions of the Takeover Code, by no later than the Longstop Date;

 

   

approval of the Scheme at the Jersey Court Meeting by a majority in number of the Randgold Shareholders present and voting, either in person or by proxy, representing three-quarters or more of the voting rights of all Randgold Shares voted by those Randgold Shareholders;

 

   

all resolutions in connection with or required to approve and implement the Scheme as set out in the notice of the Randgold Extraordinary General Meeting (including, without limitation, the Randgold Special Resolution) being duly passed by the requisite majority at the Randgold Extraordinary General Meeting (which, in relation to the Randgold Special Resolution, will require the approval of Randgold

 

 

(5) 

Lowest total cash cost and highest Adjusted EBITDA margin are non-GAAP financial performance measures based on data from Factset or Wood Mackenzie with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Factset or Wood Mackenzie which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77 and “Other Information – Comparative Measures Based on Third Party Data” on page 79.

 

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     9  


Shareholders representing at least two-thirds of the votes cast at the Randgold Extraordinary General Meeting either in person or by proxy);

 

   

the sanction of the Scheme without modification or with modification on terms acceptable to Barrick and Randgold by the Jersey Court, and the delivery to the Registrar of Companies of the order sanctioning the Scheme; and

 

   

the Share Issuance Resolution being duly passed at the Meeting and remaining valid.

See “The Merger – The Merger Announcement and the Scheme – Conditions to the Merger”.

Are there any other conditions to the completion of the Merger?

Completion of the Merger will also be conditional upon, among others, the satisfaction or waiver of the following conditions:

 

   

the Merger Shares being conditionally accepted for listing on the NYSE and the TSX and such acceptance not having been withdrawn; and

 

   

receipt of any and all approvals of the South African competition authorities, and such approvals remaining in force and not having been revoked.

See “The Merger – The Merger Announcement and the Scheme – Conditions to the Merger”.

Who will be the directors of Barrick following the Merger?

Following the Merger, two-thirds of the directors of the Board will be initially appointed by Barrick and one-third will be initially appointed by Randgold. The proposed members of the Board following the Merger, other than John L. Thornton and Mark Bristow, have not yet been identified. See “Barrick Following the Merger – Board of Directors”.

Who will be the executive officers of Barrick following the Merger?

Following the Merger:

 

   

John L. Thornton will continue to serve as the Executive Chairman of Barrick;

 

   

Mark Bristow, the current Chief Executive Officer of Randgold, will serve as the President and Chief Executive Officer of Barrick;

 

   

Graham Shuttleworth, the current Finance Director and Chief Financial Officer of Randgold, will serve as the Senior Executive Vice President and Chief Financial Officer of Barrick; and

 

   

Kevin Thomson will continue to serve as the Senior Executive Vice President, Strategic Matters of Barrick.

See “Barrick Following the Merger – Executive Officers”.

Where will the corporate offices of Barrick be located following the Merger?

Following the Merger, Barrick’s head office will continue to be in Toronto, Ontario. If the Continuance is completed, Barrick’s registered and records office will be located at 1600 - 925 West Georgia Street, Vancouver, British Columbia V6C 3L2. See “Barrick Following the Merger – Corporate Offices”.

When does Barrick expect the Merger to close?

The Merger is expected to close by the end of the first quarter of 2019. Closing is conditional on Barrick obtaining Shareholder approval of the Share Issuance Resolution and the satisfaction of other closing conditions including the approval of Randgold Shareholders and certain regulators. See “The Merger – The Merger Announcement and the Scheme – Conditions to the Merger”.

 

10       Barrick Gold Corporation | Special Meeting Circular


What are the voting approval levels required to pass the Meeting resolutions?

 

   

Share Issuance Resolution: The approval by a simple majority of the votes cast by Shareholders represented in person or by proxy at the Meeting is required to pass the Share Issuance Resolution.

 

   

Continuance Resolution The approval of two-thirds of the votes cast by Shareholders represented in person or by proxy at the Meeting is required to pass the Continuance Resolution.

The Board has approved the Merger and the Continuance and recommends that Shareholders vote FOR both resolutions.

 

LOGO

 

The Board recommends a vote FOR both resolutions at the Meeting.

Should I send in my proxy now?

Yes. Once you have carefully read and considered the information in this Circular, you need to complete and submit the enclosed voting instruction form or form of proxy. You are encouraged to vote well in advance of the proxy cut off at 5:00 p.m. (Toronto time) on November 1, 2018 to ensure your Common Shares are voted at the Meeting. If the Meeting is adjourned or postponed, your proxy must be received by 5:00 p.m. (Toronto time) on the second-last business day before the reconvened Meeting. Barrick reserves the right to accept late proxies and to waive the proxy cut-off deadline, with or without notice, but Barrick is under no obligation to accept or reject any particular late proxy.

Does any Shareholder beneficially own 10% or more of the Common Shares?

No. To the knowledge of the directors and officers of Barrick, as of October 4, 2018, no Shareholder beneficially owns, directly or indirectly, or exercises control or direction over, voting securities carrying 10% or more of the voting rights attached to our outstanding Common Shares. In addition, based on current information available to Barrick, after the Merger no current Randgold Shareholder is expected by virtue of the transaction to own 10% or more of the Common Shares.

Are there any risks I should consider in connection with the Merger?

Yes. There are a number of risk factors relating to Randgold’s business and operations, the Merger and the potential failure by Barrick to complete the Merger, all of which should be carefully considered. Risk factors relating to the Merger include the following:

 

   

The Merger is subject to satisfaction or waiver of several conditions.

 

   

Barrick’s ability to invoke certain conditions of the Merger may be limited by the Takeover Code.

 

   

The Cooperation Agreement may be terminated in certain circumstances.

 

   

The issuance of a significant number of Common Shares and a resulting “market overhang” could adversely affect the market price of Common Shares after completion of the Merger.

 

   

Barrick does not currently control Randgold and its subsidiaries.

 

   

Barrick and Randgold will incur substantial transaction fees and costs in connection with the proposed Merger.

 

   

The Break Payment may be payable by Barrick.

 

   

Randgold and Barrick may be the targets of legal claims, securities class action, derivative lawsuits and other claims.

See “Risk Factors” for further information.

Are there any risks I should consider in connection with the completion of the Merger?

Yes. There are a number of risk factors relating to Barrick’s post-Merger business and operations, all of which should be carefully considered. Risk factors relating to Barrick’s post-Merger business and operations include the following:

 

   

Significant demands will be placed on Barrick and Randgold as a result of the Merger.

 

   

The integration of Randgold may not occur as planned.

 

Barrick Gold Corporation | Special Meeting Circular

     11  


   

The new management team may not be successful in implementing the proposed business strategy.

 

   

Political risks in new jurisdictions.

 

   

Increased foreign exchange exposure may adversely affect Barrick’s earnings and the value of some of Barrick’s assets.

 

   

The unaudited pro forma consolidated financial information of Barrick and Randgold is presented for illustrative purposes only and may not be indicative of the results of operations or financial condition of Barrick following the Merger.

 

   

New legislation and tax risks in certain Randgold operating jurisdictions.

 

   

The Relationship Agreement may impair the future growth of Barrick’s African gold operations following the Merger.

 

   

Failure by Randgold to comply with applicable laws prior to the Merger could subject Barrick to penalties and other adverse consequences following the Merger.

See “Risk Factors” for additional information.

Who is eligible to vote?

Shareholders at the close of business (Toronto time) on the record date of October 4, 2018 or their duly appointed proxyholders are eligible to vote at the Meeting.

When and where will the Meeting be held?

The Meeting will be held at 10:00 a.m., Toronto time on November 5, 2018, in the Niagara Room at the InterContinental Toronto Centre located at 225 Front Street West, Toronto, Ontario, Canada.

What if I acquire ownership of Common Shares after the record date?

You will not be entitled to vote. Only persons owning Common Shares as of the record date of October 4, 2018 are entitled to vote at the Meeting.

Am I entitled to dissent rights?

A Registered Shareholder is entitled to dissent from the Continuance Resolution in the manner provided in Section 185 of the OBCA. Section 185 of the OBCA is reprinted in its entirety as “Schedule D: Section 185 – Business Corporations Act (Ontario)”. Set out in “Schedule C: Dissent Procedures” is a summary of the dissent procedures.

Who is soliciting my proxy?

Your proxy is being solicited on behalf of the management of Barrick. Management will solicit proxies primarily by mail, but proxies may also be solicited personally by telephone, e-mail, internet or facsimile by directors, officers or employees of Barrick, or by such agents as Barrick may appoint.

Barrick has retained Laurel Hill Advisory Group in connection with the solicitation of proxies. The costs of preparing and distributing the Meeting materials and the cost of soliciting proxies will be borne by Barrick. Barrick will reimburse brokers and other entities for costs incurred by them in mailing Meeting materials to beneficial owners of Common Shares.

Who can I contact if I have additional questions?

If you have any questions or require assistance with voting your proxy, please contact our proxy solicitation agent, Laurel Hill Advisory Group, at 1.877.452.7184 toll free in North America, or call collect outside North America at 416.304.0211 or by e-mail at assistance@laurelhill.com.

 

12       Barrick Gold Corporation | Special Meeting Circular


Expected Timetable of Key Events

 

Record date for determining Shareholders entitled to vote at the Meeting      October 4, 2018  
Deadline for AST to have received proxy forms or voting instructions from Shareholders      November 1, 2018  
Meeting of Shareholders      November 5, 2018  
Randgold Jersey Court Meeting      November 5, 2018  
Randgold Extraordinary General Meeting      November 5, 2018  
Randgold Jersey Court hearing to approve the Scheme      December 17, 2018(6)  
Expected closing of the Merger      By the end of the first quarter of 2019  

 

 

 

 

 

 

 

 

 

 

 

 

(6) 

If the competition clearance for the Merger in South Africa has not been received by December 12, 2018, the date for the Jersey Court hearing is expected to be January 15, 2019. In the event of such a delay, the Merger would still be expected to close in the first quarter of 2019.

 

Barrick Gold Corporation | Special Meeting Circular

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Information in this Circular

This Circular is furnished in connection with the solicitation of proxies by and on behalf of management of Barrick for use at the Special Meeting of Shareholders and any adjournment(s) or postponement(s) thereof for the purposes set forth in the accompanying Notice of Special Meeting. As a Shareholder, it is very important that you read this material carefully and then vote your Common Shares.

Unless otherwise indicated, information in this Circular is as of October 4, 2018. No person has been authorized to give any information or to make any representations in connection with the Merger, the Continuance and the other matters discussed in this Circular other than those contained in this Circular and, if given or made, any such information or representation should be considered not to have been authorized by Barrick and should not be relied upon.

This Circular does not constitute an offer to sell, or a solicitation of an offer to acquire, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation.

Information Concerning Randgold Resources Limited

Except as otherwise indicated, the information concerning Randgold contained in this Circular is based solely on information provided to Barrick by Randgold or upon publicly available information. With respect to this information, Barrick has relied exclusively on Randgold, without independent verification by Barrick. Although Barrick has no knowledge that would indicate that any such information concerning Randgold is untrue or incomplete, neither Barrick nor any of its directors or officers assume any responsibility for the accuracy or completeness of such information, nor for any failure of Randgold to disclose events which may have occurred or which may affect the completeness or accuracy of any such information but which are unknown to them. Barrick has no knowledge of any material information concerning Randgold that has not been generally disclosed. See also “– Scientific and Technical Information” and “Risk Factors”.

Non-GAAP Financial Performance Measures

Certain financial performance measures used in this Circular – namely Adjusted EBITDA, Adjusted EBITDA margin, cash costs per ounce, and total cash costs – are not prescribed by IFRS. These non-GAAP financial performance measures are included because management has used the information to analyze the combined business performance and financial position of Barrick post-Merger. These non-GAAP financial measures are intended to provide additional information only and do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

In order to provide the combined business performance and financial position of Barrick post-Merger, certain non-GAAP financial performance measures of each of Barrick and Randgold have been combined, without pro forma adjustment, to show an aggregate number. We have included in this Circular under “Other Information – Use of Non-GAAP Financial Performance Measures” details regarding the manner in which non-GAAP financial performance measures have been aggregated for purposes of this Circular as well as reconciliations to the most directly comparable IFRS measures as reported by Barrick and Randgold, together with an explanation of the rationale for including the non-GAAP financial performance measure. See “Other Information – Use of Non-GAAP Financial Performance Measures”.

In order to provide a relative comparison of Barrick post-Merger to its Senior Gold Peers, certain financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of data presented by either Factset, Wood Mackenzie or Bloomberg which contain non-GAAP financial performance measures. These non-GAAP financial performance measure comparisons – namely lowest total cash costs, highest Adjusted EBITDA margin, highest return on capital and lowest gross debt to Adjusted EBITDA ratio are based solely on the data presented by Factset, Wood Mackenzie or Bloomberg (as applicable) and are intended to provide additional information only and do not have any meaning under IFRS. See “– Third Party Data” for further information.

Certain financial performance measures of Randgold incorporated by reference in this Circular are not prescribed by IFRS. These non-GAAP financial measures are included because Randgold’s management considers them to be important comparables and key measures used within Randgold’s business for assessing performance. These non-GAAP financial performance measures are intended to provide additional information only and do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. For further details regarding non-GAAP financial performance measures, please refer to the information contained in the Randgold 20-F under “Selected Financial Data” and “Business Overview” and in the Randgold Interim Report under the heading “Non-GAAP Measures”, each of which is incorporated by reference in this Circular.

 

14       Barrick Gold Corporation | Special Meeting Circular


Third Party Data

Certain comparisons of Barrick post-Merger to its Senior Gold Peers (such as highest Adjusted EBITDA margin, highest return on capital, lowest gross debt to Adjusted EBITDA ratio and lowest total cash cost) are based on data obtained from Wood Mackenzie, Factset and Bloomberg as of August 31, 2018 (unless otherwise stated). Wood Mackenzie is an independent third party research and consultancy firm that provides data for, among others, the metals and mining industry. Factset is a financial data and software company which provides financial information and analytic software for, among others, investment professionals. Bloomberg is a software, data and media company which delivers business and market news, data and analysis. Neither Wood Mackenzie, Factset nor Bloomberg has any affiliation to Barrick or Randgold.

Where figures for Barrick post-Merger are compared to its Senior Gold Peers, the data from either Wood Mackenzie, Factset or Bloomberg (as applicable) has been used to ensure consistency in the compared measures across Barrick post-Merger and the comparator group. Neither Barrick nor Randgold has the ability to verify the Wood Mackenzie, Factset or Bloomberg figures and the non-GAAP financial performance measures used by Wood Mackenzie, Factset and Bloomberg may not correspond to the non-GAAP financial performance measures calculated by Barrick, Randgold or any of the Senior Gold Peers.

Presentation of Financial Information

The unaudited pro forma consolidated financial statements of Barrick included in this Circular are reported in US dollars and have been prepared by Barrick management in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and incorporate the significant accounting policies expected to be used to prepare consolidated financial statements after the Merger. The historical financial statements and all other financial information of Randgold included or incorporated by reference in this Circular are reported in US dollars and have been prepared in accordance with IFRS. Financial statements of each of Barrick and Randgold were audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in the case of Barrick, its financial statements for the year ended December 31, 2016 were also audited in accordance with Canadian accounting standards. Certain tables and other figures in this Circular may not add due to rounding.

Pro Forma Financial Statements

The unaudited pro forma consolidated financial statements included in this Circular give effect to the Merger and certain related adjustments described in the notes accompanying those financial statements. The unaudited pro forma consolidated balance sheet gives effect to the Merger as if it had closed on June 30, 2018. The unaudited pro forma consolidated statements of income for the year ended December 31, 2017 and the six months ended June 30, 2018 gives effect to the Merger as if it had closed on January 1, 2017. The unaudited pro forma consolidated financial statements are based on the respective historical audited consolidated financial statements of Barrick and Randgold for the year ended December 31, 2017 and the respective historical unaudited consolidated financial statements of Barrick and Randgold as at and for the six months ended June 30, 2018. Pro forma financial information presented in this Circular has been derived from the unaudited pro forma consolidated financial statements of Barrick included elsewhere in this Circular. The pro forma financial information presented in this Circular should be read in conjunction with the historical consolidated financial statements of both Barrick and Randgold for the year ended December 31, 2017 and as at and for the six months ended June 30, 2018. See “Schedule I: Pro Forma Financial Information”.

The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and do not necessarily reflect what the combined company’s financial condition would have been had the Merger occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of the operations of the combined company. The actual financial position and results of operations of Barrick may differ significantly from the pro forma amounts reflected in the unaudited pro forma consolidated financial statements due to a variety of factors.

The unaudited pro forma information and adjustments, including the allocation of the purchase price, are based upon preliminary estimates of fair values of assets acquired and liabilities assumed, current available information and certain assumptions that Barrick believes are reasonable in the circumstances, as described in the notes to the unaudited pro forma consolidated financial statements. The actual adjustments to the consolidated financial statements of Barrick upon the Closing will depend on a number of factors, including, among others, the actual expenses of the Merger and other additional information that becomes available after the date of this Circular. As a result, it is expected that actual adjustments will differ from the pro forma adjustments, and the differences may be material. See “Forward-Looking Information” and “Risk Factors”.

Scientific and Technical Information

Unless otherwise indicated, scientific or technical information in this Circular relating to Barrick and its mineral reserves is based on information prepared by employees of Barrick, its joint venture partners or its joint venture operating companies, as applicable, in each case under the supervision of, or following review by, Rick Sims, Registered Member SME, Vice President, Reserves and Resources of Barrick. Mr. Sims is a Qualified Person as defined in NI 43-101. Mr. Sims has not received and will not receive a direct or indirect interest in any property of Barrick or any of its associates or affiliates. As of the date hereof, Mr. Sims owns beneficially, directly or indirectly, less than 1% of any outstanding class of securities of Barrick and less than 1% of any outstanding class of securities of Barrick’s associates or affiliates.

 

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     15  


Unless otherwise indicated, scientific or technical information in this Circular (or incorporated herein by reference) relating to Randgold and its mineral projects is based on information prepared by employees of Randgold, in each case under the supervision, or following review by, Simon Bottoms, Group Mineral Resource Manager for Randgold and Rodney Quick, Group General Manager Evaluations for Randgold. To the knowledge of Barrick: (i) each of Messrs. Bottoms and Quick is a Qualified Person as defined in NI 43-101; (ii) each of Messrs. Bottoms and Quick is an officer or employee of Randgold; and (iii) no such person received or will receive a direct or indirect interest in any property of Randgold or any of its associates or affiliates. As of the date hereof, to the knowledge of Barrick, each such person owns beneficially, directly or indirectly, less than 1% of any outstanding class of securities of Randgold and less than 1% of any outstanding class of securities of Randgold’s associates or affiliates. The scientific and technical information in this Circular regarding Kibali and Loulo-Gounkoto is based upon NI 43-101 technical reports filed by Randgold on September 24, 2018 under its issuer profile on SEDAR at www.sedar.com. NI 43-101 permits Barrick to rely on these technical reports for purposes of the disclosure contained in this Circular.

Mineral Reserve and Mineral Resource Information

Mineral reserves are estimated and reported by Barrick in accordance with NI 43-101 pursuant to the CIM, as required by Canadian securities regulatory authorities. For United States reporting purposes, Industry Guide 7 (under the Exchange Act), as interpreted by the Staff of the SEC, applies different standards in order to classify mineralization as a mineral reserve (see “Barrick Following the Merger – Combined Mineral Reserves – Barrick’s Gold Mineral Reserves”). In addition, while the terms “measured”, “indicated” and “inferred” mineral resources are required pursuant to NI 43-101, the SEC does not recognize such terms. Canadian standards differ significantly from the requirements of the SEC, and mineral resource information contained herein is not comparable to similar information regarding mineral reserves disclosed in accordance with the requirements of the SEC. Readers should understand that “inferred” mineral resources have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. In addition, readers are cautioned not to assume that all or any part of Barrick’s mineral resources constitute or will be converted into mineral reserves.

Ore reserves and mineral resources are estimated and reported by Randgold in accordance with the JORC Code. The JORC Code is an “acceptable foreign code” for purposes of NI 43-101 and, as a result, Barrick is entitled to include Randgold ore reserves and mineral resources disclosure in this Circular. Ore reserves and mineral resources reported pursuant to the JORC Code are functionally equivalent to CIM reporting standards and the combined mineral reserves information included in this Circular for illustrative purposes has been prepared by aggregating Barrick’s mineral reserves disclosure with ore reserves reported by Randgold pursuant to the JORC Code, in each case as of December 31, 2017. Randgold has reconciled the reported ore reserves to the CIM definition of “mineral reserves” and there are no material differences. The JORC Code differs significantly from the requirements of the SEC, and mineral resource information contained or incorporated by reference herein is not comparable to similar information regarding mineral reserves disclosed in accordance with the requirements of the SEC. Readers should understand that “inferred” mineral resources have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. In addition, readers are cautioned (i) not to assume that all or any part of Randgold’s mineral resources constitute or will be converted into mineral reserves and (ii) unlike Barrick which reports its mineral resources exclusive of mineral reserves, Randgold reports its mineral resources inclusive of ore reserves.

Barrick mineral reserves are reported using a $1,200 per ounce gold price assumption (except for Kalgoorlie which uses an assumption of A$1,600 per ounce and Bulyanhulu, North Mara and Buzwagi, which use an assumption of $1,100 per ounce). Randgold’s ore reserves are reported using a $1,000 per ounce gold price assumption (except for the Kibali KCD open pit, which uses a $1,100 per ounce assumption in its pit design). Barrick tonnage and grade figures included in this Circular are reported on an attributable basis and the Randgold tonnage and grade figures included in this Circular are reported on a total basis.

As a result of the differences described above, the reported Barrick mineral reserves and Randgold ore reserves may not be directly comparable, and the combined mineral reserves should be considered illustrative only. The potential combined mineral reserves should be treated as forward-looking information and are subject to change under differing gold price assumptions.

Exchange Rate Information

The following table sets forth, for each period indicated, the high and low exchange rates, the average exchange rate, and the exchange rate at the end of the period, based on the rate of exchange of one US dollar in exchange for Canadian dollars published by the Bank of Canada.

 

     Year ended December 31,    Six months ended June 30,
     2017    2016    2018

High

   1.3743    1.4589    1.3310

Low

   1.2128    1.2544    1.2288

Average

   1.2986    1.3248    1.2781

Period End

   1.2545    1.3427    1.3168

On September 21, 2018, the business day immediately prior to the Announcement Date, the average daily exchange rate as reported by the Bank of Canada was US $1.00 = Cdn $1.2916 or Cdn $1.00 = US $0.7742. On October 3, 2018, the average daily exchange rate as reported by the Bank of Canada was US $1.00 = Cdn $1.2382 or Cdn $1.00 = US $0.7793.

 

16       Barrick Gold Corporation | Special Meeting Circular


The following table sets forth, for each period indicated, the high and low exchange rates, the average exchange rate, and the exchange rate at the end of the period, based on the rate of exchange of one pound sterling in exchange for Canadian dollars published by the Bank of Canada.

 

     Year ended December 31,    Six months ended June 30,
     2017    2016    2018

High

   1.7767    2.0758    1.8371

Low

   1.5865    1.6009    1.6822

Average

   1.6720    1.7962    1.7582

Period End

   1.6961    1.6564    1.7357

On September 21, 2018, the business day immediately prior to the Announcement Date, the average daily exchange rate as reported by the Bank of Canada was GBP 1.00 = Cdn $1.7114 or Cdn $1.00 = GBP 0.5916. On October 3, 2018, the average daily exchange rate as reported by the Bank of Canada was GBP 1.00 = Cdn $1.6670 or Cdn $1.00 = GBP 0.5999.

The information above in respect of the year ended December 31, 2016 is based on the noon rates for such period published by the Bank of Canada. The information in respect of periods commencing on or after January 1, 2017 is based on the average daily exchange rates for such period published by the Bank of Canada.

Notice to Shareholders in the United States

Barrick is incorporated under the laws of the Province of Ontario and is a “foreign private issuer” under US Securities Laws. The solicitations of proxies for the Meeting are not subject to the requirements of Sections 14(a) and 14(c) of the Exchange Act. Accordingly, the solicitations and transactions contemplated in this Circular are being made in the United States for securities of a Canadian issuer in accordance with Canadian corporate and securities laws, and this Circular has been prepared solely in accordance with disclosure requirements applicable in Canada. Shareholders in the United States should be aware that such requirements are different from those of the United States applicable to registration statements under the Securities Act and proxy statements under the Exchange Act.

Information concerning the operations of Barrick and Randgold contained herein has been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects to United States disclosure standards. The financial statements of Barrick and Randgold (which Randgold financial statements are incorporated by reference in this Circular or attached as “Schedule H: Randgold Historical Financial Statements”), were prepared in accordance with IFRS, which differs from generally accepted accounting principles in the United States in certain material respects and thus may not be comparable to financial statements and information of United States companies prepared in accordance with generally accepted accounting principles in the United States. See also “Information in this Circular – Presentation of Financial Information“.

The financial statements of Barrick for the year ended December 31, 2017 are subject to audit under auditing standards of the Public Company Accounting Oversight Board (PCAOB). The financial statements of Barrick for the year ended December 31, 2016 are subject to audit under Canadian auditing standards and the auditing standards of the PCAOB. Barrick’s auditors are required to be independent with respect to the Company within the meaning of the Chartered Professional Accountants of Ontario CPA Code of Professional Conduct and in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. The Randgold financial statements for the year ended December 31, 2017 are subject to audit under auditing standards of the PCAOB and the auditors are required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. The special purpose interim financial statements of Randgold included in “Schedule H: Randgold Historical Financial Statements” were subject to review under International Standards on Review Engagements (UK) 2410.

The enforcement by Shareholders of civil liabilities under US Securities Laws may be affected adversely by the fact that Barrick is incorporated or organized outside the United States, that some or all of its directors and officers and the experts named in this Circular are not residents of the United States and that all or a substantial portion of its assets and such persons may be located outside the United States. As a result, it may be difficult or impossible for US Shareholders to effect service of process within the United States upon Barrick, its officers and directors or the experts named herein, or to realize against them upon judgments of courts of the United States predicated upon civil liabilities under US Securities Laws. In addition, US Shareholders should not assume that the courts of Canada: (i) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil liabilities under US Securities Laws; or (ii) would enforce, in an original action, liabilities against such persons predicated upon civil liabilities under US Securities Laws.

See also “Information in this Circular – Mineral Reserve and Mineral Resource Information”.

 

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Forward-Looking Information

This Circular contains “forward-looking information” within the meaning of applicable Canadian securities legislation relating to: (i) the future growth, results of operations, performance, business prospects and opportunities of the Company and Randgold; (ii) the Merger; (iii) the integration of Randgold’s business with the existing operations of the Company; (iv) the impact of the Merger on the financial position of the Company; (v) the outlook for Barrick’s and Randgold’s respective businesses and the gold mining industry generally based on information currently available; and (vi) the Continuance of Barrick. These expectations may not be appropriate for other purposes. Often, but not always, forward-looking information can be identified by the use of words such as “believe”, “expect”, “anticipate”, “target”, “plan”, “objective”, “assume”, “intend”, “project”, “goal”, “continue”, “budget”, “estimate”, “potential”, “may”, “will”, “can”, “could”, “would”, or similar expressions. In particular, the Circular contains forward-looking information pertaining to:

 

   

expectations regarding whether the Merger will be completed, including whether the conditions to completion of the Merger will be satisfied, and the anticipated timing for Closing;

 

   

the combined company’s future plans, business prospects and performance, growth potential, financial strength, market profile, revenues, working capital, capital expenditures, investment valuations, income, margins, access to capital, and overall strategy;

 

   

expectations regarding the receipt of all necessary regulatory and third party approvals and the expiration of all relevant waiting periods;

 

   

the anticipated number of Common Shares to be issued in connection with the Merger, the expected total capitalization of Barrick on a consolidated basis following the Merger and the ratio of the Common Shares to be held by Shareholders and Randgold Shareholders, respectively, following the Merger;

 

   

the anticipated benefits of the Merger;

 

   

the re-rating potential of the Company post-Merger;

 

   

expectations regarding the value and nature of the consideration payable to Randgold Shareholders as a result of the Merger;

 

   

the anticipated mineral reserves of Barrick following completion of the Merger;

 

   

the governance and management structure of Barrick following the Merger;

 

   

the expenses associated with the Merger;

 

   

the potential for Strategic Assets to become Tier One Assets;

 

   

the expectation that the Merger Shares will be listed on the TSX and NYSE upon Closing;

 

   

the intention of Barrick and Randgold to seek the approval of their respective shareholders in connection with the Merger;

 

   

the expected treatment and costs associated with the Randgold Share Plans as a result of the Merger;

 

   

the expectation that Acacia will not exercise its Pre-emption Right in connection with the Merger;

 

   

the expectation that Barrick will be able to make arrangements to ensure that the Relationship Agreement does not impair the future growth of Barrick’s African gold operations following the Merger;

 

   

the expectation that Barrick will retain key Barrick and Randgold employees following the Merger;

 

   

the expectation that Randgold will cease to be a public company following the Merger and will have its ordinary shares delisted from the LSE and its ADSs delisted from NASDAQ following the Merger;

 

   

the expectation that Merger Shares issuable to Randgold ADS holders will be distributed to such holders and that the Randgold ADS program will be terminated at Closing; and

 

   

the relocation of the registered and records office of Barrick as a result of the Continuance.

These statements are based on the reasonable assumptions, estimates, analyses, and opinions of management made in light of management’s experience and perception of trends, current conditions, and expected developments, as well as other factors that management considers to be relevant and reasonable at the date that such statements are made. Forward-looking information involves known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results, performance, or achievements of the Company, as applicable, to be materially different from those anticipated, estimated, or intended. These risks, uncertainties and assumptions include:

 

18       Barrick Gold Corporation | Special Meeting Circular


   

the risk that the conditions to completion of the Merger will not be satisfied;

 

   

the risk that shareholder approval of the Merger will not be obtained from Randgold Shareholders or that the Share Issuance Resolution will not be approved;

 

   

the risk that the Continuance Resolution will not be approved;

 

   

the risk that required regulatory and third party approvals necessary to complete the Merger will not be obtained, or that conditions will be imposed in connection with such approvals that will increase the costs associated with the Merger or have other negative implications for the Company on a consolidated basis following the Merger;

 

   

the risk that litigation relating to the Merger may be commenced which may prevent, delay or give rise to significant costs or liabilities on the part of Barrick or Randgold;

 

   

the risk that Acacia will exercise or attempt to exercise its Pre-emption Right in connection with the Merger;

 

   

the risk that the Relationship Agreement will impair the future growth of Barrick’s African gold operations following the Merger;

 

   

the risk that Barrick will discover previously undisclosed liabilities of Randgold following Closing;

 

   

the risk that Barrick may be required to make the Break Payment to Randgold in certain circumstances if the Merger is not completed;

 

   

the risk that the focus of management’s time and attention on the Merger may detract from other aspects of the respective businesses of Barrick and Randgold;

 

   

the risk that the anticipated benefits and value creation from the Merger will not be realized, or may not be realized in the expected timeframes;

 

   

the risk that a material decrease in the trading price of the Common Shares may occur which could result in a failure of the Merger or could be sustained following Closing;

 

   

the risk that there may be competing offers for Barrick or Randgold which arise as a result of or in connection with the Merger;

 

   

the risk that Randgold may not be integrated successfully following the Merger;

 

   

the risk that Barrick may not be able to retain key employees of Barrick or Randgold;

 

   

risks relating to certain of the jurisdictions in which Barrick or Randgold operates, in respect of which there have been recent changes and/or proposed changes in mining laws and/or tax laws and where governments may seek a greater share of mineral wealth;

 

   

risks relating to political instability in certain of the jurisdictions in which Randgold operates;

 

   

risks that the failure by Randgold to comply with applicable laws prior to the Merger could subject Barrick to penalties and other adverse consequences following the Merger;

 

   

risks relating to Randgold operations near communities that may regard its operations as being detrimental to them;

 

   

risks relating to disruption of supply routes which may cause delays in construction and mining activities at Randgold’s more remote properties;

 

   

risks relating to fluctuations in the spot and forward price of gold, copper or certain other commodities (such as silver, diesel fuel, natural gas and electricity), and the availability and increased costs associated with mining inputs and labor;

 

   

risks related to increased costs, delays, suspensions and technical challenges associated with the construction of capital projects;

 

   

the risk of operating or technical difficulties in connection with mining or development activities, including geotechnical challenges and disruptions in the maintenance or provision of required infrastructure and information technology systems;

 

   

the failure to comply with environmental and health and safety laws and regulations, and the timing of receipt of, or failure to comply with, necessary permits and approvals;

 

   

risk of loss due to acts of war, terrorism, sabotage and civil disturbances;

 

   

risks related to litigation and contests over title to properties, particularly title to undeveloped properties, or over access to water, power and other required infrastructure;

 

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risks associated with working with partners in jointly controlled assets; and

 

   

increased costs and physical risks, including extreme weather events and resource shortages, related to climate change.

In addition, there are risks and hazards associated with the business of mineral exploration, development and mining, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins, flooding and gold bullion, copper cathode or gold or copper concentrate losses (and the risk of inadequate insurance, or inability to obtain insurance, to cover these risks).

Forward-looking information contained herein is given as of the date of this Circular, and the Company disclaims any obligation or intention to update any forward-looking information, whether as a result of new information, future events, or results or otherwise unless so required by applicable securities laws. For additional information relating to the Company’s risk factors and risk factors relating to the Merger, the failure to complete the Merger and the post-Merger business of Barrick, reference should be made to “Risk Factors” and the Company’s continuous disclosure materials filed from time to time under its issuer profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

 

20       Barrick Gold Corporation | Special Meeting Circular


Executive Summary

This executive summary highlights certain information contained in this Circular. This summary is not intended to be complete and is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, contained elsewhere in this Circular and the attached schedules and in the documents incorporated by reference, all of which are important and should be reviewed carefully. Certain capitalized terms used in this summary are defined in “Key Terms above.

The Meeting

The Meeting will be held at 10:00 a.m., Toronto time on November 5, 2018, in the Niagara Room at the InterContinental Toronto Centre located at 225 Front Street West, Toronto, Ontario, Canada.

Your vote is important. You are eligible to vote if you were a Shareholder of record at the close of business on October 4, 2018. To make sure your Common Shares are represented at the Meeting, you may cast your vote in person or by submitting your proxy or voting instruction form. Please see page 34 for more details on how you can vote.

Purpose of the Meeting

The purpose of the Meeting is to consider and, if deemed advisable, pass, with or without amendment, the Share Issuance Resolution and the Continuance Resolution. The Share Issuance Resolution and the Merger are not conditional on the Continuance Resolution being approved.

The Merger

On September 24, 2018, Barrick and Randgold entered into the Cooperation Agreement and issued the Merger Announcement in which they announced that they had reached agreement on the terms and conditions of an all-share merger of Barrick and Randgold pursuant to which Barrick will acquire all of the issued and to be issued ordinary shares of Randgold (other than the Excluded Shares). The Merger is expected to be effected pursuant to a court sanctioned scheme of arrangement under Jersey Companies Law. If completed, the Merger will result in Barrick becoming the owner of all of the Randgold Shares on the Effective Date. Randgold Shareholders will receive 6.1280 Common Shares for each Randgold Share held on the Effective Date. This Exchange Ratio is based on the volume-weighted average prices of Common Shares traded on the NYSE, and Randgold ADSs traded on NASDAQ, respectively, over the 20 trading days ended on September 21, 2018 (being the last business day before the Announcement Date). On Closing, Randgold will become a wholly-owned subsidiary of Barrick and Barrick will continue the operations of Barrick and Randgold on a combined basis. At the time of Closing, existing Shareholders will own approximately 66.6% of the Common Shares and Randgold Shareholders will own approximately 33.4% of the Common Shares.

For further information regarding Barrick following completion of the Merger, see “The Merger – Details of the Merger and “Schedule I: Pro Forma Financial Information”.

Randgold

Randgold is a leading Africa-focused gold mining and exploration company, with an extensive portfolio of mines and greenfield and brownfield projects.

Randgold was founded in 1995 and is headquartered in Jersey, Channel Islands. Over the past 23 years, Randgold has established an extensive portfolio of mines and exploration programmes in West and Central Africa, including two Tier One Gold Assets in Mali and the DRC. Randgold continues to expand its portfolio by developing mutually beneficial partnerships with host governments, communities and joint venture partners. Such partnerships include Randgold’s joint ventures with AngloGold Ashanti in the DRC and with Endeavour Mining and Newcrest in Côte d’Ivoire.

Randgold’s shares trade on the LSE under the symbol “RRS” and its ADSs trade on NASDAQ under the symbol “GOLD”. The registered office of Randgold is 3rd Floor, Unity Chambers, 28 Halkett Street, St Helier, Jersey, JE2 4WJ, Channel Islands.

For the financial year ended December 31, 2017, Randgold reported gold production of 1.315 million ounces, revenue of $1,280 million and comprehensive income of $335 million.

As of the business day prior to the Announcement Date, there were 94,475,346 Randgold Shares issued and outstanding and Randgold’s market capitalization was $6.1 billion, based on the closing price of the Randgold ADSs on NASDAQ on such date of $63.91.

For additional information relating to Randgold see “Information Concerning Randgold and Barrick – Randgold”, “Schedule G: Additional Information Concerning Randgold and “Schedule H: Randgold Historical Financial Statements”.

 

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Fairness Opinions

Barrick retained M. Klein and Co. and Morgan Stanley as financial advisors in connection with the Merger. In determining to approve the Merger, the Board considered, among other things, the fairness opinion of each of its financial advisors. The M. Klein and Co. fairness opinion and the Morgan Stanley fairness opinion each concluded that, as of the date of the fairness opinion, subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of review undertaken by each financial advisor as described in such opinions, the Exchange Ratio was fair, from a financial point of view, to Barrick. The full text of the M. Klein and Co. fairness opinion and the Morgan Stanley fairness opinion setting out the assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the M. Klein and Co. fairness opinion and the Morgan Stanley fairness opinion, are attached as “Schedule E: M. Klein and Co. Fairness Opinion and “Schedule F: Morgan Stanley Fairness Opinion”, respectively. The summary of the M. Klein and Co. fairness opinion and the Morgan Stanley fairness opinion in this Circular is qualified in its entirety by reference to the full text of the M. Klein and Co. fairness opinion and the Morgan Stanley fairness opinion, respectively.

M. Klein and Co. and Morgan Stanley each delivered its fairness opinion for the information and assistance of the Board in connection with its consideration of the Merger. Neither the M. Klein and Co. fairness opinion nor the Morgan Stanley fairness opinion is a recommendation as to whether or not Shareholders should vote in favour of the Share Issuance Resolution or any other matter. See “The Merger – Fairness Opinions – M. Klein and Co. Fairness Opinion”, “The Merger – Fairness Opinions – Morgan Stanley Fairness Opinion”, “Schedule E: M. Klein and Co. Fairness Opinion and “Schedule F: Morgan Stanley Fairness Opinion”.

Recommendation of the Board

After careful consideration, including consideration of the comprehensive briefings from management on its due diligence findings, consultation with its legal and financial advisors, the receipt of fairness opinions of each of M. Klein and Co. and Morgan Stanley and other factors described below under “The Merger – Reasons for the Recommendation of the Board”, the Board determined that the Merger and the Continuance are in the best interests of Barrick and determined to recommend that Shareholders vote in favour of the Share Issuance Resolution and the Continuance Resolution. Accordingly, the Board approved and recommends that Shareholders vote FOR the Share Issuance Resolution and FOR the Continuance Resolution. See “The Merger and “The Continuance”.

 

LOGO

 

The Board recommends a vote FOR the Share Issuance Resolution and FOR the Continuance Resolution.

Reasons for the Recommendation of the Board

In reaching its conclusions and formulating its recommendation of the Merger to Shareholders, the Board considered a number of factors, including those listed below, with the benefit of input from Barrick’s management and financial and legal advisors.

The following is a summary of the principal reasons for the recommendation that Shareholders vote FOR the Share Issuance Resolution and the Continuance Resolution:

 

   

Creation of industry-leading gold company. The Board believes that the Merger will create an industry-leading gold company with the greatest concentration of Tier One Gold Assets in the industry, the lowest total cash cost position among Senior Gold Peers,(7) and a diversified asset portfolio positioned for growth in many of the world’s most prolific gold districts.

 

   

Superior size and scale. Based on Barrick and Randgold’s respective closing prices on the NYSE and NASDAQ as of September 21, 2018 (being the last business day prior to the Announcement Date), Barrick would have an aggregate market capitalization of $18.3 billion. In addition, based on the 2017 financial results for both companies, Barrick would have generated aggregate revenue of approximately $9.7 billion, aggregate net income of approximately $1.9 billion, and aggregate Adjusted EBITDA(8) of approximately $4.7 billion.

 

 

(7) 

Lowest total cash cost is a non-GAAP financial performance measure based on data from Wood Mackenzie with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Wood Mackenzie which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77 and “Other Information – Comparative Measures Based on Third Party Data” on page 79.

 

(8) 

Adjusted EBITDA is a non-GAAP financial performance measure with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. This financial metric is presented on a combined or aggregate basis and does not include any pro forma adjustments. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77.

 

22       Barrick Gold Corporation | Special Meeting Circular

 


   

Ownership of five of the world’s top ten Tier One Gold Assets, with two potential Tier One Gold Assets. Barrick will, on completion of the Merger, own the following:

 

   

Tier One Gold Assets: Cortez, Goldstrike, Kibali (45%), Loulo-Gounkoto (80%) and Pueblo Viejo (60%); and

 

   

potential to become Tier One Gold Assets: Goldrush/Fourmile and Turquoise Ridge (75%).

 

   

Strong financial position. Based on the 2017 financial results of Barrick and Randgold, Barrick would have had on a combined basis the highest Adjusted EBITDA,(9) the highest Adjusted EBITDA margin(9) and the lowest total cash cost position among Senior Gold Peers:(9)

 

   

combined Adjusted EBITDA margin(10) of 48% (for the financial year ended December 31, 2017); and

 

   

combined cost of sales related to gold production of $798 per ounce and total cash costs(10) of $538 per ounce (for the financial year ended December 31, 2017).

 

   

Proven management team. Proven management team of owners with the ability to operate successfully in complex jurisdictions:

 

   

continuation of Barrick’s strong partnership-ownership culture and deep experience operating across a range of geographies, mining methods and ore types; and

 

   

from January 1, 2008 to August 31, 2018, Randgold achieved the highest return on capital among Senior Gold Peers.(9) Randgold’s share price has also risen by 76% over the same period, while Senior Gold Peers’ share prices have declined by an average of 48%.

 

   

Strong cash flow generation to support robust investment and a greater ability to return cash to Shareholders.

 

   

Established partnerships with leading Chinese mining companies.

 

   

Superior scale and the largest gold reserves among Senior Gold Peers. Potential combined 78 million ounces of proven and probable gold reserves on an attributable basis (as at December 31, 2017).(11)

 

   

Strong balance sheet with expected investment grade ratings:

 

   

the lowest ratio of gross debt (as of June 30, 2018) to Adjusted EBITDA (for the financial year ended December 31, 2017) of any Senior Gold Peer;(9)

 

   

on an aggregate basis as at June 30, 2018, Barrick and Randgold had a combined cash position of $2.7 billion and debt net of cash of $3.7 billion; and

 

   

Barrick currently has an investment grade rating of BBB and Baa2 from S&P and Moody’s, respectively. As at June 30, 2018, Randgold had a net cash balance of $604 million and strong cash generation from its underlying operations. This would provide additional flexibility to Barrick to service existing Barrick debt and may positively impact Barrick’s current credit ratings.

 

   

Continued exposure to copper. Continued ownership of a strategic Copper Business that produced 413 million pounds of copper in 2017.

 

   

Significant re-rating potential. Given the quality of the combined asset base and the proven management team, with the highest Adjusted EBITDA margin(9) and the lowest total cash cost for 2017 relative to the Senior Gold Peers,(9) there is significant potential for Barrick to re-rate over time.

 

   

Fairness opinions. The Board has received a fairness opinion from each of M. Klein and Co. and Morgan Stanley to the effect that as of September 23, 2018, and subject to the various assumptions made, procedures followed, matters considered and limitations and

 

(9) 

Lowest total cash cost, highest Adjusted EBITDA, highest Adjusted EBITDA margin, highest return on capital and lowest ratio of gross debt to Adjusted EBITDA are non-GAAP financial performance measures based on data from Bloomberg, Factset or Wood Mackenzie with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Bloomberg, Factset or Wood Mackenzie which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77 and “Other Information – Comparative Measures Based on Third Party Data” on page 79.

 

(10) 

Adjusted EBITDA margin and total cash costs are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. These financial metrics are presented on a combined or aggregate basis and do not include any pro forma adjustments. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77.

 

(11) 

See “Information in this Circular – Mineral Reserve and Mineral Resource Information” on page 16 and “Barrick Following the Merger – Combined Mineral Reserves” on page 61 for details regarding qualifications, assumptions, tonnage, grade and a breakdown of proven gold reserves and probable gold reserves.

 

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     23  

 


 

qualifications on the scope of review undertaken by each financial advisor as described in such opinions, the Exchange Ratio was fair, from a financial point of view, to Barrick. See “The Merger – Fairness Opinions”.

 

   

Support of Barrick directors. All of the directors of Barrick have entered into voting and support agreements pursuant to which they have agreed, among other things, to vote their Common Shares in favour of the Share Issuance Resolution and the Continuance Resolution. As of the Announcement Date, these directors collectively beneficially owned or exercised control or direction over an aggregate of 2,780,622 Common Shares, representing approximately 0.238% of the issued and outstanding Common Shares.

 

   

Opportunity to pursue Continuance. Barrick believes it is appropriate at this time to continue to British Columbia, which has a more modern corporate statute that provides additional flexibility to Barrick in a number of areas, including increased flexibility with respect to capital management and in the composition of the Board of Barrick. In British Columbia, Barrick will have greater flexibility to attract the most qualified and experienced directors from a global talent pool, who have the expertise and skills required by Barrick’s global business, that will operate in a diverse range of jurisdictions across five continents.

 

   

Other factors. The Board also considered the Merger with reference to current economics, industry and market trends affecting each of Barrick and Randgold in the gold market, information concerning mineral reserves and mineral resources, business, operations, properties, assets, financial condition, operating results and management’s assessment of the prospects of each of Barrick and Randgold and the then historical trading prices of the Common Shares and the Randgold Shares.

See “The Merger – Reasons for the Recommendation of the Board”.

The Board also considered the risks relating to the Merger, including those matters described under the heading “Risk Factors”. The Board believes that overall, the anticipated benefits of the Merger to Barrick outweigh these risks.

In making its determinations and recommendations, the Board also observed that a number of procedural safeguards were in place and are present to permit the Board to represent the interests of Barrick, our Shareholders and Barrick’s other stakeholders. These procedural safeguards include, among others:

 

   

Ability to respond to superior proposals. Notwithstanding the limitations contained in the Cooperation Agreement on Barrick’s ability to solicit interest from third parties, the Cooperation Agreement allows Barrick to engage in discussions or negotiations regarding any unsolicited Competing Proposal for Barrick received prior to the Meeting that constitutes or would reasonably be expected to result in a Barrick Superior Proposal (if failure to take such action would be inconsistent with the fiduciary duties of the Board under applicable law).

 

   

Reasonable Break Payment. The amount of the Break Payment, being $300 million, payable under certain circumstances described under “The Merger – Cooperation Agreement – Break Payment”, is reasonable.

 

   

Shareholder approval. The Share Issuance Resolution must be approved by the affirmative vote of at least a simple majority of the votes cast by Shareholders who vote in person or by proxy at the Meeting.

The information and factors described above and considered by the Board in reaching its determinations are not intended to be exhaustive, but include material factors considered by the Board. In view of the wide variety of factors considered in connection with the evaluation of the Merger and the complexity of these matters, the Board did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to these factors. In addition, individual members of the Board may have given different weight to different factors.

A detailed discussion of the background to the Merger and the Board’s deliberations in connection with the Merger is included under “The Merger – Background to the Merger”.

Merger Announcement and the Scheme

The following is a summary of selected provisions of the Merger Announcement, which describes the terms and conditions of the Merger, a copy of which is attached as Schedule 1 to the Cooperation Agreement which is attached to this Circular in “Schedule J: Cooperation Agreement”. While we believe this description covers the material terms of the Merger Announcement, it may not contain all of the information that is important to you and is qualified in its entirety by reference to the Merger Announcement. We urge you to read the Merger Announcement carefully and in its entirety. See also “The Merger – The Merger Announcement and the Scheme”.

It is intended that the Merger will be implemented by way of a court-sanctioned scheme of arrangement between Randgold and Randgold

Shareholders under Article 125 of the Jersey Companies Law. The purpose of the Scheme is to provide for Barrick to become the owner of the entire issued and to be issued share capital of Randgold.

The procedure involves, among other things, an application by Randgold to the Jersey Court to sanction the Scheme in which the Randgold Shareholders will receive the Merger Shares. Completion of the Merger is subject to certain additional conditions and terms referred to in Appendix 1 of the Merger Announcement.

 

24       Barrick Gold Corporation | Special Meeting Circular

 


Upon the Scheme becoming effective, it will be binding on all Randgold Shareholders (irrespective of whether or not they attended or voted at the Jersey Court Meeting or the Randgold Extraordinary General Meeting), and share certificates in respect of Randgold Shares will cease to be valid and entitlements to Randgold Shares held within the CREST system will be cancelled.

The Scheme will be governed by Jersey law and will be subject to the jurisdiction of the Jersey courts and to the conditions and further terms set out in the Merger Announcement and in the Scheme Document. The Merger and the Scheme will be subject to the applicable requirements of the LSE, the UK Financial Conduct Authority, the Takeover Code, the TSX, the NYSE, NASDAQ and applicable securities laws in Canada and the United States.

Conditions to the Merger

Completion of the Merger is conditional upon, among other things, the satisfaction or waiver of the following closing conditions (assuming that the Merger is effected by means of the Scheme):

 

   

the Scheme becoming unconditional and effective, subject to the provisions of the Takeover Code, by no later than the Longstop Date;

 

   

approval of the Scheme at the Jersey Court Meeting by a majority in number of the Randgold Shareholders present and voting, either in person or by proxy, representing three-quarters or more of the voting rights of all Randgold Shares voted by those Randgold Shareholders;

 

   

all resolutions in connection with or required to approve and implement the Scheme as set out in the notice of the Randgold Extraordinary General Meeting (including, without limitation, the Randgold Special Resolution) being duly passed by the requisite majority at the Randgold Extraordinary General Meeting (which, in relation to the Randgold Special Resolution, will require the approval of Randgold Shareholders representing at least two-thirds of the votes cast at the Randgold Extraordinary General Meeting either in person or by proxy);

 

   

the sanction of the Scheme without modification or with modification on terms acceptable to Barrick and Randgold by the Jersey Court, and the delivery to the Registrar of Companies of the order sanctioning the Scheme; and

 

   

the Share Issuance Resolution being duly passed at the Meeting and remaining valid.

In addition, Barrick and Randgold have agreed that the Merger will be conditional upon the following conditions and, accordingly, the necessary actions to make the Merger effective will not be taken unless such conditions (as amended, if appropriate) have been satisfied or, to the extent capable of waiver, waived on or before the Longstop Date:

 

   

the Merger Shares being conditionally accepted for listing on the TSX and NYSE and such acceptances not having been withdrawn; and

 

   

receipt of any and all approvals of the South African competition authorities, and such approvals remaining in force and not having been revoked.

Barrick and Randgold have further agreed that the Merger will be conditional upon certain other conditions being satisfied or waived by one or both of Barrick and Randgold on or before the Longstop Date. See “The Merger – The Merger Announcement and the Scheme”.

Other than the conditions relating to the Scheme becoming unconditional and effective by no later than the Longstop Date (subject to the provisions of the Takeover Code), the approval of the Scheme and all resolutions required to implement the Scheme at the Jersey Court Meeting and Randgold Extraordinary General Meeting by the Randgold Shareholders, the sanction of the Scheme by the Jersey Court, the approval of the Share Issuance Resolution by the Shareholders, and the admission of the Merger Shares to listing on the TSX and NYSE, Barrick may invoke a condition to the Merger to cause the Merger not to proceed only if the Panel is satisfied that the circumstances giving rise to the right to invoke that condition are of material significance to Barrick in the context of the Merger.

Effect of Approval of Scheme

Upon the Scheme becoming effective, it will be binding on all Randgold Shareholders (irrespective of whether or not they attended or voted at the Jersey Court Meeting or the Randgold Extraordinary General Meeting), and share certificates in respect of Randgold Shares will cease to be valid and entitlements to Randgold Shares held within the CREST system will be cancelled.

Timing for Completion of the Merger

Subject to receiving all required approvals, including the approval of the Share Issuance Resolution by Shareholders at the Meeting, and the satisfaction or waiver of all other conditions to Closing of the Merger, the Merger is expected to close by the end of the first quarter of 2019. It is possible that factors outside of Barrick’s control could delay or prevent completion of the Merger. See “The Merger – The Merger Announcement and the Scheme – Timing for Completion of the Merger and “Risk Factors”.

 

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Dividends

Under the terms of the Merger, Barrick and Randgold have agreed that:

 

   

Randgold Shareholders will be entitled to receive and retain the anticipated 2018 Randgold dividend of $2.00 per Randgold Share on or around the Effective Date, subject to the approval of the Board of Randgold (the Randgold Permitted Dividend). The Randgold Permitted Dividend is expected to be declared on or before the Effective Date, payable to Randgold Shareholders (by reference to a record date to be announced at the time of that declaration) on or around the Effective Date; and

 

   

subject to the discretion of the Board with respect to the declaration of dividends, Shareholders will receive a total 2018 annualized dividend of up to $0.14 per Common Share. Quarterly dividends of: (i) up to $0.03 per Common Share will be paid for the three month period ending September 30, 2018; and (ii) up to $0.05 per Common Share (with a record date prior to the Effective Date) will be paid for the three month period ending December 31, 2018, in each case if, as and when declared by the Board (the Barrick Permitted Dividend).

If, after the Announcement Date, any dividend (other than or in excess of the Barrick Permitted Dividend) is declared, made or paid or becomes payable in respect of the Common Shares with a record date before the Effective Date (a Non-Permitted Barrick Dividend), then Randgold will be entitled (in addition to the Randgold Permitted Dividend) to declare and pay, and the Randgold Shareholders will be entitled to receive and retain, prior to the record time for the Scheme, an equalization dividend (the Randgold Equalization Dividend) in US dollars in respect of the Randgold Shares in an amount per Randgold Share equal to the amount of the Non-Permitted Barrick Dividend per Common Share multiplied by the Exchange Ratio (taking into account any reduction to the Exchange Ratio arising as a result of any Randgold Return of Capital).

If, after the Announcement Date, any dividend, distribution or return of capital is declared, made or paid or becomes payable in respect of the Randgold Shares (other than a Randgold Permitted Dividend or a Randgold Equalization Dividend) with a record date on or before the record time for the Scheme (each a Randgold Return of Capital), Barrick reserves the right to adjust the Exchange Ratio accordingly by reference to the aggregate amount of such Randgold Return of Capital.

See “The Merger – The Merger Announcement and the Scheme – Dividends”.

Randgold Share Plans

Barrick and Randgold have agreed that awards under the Randgold Share Plans will be treated as follows:

 

   

Restricted Share Scheme. Randgold has granted awards under this plan in respect of 915,502 Randgold Shares.

 

   

Except as set out below, awards granted under this plan will vest concurrently with Closing and the Randgold Shares issued to participants will be exchanged for Merger Shares at the Exchange Ratio.

 

   

The executive directors of Randgold have agreed that their awards under this plan will vest concurrently with Closing over a time pro-rated number of Randgold Shares to the extent the applicable performance conditions have been satisfied on the date of vesting (as determined by the Randgold remuneration committee), and such pro-rated number of Randgold Shares will be exchanged for Merger Shares at the Exchange Ratio. Barrick will assume the awards that do not vest in connection with Closing and will satisfy such awards on vesting through the issuance of Common Shares, taking into account the Exchange Ratio.

 

   

Co-Investment Plan. Randgold has granted awards under this plan in respect of 131,611 Randgold Shares. Awards granted under this plan will vest concurrently with Closing and the Randgold Shares issued to participants will be exchanged for Merger Shares at the Exchange Ratio.

 

   

Long-Term Incentive Plan. Randgold has granted awards under this plan in respect of 261,784 Randgold Shares. Barrick will assume the awards granted under this plan and will satisfy such awards on vesting through the issuance of Common Shares, taking into account the Exchange Ratio (in the case of participants other than executive directors of Randgold, adjusted downward by 25% to reflect revised performance conditions for such participants).

See “The Merger – The Merger Announcement and the Scheme – Randgold Share Plans”.

Randgold ADS Program

Barrick and Randgold have agreed that they will put arrangements in place to allow holders of Randgold ADSs to participate in the Merger. At Closing, Randgold expects to terminate the Randgold ADS program. Concurrently with or following Closing, Barrick expects to take steps to effect the distribution of the Merger Shares issued in respect of Randgold Shares underlying the Randgold ADSs to the beneficial owners of such Merger Shares. See “The Merger – The Merger Announcement and the Scheme – Randgold ADS Program”.

 

26       Barrick Gold Corporation | Special Meeting Circular

 


Cooperation Agreement

The following is a summary of selected provisions of the Cooperation Agreement. This summary does not contain all of the information contained in the Cooperation Agreement and is qualified in its entirety by reference to the Cooperation Agreement which is attached as “Schedule J: Cooperation Agreement”. We urge you to read the Cooperation Agreement carefully and in its entirety. See also “The Merger – Cooperation Agreement ”.

Termination

The Cooperation Agreement may be terminated prior to the Effective Date in certain circumstances. A number of such termination events lead to payment by Barrick to Randgold of the Break Payment. See “The Merger – Cooperation Agreement – Termination”.

Break Payment

Barrick will, in certain circumstances, pay or cause to be paid to Randgold $300 million, being 2.46% of the market capitalization of Barrick as of the Announcement Date. See “The Merger – Cooperation Agreement – Break Payment”.

Change in Merger Structure

Barrick may switch to a Takeover Offer structure (with the consent of the Panel) if:

 

   

Randgold provides its prior written consent;

 

   

a Randgold Board Adverse Recommendation Change occurs;

 

   

a Competing Proposal for Randgold is announced in accordance with Rule 2.7 of the Takeover Code, which is recommended in whole or in part by Randgold’s board of directors; or

 

   

Randgold announces its intention to proceed with a Competing Proposal for Randgold.

For further details on a switch to a Takeover Offer, see “The Merger – Cooperation Agreement – Change in Merger Structure”.

Barrick Non-Solicit and Randgold Right to Match

Pursuant to the Cooperation Agreement, Barrick has agreed to take certain actions to obtain the approval by Shareholders of the Share Issuance Resolution.

At any time prior to the approval by Shareholders of the Share Issuance Resolution, the Board may make a Barrick Board Adverse Recommendation Change and enter into an acquisition agreement or other agreement with respect to a Barrick Superior Proposal if both: (i) Barrick receives a Barrick Superior Proposal; and (ii) the Board determines in good faith (after consultation with outside counsel and its financial advisors) that the failure to do so would be inconsistent with its fiduciary duties under applicable law; provided, however, that Barrick shall not be entitled to do so until: (A) after the fifth business day following Randgold’s receipt of written notice from Barrick advising Randgold that the Board intends to take such action, including the terms and conditions of any Barrick Superior Proposal that is the basis of the proposed action by the Board (with any amendment to the financial terms or any other material term of such Barrick Superior Proposal constituting a new Competing Proposal for Barrick and requiring a new Barrick Notice of Recommendation Change, except that references to the five business day period above will be deemed to be references to a three business day period); and (B) Barrick has consulted with Randgold during such period and provided Randgold with a reasonable opportunity at its election to propose changes to the terms and conditions of the Merger or the Cooperation Agreement and, if Randgold has proposed to amend the terms of the Merger or the Cooperation Agreement, the Board shall have determined, in good faith, after consultation with its outside counsel and financial advisors, that the Competing Proposal for Barrick is a Barrick Superior Proposal notwithstanding the proposed changes to the terms and conditions of the Merger or the Cooperation Agreement (if any). See “The Merger – Cooperation Agreement – Barrick Non-Solicit, Randgold Right to Match and Other Barrick Covenants”.

Randgold Covenants

The Takeover Code prohibits an offeree company such as Randgold and any person acting in concert with it from entering into any offer-related arrangement with either an offeror or any person acting in concert with it during an offer period or when an offer is reasonably in contemplation, except with the consent of the Panel or if certain exceptions apply. The provisions of the Cooperation Agreement have therefore been agreed so as to ensure that obligations of Randgold fall within one or more of the exceptions to this prohibition, which permit:

 

   

commitments to provide information or assistance for the purposes of obtaining any official authorization or regulatory clearance;

 

   

commitments which impose obligations only on the offeror; and

 

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agreements relating to any existing employee incentive arrangements.

As a result of the Takeover Code rules, Barrick cannot have the benefit of certain deal protection features commonly available in a North American context. See “The Merger – Cooperation Agreement – Barrick Non-Solicit, Randgold Right to Match and Other Barrick Covenants”.

Irrevocable Undertakings and Voting and Support Agreements

Irrevocable Undertakings in respect of Randgold Shares

Barrick has received irrevocable undertakings to vote in favour of the Scheme at the Jersey Court Meeting and Randgold Extraordinary General Meeting from the directors of Randgold in respect of their entire holdings amounting to 997,696 Randgold Shares representing approximately 1.06% of Randgold’s existing issued ordinary share capital. The undertakings from the directors of Randgold will cease to be binding only if Barrick announces (with the consent of the Panel) that it does not intend to make or proceed with the Merger or if the Scheme lapses or is withdrawn (other than where Barrick has elected to exercise its right to proceed by way of a Takeover Offer and such Takeover Offer has not lapsed or been withdrawn), but will remain binding in the event that a higher competing offer for Randgold is made. See “The Merger – Irrevocable Undertakings and Voting and Support Agreements – Undertakings in respect of Randgold Shares”.

Voting and Support Agreements in respect of Common Shares

Randgold has entered into voting and support agreements with the directors of Barrick to vote in favour of the Share Issuance Resolution and the Continuance Resolution at the Meeting in respect of their entire holdings currently amounting to 5,065,850 Common Shares representing approximately 0.434% of the currently issued and outstanding Common Shares. These voting and support agreements will cease to be binding only if Barrick announces (with the consent of the Panel) that it does not intend to make or proceed with the Merger or if the Scheme lapses or is withdrawn (other than where Barrick has elected to exercise its right to proceed by way of a Takeover Offer and such Takeover Offer has not lapsed or been withdrawn), but will remain binding in the event that a Barrick Superior Proposal is made. See “The Merger – Irrevocable Undertakings and Voting and Support Agreements – Voting and Support Agreements in respect of Common Shares”.

Acacia

The terms of the Relationship Agreement between Acacia and Barrick, among other matters, grant Acacia the Pre-emption Right in the event that Barrick proposes to acquire any business or interest having more than 50% of its overall mining resources both located in Africa and in gold and/or silver. This would include Randgold. Notwithstanding the foregoing, any exercise of the Pre-emption Right by Acacia in respect of Randgold would require the approval, by ordinary resolution, of Acacia’s shareholders pursuant to the UK Listing Authority’s listing rules by virtue of the size of Randgold relative to Acacia. Barrick owns approximately 63.9% of the issued share capital of Acacia and therefore any exercise of the Pre-emption Right by Acacia in respect of Randgold would be contingent on Barrick’s support. Barrick has provided notice to Acacia of the proposed Merger and has indicated to Acacia that it would not support an acquisition of Randgold by Acacia. See “The Merger – Acacia and “Risk Factors”.

Listing of the Merger Shares

Barrick has applied to list the Merger Shares on the TSX and NYSE, and has received conditional approval from the TSX. It is a condition of closing the Merger that the TSX and NYSE shall have conditionally approved the listing of the Merger Shares. Listing will be conditional on the satisfaction by Barrick of the conditions to listing imposed by each such exchange. Barrick will not be able to satisfy the listing requirements of the TSX unless a majority of Shareholders represented in person or by proxy at the Meeting vote FOR the Share Issuance Resolution. See “The Merger – Listing of the Merger Shares” and “Risk Factors”.

Barrick Following the Merger

Following the Merger, Barrick’s new management team will be tasked with implementing a business plan that will focus on the following:

 

   

Asset Quality

 

   

Grow and invest in a portfolio of Tier One Gold Assets and Strategic Assets with an emphasis on organic growth. Near-term priorities include Goldrush/Fourmile, Turquoise Ridge and a strategic partnership with Shandong Gold in the El Indio belt.

 

   

Sell Non-Core Assets over time in a disciplined manner.

 

   

Invest in exploration across extensive land positions in many of the world’s most prolific gold districts.

 

   

Maximize the long-term value of a strategic Copper Business.

 

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Operational Excellence

 

   

Fully implement a decentralized management ethos with a strong ownership culture.

 

   

Streamline management and operations, and eliminate non-essential costs.

 

   

Leverage innovation and technology to accelerate operational improvement.

 

   

Build trust-based partnerships with host governments and local communities to drive shared long-term value.

 

   

Strive for zero harm workplaces.

 

   

Sustainable Profitability

 

   

Disciplined approach to growth, emphasizing a partnership strategy.

 

   

Increased returns to shareholders driven by focus on return on capital, IRR and free cash flow per share growth.

Board of Directors

Following the Merger, two-thirds of the directors of the Board will be initially appointed by Barrick and one-third will be initially appointed by Randgold. The proposed members of the Board following the Merger, other than John L. Thornton and Mark Bristow have not yet been identified. See “Barrick Following the Merger – Board of Directors”.

Executive Officers

Following the Merger:

 

   

John L. Thornton will continue to serve as the Executive Chairman of Barrick;

 

   

Mark Bristow, the current Chief Executive Officer of Randgold, will serve as the President and Chief Executive Officer of Barrick;

 

   

Graham Shuttleworth, the current Finance Director and Chief Financial Officer of Randgold, will serve as the Senior Executive Vice President and Chief Financial Officer of Barrick; and

 

   

Kevin Thomson will continue to serve as the Senior Executive Vice President, Strategic Matters of Barrick.

See “Barrick Following the Merger – Executive Officers”.

Corporate Offices

Following the Merger, Barrick’s head office and certain key functions will continue to be located at Brookfield Place, TD Canada Trust Tower Suite 3700, 161 Bay Street, Toronto, Ontario, Canada, M5J 2S1. If the Continuance is completed, Barrick’s registered and records office will be located at 1600 - 925 West Georgia Street, Vancouver, British Columbia V6C 3L2. See “Barrick Following the Merger – Corporate Offices”.

Trading of Common Shares

Following the Merger, the Common Shares will continue to trade on the TSX and NYSE under the symbol ABX. The Common Shares will not be listed on the LSE or any other exchange as a result of the Merger. See “Barrick Following the Merger – Trading of Common Shares”.

 

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Pro Forma Capitalization

The following table sets out the consolidated cash and cash equivalents and the consolidated capitalization of Barrick as at June 30, 2018 on an actual basis and on a pro forma basis, giving effect to the Merger (as if it had closed on June 30, 2018) and certain related adjustments. The following table should be read together with the unaudited pro forma consolidated financial statements included in “Schedule I: Pro Forma Financial Information”, the respective historical consolidated financial statements of Barrick and Randgold and the related management’s discussion and analysis.

 

     As at June 30, 2018
(in millions of US dollars)
 
     Actual      Pro Forma  

Cash and cash equivalents

   $ 2,085      $ 2,383  
  

 

 

    

 

 

 

Long-term debt1

   $ 5,712      $ 5,712  
  

 

 

    

 

 

 

Total equity

     

Capital stock (Common Shares authorized: unlimited; outstanding as at June 30, 2018, 1,166,892,835; as adjusted to give effect to the Merger, 1,753,768,039)

     20,900        27,042  

Deficit

     (11,701      (12,007

Accumulated and other comprehensive income

     (164      (164

Other

     321        321  

Non-controlling interests

     1,750        2,297  

Total equity

     11,106        17,489  
  

 

 

    

 

 

 

Total capitalization2

   $ 16,818      $ 23,201  
  

 

 

    

 

 

 

 

  1

Long-term debt excludes the current portion of long-term debt, provisions for environmental rehabilitation, deferred income tax liabilities and other long-term liabilities, and includes capital leases. Refer to note 14B in Barrick’s interim consolidated financial statements as at and for the six month period ended June 30, 2018 for more information regarding Barrick’s long-term debt.

  2

Total capitalization is long-term debt plus total equity.

See “Forward-Looking Information”, “Information in this Circular – Pro Forma Financial Statements”, “Risk Factors” and “Barrick Following the Merger – Pro Forma Capitalization” and “Schedule I: Pro Forma Financial Information”.

Combined Mineral Reserves

As at December 31, 2017, on a combined basis, after giving effect to the Merger, Barrick’s total attributable proven and probable gold mineral reserves were 78 million ounces (rounded to the nearest million).

This figure was determined by aggregating Barrick’s attributable gold mineral reserves as of December 31, 2017 (comprising attributable proven gold mineral reserves of 398 million tonnes, at a grade of 1.91 grams/tonne, containing 24 million ounces and attributable probable gold mineral reserves of 896 million tonnes, at a grade of 1.39 grams/tonne, containing 40 million ounces, for aggregate proven and probable gold mineral reserves of 1,295 million tonnes, at a grade of 1.55 grams/tonne, containing 64 million ounces) and Randgold’s gold ore reserves as of December 31, 2017 (comprising total proved gold ore reserves of 44 million tonnes, at a grade of 3.78 grams/tonne, containing 3.5 million attributable ounces and total probable gold ore reserves of 128 million tonnes, at a grade of 3.78 grams/tonne, containing 10 million attributable ounces, for aggregate proved and probable total gold ore reserves of 172 million tonnes, at a grade of 3.78 grams/tonne, containing 14 million attributable ounces). See “Information in this Circular – Mineral Reserve and Mineral Resource Information” and “Barrick Following the Merger – Combined Mineral Reserves” for further details, together with the underlying qualifications and assumptions underpinning these combined mineral reserve estimates.

Selected Unaudited Pro Forma Financial Information

Certain selected unaudited pro forma combined financial information is set forth in the following table. Such information should be read in conjunction with the unaudited pro forma consolidated financial information of Barrick and Randgold after giving effect to the Merger for the year ended December 31, 2017 and as at and for the six months ended June 30, 2018, included in “Schedule I: Pro Forma Financial Information”. Adjustments have been made to prepare the unaudited pro forma consolidated financial information of Barrick and Randgold, which adjustments are based on certain assumptions. Both the adjustments and the assumptions made in respect thereof are described in the notes to the unaudited pro forma consolidated financial information set forth in “Schedule I: Pro Forma Financial Information”.

The unaudited pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating or financial results that would have occurred had the Merger actually occurred at the times contemplated by the notes to the unaudited pro forma consolidated financial statements set forth in “Schedule I: Pro Forma Financial Information”, or of the results expected in future periods.

 

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Pro Forma Consolidated Balance Sheet

As at June 30, 2018

(in millions of United States dollars) (Unaudited)

         
      Barrick      Randgold      Pro Forma
Adjustments
    Pro Forma
Consolidated  
 

  ASSETS

          

  Current assets

          

Cash and equivalents

     $2,085        $604        (306     $2,383    

Accounts receivable

     194        209          403    

Inventories

     1,940        136          2,076    

Other current assets

     356        -          356    

  Total current assets

     $4,575        $948          $5,217    

  Non-current assets

          

Equity in investees

     1,214        1,481        388       3,083    

Property, plant and equipment

     13,727        1,562        1,889       17,178    

Goodwill

     1,330        -        1,146       2,476    

Intangible assets

     230        -          230    

Deferred income tax assets

     1,072        -          1,072    

Non-current portion of inventory

     1,781        152          1,933    

Other assets

     1,193        53          1,246    

  Total non-current assets

     $20,547        $3,248          $27,218    

  Total assets

     $25,122        $4,196          $32,435    

  LIABILITIES AND EQUITY

          

  Current liabilities

          

Accounts payable

     $944        $128          $1,072    

Debt

     680        -          680    

Current income tax liabilities

     270        13          283    

Other current liabilities

     266        -          266    

  Total current liabilities

     $2,160        $140          $2,300    

  Non-current liabilities

          

Debt

     5,712        -          5,712    

Provisions

     3,108        56          3,164    

Deferred income tax liabilities

     1,341        58        673       2,072    

Other liabilities

     1,695        3          1,698    

  Total non-current liabilities

     $11,856        $117          $12,646    

  Total liabilities

     $14,016        $257          $14,946    

  Total equity attributable to Barrick Gold Corporation shareholders

     $9,356        $3,642        2,194       $15,192    

Non-controlling interests

     1,750        297        250       2,297    
                              

  Total equity

     $11,106        $3,939          $17,489    

  Total liabilities and equity

     $25,122        $4,196          $32,435    

See “Forward-Looking Information, “Information in this Circular – Pro Forma Financial Statements”, “Risk Factors” and “Barrick Following the Merger – Selected Unaudited Pro Forma Financial Information” and “Schedule I: Pro Forma Financial Information”.

 

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Continuance

In connection with the Merger and the changes to the Board contemplated in relation to the Merger, Barrick believes it is appropriate at this time to continue to British Columbia, which has a more modern corporate statute that provides additional flexibility to Barrick in a number of areas, including increased flexibility with respect to capital management and in the composition of the Board. In British Columbia, Barrick will have greater flexibility to attract the most qualified and experienced directors from a global talent pool, who have the expertise and skills required by Barrick’s global business, that will operate in a diverse range of jurisdictions across five continents. The British Columbia corporate statute also provides increased flexibility with respect to capital management, resulting from more flexible rules relating to dividends, share purchases and redemptions, and accounting for capital. In addition, harmonization of the BCBCA with applicable securities laws has reduced the regulatory burden as compared to other Canadian jurisdictions. See “The Continuance”.

The Board approved and recommends that Shareholders vote FOR the Continuance Resolution.

 

LOGO

 

The Board recommends a vote FOR the Continuance Resolution.

The Continuance Resolution confers discretionary authority on the Board to revoke the Continuance Resolution before the Continuance occurs. The Board may exercise its discretion and elect not to proceed with the Continuance, notwithstanding Shareholder approval, for any number of reasons, including, for example, the number of Registered Shareholders that dissent in respect of the Continuance Resolutions or if the Merger is not completed.

Upon completion of the Continuance, the OBCA will cease to apply to Barrick and Barrick will become subject to the BCBCA, as if it had been originally incorporated under the BCBCA. The articles of amalgamation and the by-laws of Barrick will be replaced by notice of articles and articles, the proposed form of which are attached as “Schedule K: Proposed Articles”. The registration of the Continuance does not create a new legal entity, nor does it prejudice or affect the continuity of Barrick; however, the Continuance of Barrick under the BCBCA will affect certain rights of Shareholders as they currently exist under the OBCA. Set out below under “The Continuance – Corporate Law Differences is a summary of some of the key differences in corporate law between the OBCA and BCBCA. A description of the key differences between the current articles and by-laws of Barrick and the proposed articles can be found under “The Continuance – Corporate Law Differences – Comparison of Barrick’s Existing Articles and By-Laws and the Proposed Articles”.

Completion of the Merger is not conditional on approval of the Continuance Resolution.

Risk Factors

Shareholders voting in favour of the Share Issuance Resolution and Continuance Resolution should be aware that the Merger and Continuance involve risks. Risk factors relating to Barrick are described under the heading “Risk Factors in our latest annual information form and in our most recent annual and interim management’s discussion and analysis. Shareholders should also carefully consider the risk factors which relate to Randgold under the heading “Risk Factors in the Randgold 20-F and under the heading “Principal Risk Factors and Uncertainties” in the Randgold Interim Report, each of which are incorporated by reference in this Circular. In addition, there are risks associated with completion of the Merger. Some of these risks include that the Cooperation Agreement may be terminated in certain circumstances, in which case the market price for the Common Shares may be adversely affected. In addition, completion of the Merger is subject to a number of conditions precedent, some of which are outside the control of Barrick and Randgold. Shareholders should carefully consider all such risk factors. See “Risk Factors”.

 

32       Barrick Gold Corporation | Special Meeting Circular

 


Meeting and Voting Information

Proxy Solicitation and Meeting Materials

How we will solicit proxies

Your proxy is being solicited on behalf of Barrick’s management in connection with the Meeting to be held on November 5, 2018. Management will solicit proxies primarily by mail, but proxies may also be solicited personally by telephone by employees of the Company. We have retained the services of Laurel Hill Advisory Group to provide governance services and assist in soliciting proxies by mail and telephone for estimated aggregate fees of approximately Cdn. $100,000, plus distribution costs and other expenses. Our contractual arrangements with Laurel Hill Advisory Group provide for additional fees to be payable in certain circumstances. The costs of preparing and distributing the Meeting materials and the cost of soliciting proxies will be borne by the Company.

How meeting materials will be delivered to Shareholders

The proxy materials are sent to our Registered Shareholders through our transfer agent, AST. We generally do not send our proxy materials directly to non-Registered Shareholders and instead use the services of Broadridge who acts on behalf of intermediaries to send proxy materials. We intend to pay intermediaries to send proxy materials and voting instruction forms to objecting non-Registered Shareholders.

Are materials for the Meeting being provided by way of notice and access?

No. Barrick is not sending meeting materials for the Meeting to Shareholders using the “notice and access” provisions of NI 54-101, or pursuant to the rules and regulations of the SEC. Copies of the Notice of Special Meeting and Circular for the Meeting are available under our issuer profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Meeting Procedures

Attending the Meeting

 

     
LOGO   Date:   November 5, 2018
  Time:   10:00 a.m., Toronto time
  Location:   Niagara Room at the InterContinental Toronto Centre located at 225 Front Street West, Toronto, Ontario, Canada
    Registration:   You or your proxyholder must see a representative of AST before entering the Meeting to register your attendance

How many Shareholders are needed to reach a quorum?

We need to have at least two people present at the Meeting who hold, or represent by proxy, in aggregate, at least 25% of the issued and outstanding Common Shares entitled to be voted at the Meeting. On October 4, 2018, the Company had 1,167,593,272 Common Shares issued and outstanding. Each Common Share is entitled to one vote.

Who is eligible to vote at or attend the Meeting?

The record date for determining the Shareholders entitled to receive notice of and vote at the Meeting is October 4, 2018. As of the record date, there were 1,167,593,272 Common Shares issued and outstanding.

Will Company employees vote their Common Shares at the Meeting?

Employees of Barrick are entitled to vote Common Shares beneficially owned by them, including Common Shares held in our equity compensation plans, at the Meeting. As of October 4, 2018, less than 1% of Barrick’s Common Shares were beneficially owned by employees, including through our equity compensation plans.

 

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Voting Procedures

How do I vote my Common Shares?

 

 

Please follow the voting instructions based on whether you are a Registered or non-Registered Shareholder:

 

•   You are a Registered Shareholder if you have a share certificate issued in your name or appear as the registered shareholder on the books of the Company.

 

•   You are a non-Registered Shareholder if your Common Shares are registered in the name of an intermediary (for example, a bank, trust company, investment dealer, clearing agency, or other institution).

 

If you are not sure whether you are a Registered or non-Registered Shareholder, please contact Laurel Hill Advisory Group at 1.877.452.7184 toll free in North America, or call collect outside North America at 416.304.0211 or by e-mail at assistance@laurelhill.com.

 

How can I vote if I am a Registered Shareholder?

 

  Option 1 – By proxy (proxy form)

LOGO

  By Internet:
 

 

Go to AST’s website at www.astvotemyproxy.com and follow the instructions on screen. You will need your 13-digit control number, which can be found on your proxy form.

 

 

Please see below, under the heading “How will my Common Shares be voted if I return a proxy?“, for more information.

 

LOGO

 

 

By Telephone:

 

 

Call 1.888.489.7352 (toll-free in Canada and the United States) from a touch-tone phone and follow the instructions. You will need your 13-digit control number, which can be found on your proxy form.

 

 

Please note that you cannot appoint anyone other than the directors and officers named on your proxy form as your proxyholder if you vote by telephone. Please see below, under the heading “How will my Common Shares be voted if I return a proxy?”, for more information.

 

LOGO

 

 

By Fax:

 

 

Complete, sign, and date your proxy form, and send all pages (in one transmission) by fax to 1.866.781.3111 (toll-free in Canada and the United States) or 416.368.2502 (outside Canada and the United States).

 

 

Please see below, under the heading “How will my Common Shares be voted if I return a proxy?“, for more information.

 

LOGO

 

 

By Mail:

 

 

Complete, sign, and date your proxy form, and return it in the envelope provided.

 

 

Please see below, under the heading “How will my Common Shares be voted if I return a proxy?“, for more information.

 

LOGO

 

 

Appointing another person to attend the Meeting and vote your Common Shares for you:

 

 

You may appoint a person or company other than the directors and officers designated by the Company on your form of proxy to represent you and vote on your behalf at the Meeting. This person or company does not have to be a Shareholder. To do so, strike out the names of our directors and officers that are printed on the proxy form and write the name of the person or company you are appointing in the space provided. Complete your voting instructions, sign, and date the proxy form, and return it to AST as instructed. Please ensure that the person you appoint is aware that he or she has been appointed and attends the Meeting. At the Meeting, your appointee should see an AST representative at the registration desk. Please note that you cannot appoint anyone other than the directors and officers named on your proxy form as your proxyholder if you vote by telephone. Please see below, under the heading “How will my Common Shares be voted if I return a proxy?“, for more information.

 

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  Option 2 – In person at the Meeting

LOGO

  You do not need to complete or return your proxy form if you intend to vote in person at the Meeting.

How can I vote if I am a non-Registered Shareholder?

 

  Option 1 – By proxy (voting instruction form)

LOGO

  You will receive a voting instruction form that allows you to vote on the Internet, by telephone, by fax, or by mail. To vote, you should follow the instructions provided on your voting instruction form. Your intermediary is required to ask for your voting instructions before the Meeting. Please contact your intermediary if you did not receive a voting instruction form.
 

 

Alternatively, you may receive from your intermediary a pre-authorized proxy form indicating the number of Common Shares to be voted, which you should complete, sign, date, and return as directed on the form.

 

 

Non-Registered Shareholders who do not object to their name being made known to the Company may be contacted by our proxy solicitation agent to assist in conveniently voting their shares directly by telephone. Barrick may also utilize the Broadridge QuickVote service to assist such Shareholders with voting their shares. Please see “How we will solicit proxies“ on page 33 for more information.

 
  Option 2 – In Person at the Meeting

LOGO

  We do not have access to the names or holdings of our non-Registered Shareholders. That means you can only vote your Common Shares in person at the Meeting if you have previously appointed yourself as the proxyholder for your Common Shares, by printing your name in the space provided on your voting instruction form and submitting it as directed on the form.
 

 

You may also appoint someone else as the proxyholder for your Common Shares by printing their name in the space provided on your voting instruction form and submitting it as directed on the form. Your vote, or the vote of your proxyholder, will be taken and counted at the Meeting. You or your proxyholder must see a representative of AST before entering the Meeting to register your attendance.

 

 

Your voting instructions must be received in sufficient time to allow your voting instruction form to be forwarded by your intermediary to AST before 5:00 p.m. (Toronto time) on November 1, 2018.

Is there a deadline for my proxy to be received?

Yes. Whether you vote by mail, fax, telephone, or Internet, your proxy must be received by no later than 5:00 p.m. (Toronto time) on November 1, 2018. If the Meeting is adjourned or postponed, your proxy must be received by 5:00 p.m. (Toronto time) on the second-last business day before the reconvened meeting.

As noted above, if you are a non-Registered Shareholder, all required voting instructions must be submitted to your intermediary sufficiently in advance of this deadline to allow your intermediary time to forward this information to AST. Barrick reserves the right to accept late proxies and to waive the proxy cut-off deadline, with or without notice, but Barrick is under no obligation to accept or reject any particular late proxy.

How will my Common Shares be voted if I return a proxy?

By completing and returning a proxy, you are authorizing the person named in the proxy to attend the Meeting and vote your Common Shares on each item of business according to your instructions. If you have appointed the designated directors or officers of Barrick as your proxy and you do not provide them with instructions, they will vote your Common Shares as follows:

 

   

FOR the Share Issuance Resolution; and

 

   

FOR the Continuance Resolution.

What happens if there are amendments, variations, or other matters brought before the Meeting?

Your proxy authorizes your proxyholder to act and vote for you on any amendment or variation of any of the business of the Meeting and on any other matter that properly comes before the Meeting. Your proxy is effective at any continuation following an adjournment of the Meeting. As of October 4, 2018, no director or officer of the Company is aware of any variation, amendment, or other matter to be presented for a vote at the Meeting.

 

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What if I change my mind?

You can revoke a vote you made by proxy by:

 

   

Voting again on the Internet or by telephone before 5:00 p.m. (Toronto time) on November 1, 2018;

 

   

Completing a proxy form or voting instruction form that is dated later than the proxy form or voting instruction form that you are changing, and mailing or faxing it as instructed on your proxy form or voting instruction form, as the case may be, so that it is received before 5:00 p.m. (Toronto time) on November 1, 2018; or

 

   

Any other means permitted by law.

If you are a Registered Shareholder, you can also revoke a vote you made by sending a notice in writing from you or your authorized attorney to our Corporate Secretary so that it is received before 5:00 p.m. (Toronto time) on November 1, 2018, or giving notice in writing from you or your authorized attorney to the Chair of the Meeting, at the Meeting or at any adjournment.

Is my vote by proxy confidential?

Yes. All proxies are received, counted, and tabulated independently by AST, our transfer agent, or Broadridge, in a way that preserves the confidentiality of shareholder votes, except:

 

   

As necessary to permit management and the Board of Directors to discharge their legal obligations to the Company and our Shareholders, or to determine the validity of the proxy;

 

   

In the event of a proxy contest; or

 

   

In the event a Shareholder has made a written comment on the proxy intended for management or the Board of Directors.

 

 

 

Need help casting your vote or require more information about the proxy voting process?

 

For assistance with casting your vote, please contact Laurel Hill Advisory Group at:

 

Laurel Hill Advisory Group

 

Toll-Free within Canada and the United States:

1.877.452.7184

 

Call collect: 416.304.0211

E-mail: assistance@laurelhill.com

 

 

Other Important Information

How do I obtain copies of Barrick’s and Randgold’s disclosure documents?

Barrick will provide to any person, upon request to our Investor Relations Department, a copy of our 2017 annual report, our latest annual information form, this Circular and any document (including any Randgold disclosure document) incorporated by reference herein. Our public disclosure documents are also available free of charge on our website at www.barrick.com, and under our issuer profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Randgold’s public disclosure documents are available free of charge on its website at www.randgoldresources.com, and under its issuer profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

The information contained on, or accessible through, any of these websites is not incorporated by reference into this Circular and is not, and should not be considered to be, a part of this Circular unless it is explicitly so incorporated.

 

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Business of the Meeting

Share Issuance Resolution

On September 24, 2018, Barrick and Randgold entered into the Cooperation Agreement and issued the Merger Announcement in which they announced that they had reached agreement on the terms and conditions of an all-share merger of Barrick and Randgold pursuant to which Barrick will acquire all of the issued and to be issued Randgold Shares (other than the Excluded Shares). Pursuant to the terms of the Merger, Randgold Shareholders will receive 6.1280 Common Shares for each Randgold Share held on the Effective Date. This Exchange Ratio is based on the volume-weighted average prices of Common Shares traded on the NYSE, and Randgold ADSs traded on NASDAQ, respectively, over the 20 trading days ended on September 21, 2018 (being the last business day before the Announcement Date). See “The Merger – Details of the Merger”.

There were approximately 94.5 million Randgold Shares outstanding as of September 24, 2018 and up to 95.8 million Randgold Shares may be outstanding on Closing as a result of the vesting of awards outstanding today under the Randgold Share Plans. If the maximum number of Randgold Shares are issued and outstanding on Closing, Barrick expects to issue approximately 586.6 million Merger Shares to Randgold Shareholders in connection with the Merger, representing approximately 50% of the issued and outstanding Common Shares as of September 24, 2018. The Merger Shares are expected to represent approximately 33.4% of outstanding Common Shares on Closing. Based on the closing price of the Common Shares on the NYSE (being $63.91) and the US $/Cdn $ exchange rate, each on September 21, 2018, the aggregate value of the Merger Shares to be paid to Randgold Shareholders would be approximately $6.1 billion (Cdn $7.9 billion).

Pursuant to Section 611(c) of the TSX Manual, the TSX requires that shareholder approval be obtained where the number of securities issued or issuable in payment of the purchase price for an acquisition exceeds 25% of the outstanding securities of the listed issuer, on a non-diluted basis. Accordingly, Shareholders will be asked at the Meeting to vote on the Share Issuance Resolution, the text of which is set out in “Schedule A: Share Issuance Resolution” , approving the issuance of the Merger Shares to Randgold Shareholders as consideration for the Merger. To be effective, the Share Issuance Resolution must be approved by at least a simple majority of the votes cast by Shareholders present in person or represented by proxy at the Meeting. If Shareholder approval is obtained and the other conditions to the Merger are satisfied or, if applicable, waived, Closing is expected to occur by the end of the first quarter of 2019. See “The Merger – The Merger Announcement and the Scheme – Timing for Completion of the Merger” and “The Merger – Listing of the Merger Shares” on page 53 for further details.

In order to become effective the Merger will require, among other things, the approval of the Share Issuance Resolution. The Share Issuance Resolution will require the affirmative vote of at least a simple majority of the votes cast by Shareholders who vote in person or by proxy at the Meeting. A copy of the Share Issuance Resolution is set out in “Schedule A: Share Issuance Resolution”.

 

LOGO

 

The Board recommends a vote FOR the Share Issuance Resolution.

If John L. Thornton or Kevin Thomson is your proxyholder and you have not given instructions on how to vote your Common Shares, he will vote “FOR” the Share Issuance Resolution.

Continuance Resolution

Shareholders will be asked at the Meeting to vote on the Continuance Resolution, the text of which is set out in “Schedule B: Continuance Resolution”, approving the Continuance of Barrick from the Province of Ontario to the Province of British Columbia. Upon completion of the Continuance, the OBCA will cease to apply to Barrick and Barrick will become subject to the BCBCA, as if it had been originally incorporated under the BCBCA. The articles of amalgamation and the by-laws of Barrick will be replaced by notice of articles and articles, the proposed form of which are attached as “Schedule K: Proposed Articles”. The registration of the Continuance does not create a new legal entity, nor does it prejudice or affect the continuity of Barrick; however, the Continuance of Barrick under the BCBCA will affect certain rights of Shareholders as they currently exist under the OBCA. Set out below under “The Continuance – Corporate Law Differences” is a summary of some of the key differences in corporate law between the OBCA and BCBCA. A description of the key differences between the current articles and by-laws of Barrick and the proposed articles can be found under “The Continuance – Corporate Law Differences – Comparison of Barrick’s Existing Articles and By-Laws and the Proposed Articles”.

To be effective, the Continuance Resolution will require the affirmative vote of at least two-thirds of the votes cast by Shareholders who vote in person or by proxy at the Meeting. If Shareholder approval for the Continuance is not obtained, Barrick will remain an Ontario corporation, subject to the requirements of the OBCA. Completion of the Merger is not conditional on approval of the Continuance Resolution. If the Continuance Resolution is approved at the Meeting, the Continuance is expected to be effected on or prior to completion of the Merger; however, Barrick may nevertheless elect not to complete the Continuance. Similarly, even if the Merger is not completed, Barrick may complete the Continuance. Registered Shareholders have certain rights of dissent in respect of the Continuance. See “The Continuance - Dissent Right of Shareholders” and “Schedule C: Dissent Procedures”.

 

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LOGO

 

The Board recommends a vote FOR the Continuance Resolution.

If John L. Thornton or Kevin Thomson or is your proxyholder and you have not given instructions on how to vote your Common Shares, he will vote “FOR” the Continuance Resolution.

Other Business

As of the date of this Circular, management is not aware of any changes to the items listed above and does not expect any other business to be brought forward at the Meeting. If there are changes or new business, your proxyholder can vote your Common Shares on these items as he or she sees fit.

 

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The Merger

Details of the Merger

On September 24, 2018, Barrick and Randgold entered into the Cooperation Agreement and issued the Merger Announcement pursuant to which Barrick will acquire all of the issued and to be issued Randgold Shares (other than the Excluded Shares). The Merger is expected to be effected pursuant to a court sanctioned scheme of arrangement under Jersey Companies Law. If completed, the Merger will result in Barrick becoming the owner of all of the Randgold Shares on the Effective Date. Randgold Shareholders will receive 6.1280 Common Shares for each Randgold Share held on the Effective Date. This Exchange Ratio is based on the volume-weighted average prices of Common Shares traded on the NYSE, and Randgold ADSs traded on NASDAQ, respectively, over the 20 trading days ended on September 21, 2018 (being the last business day before the Announcement Date). On Closing, Randgold will become a wholly-owned subsidiary of Barrick and Barrick will continue the operations of Barrick and Randgold on a combined basis. At the time of Closing, existing Shareholders will own approximately 66.6% of the Common Shares and Randgold Shareholders will own approximately 33.4% of the Common Shares. For further information regarding Barrick following completion of the Merger, see “Barrick Following the Merger” and “Schedule I: Pro Forma Financial Information”.

There were approximately 94.5 million Randgold Shares outstanding on the Announcement Date, approximately 1.3 million Randgold Shares were issuable pursuant to Randgold Share Plans and no other convertible securities of Randgold were outstanding. The Takeover Code provides that no additional Randgold Shares or convertible securities of Randgold will be issued by Randgold prior to Closing, other than in certain circumstances, with the consent of the Panel. Approximately 95.8 million Randgold Shares are expected to be outstanding at the Effective Date.

Giving effect to the Exchange Ratio, Barrick expects to issue up to approximately 586.6 million Common Shares (representing approximately 50% of Barrick’s issued and outstanding Common Shares calculated on a non-diluted basis) to Randgold Shareholders in connection with the Merger. See “The Merger – Listing of the Merger Shares” on page 53.

Background to the Merger

The terms and conditions contained in the Merger Announcement and the Cooperation Agreement are the result of arm’s length negotiations conducted between the representatives of Barrick and Randgold, and their respective advisors. The following is a summary of the principal events leading up to the Merger Announcement and the execution of the Cooperation Agreement.

Since becoming the Executive Chairman of Barrick in April 2014, John Thornton has held periodic meetings with Mark Bristow, the Chief Executive Officer of Randgold, to discuss their respective views of the gold mining industry and to explore potential strategic opportunities for Barrick and Randgold. At one such meeting held in February of 2018, Messrs. Thornton and Bristow considered a variety of strategic opportunities, ranging from a sale by Barrick of non-core assets to Randgold in return for shares, to the possibility of a merger transaction.

In the weeks that followed the February 2018 meeting, further meetings were held in the United States and the United Kingdom between Messrs. Thornton and Bristow to discuss further potential strategic transactions involving Barrick and Randgold. While a merger transaction was among the strategic opportunities discussed, initially Messrs. Thornton and Bristow focused on a possible sale by Barrick to Randgold of certain non-core assets in return for Randgold Shares, as a potential first step in a transaction.

In early April, Barrick engaged Davies Ward Phillips & Vineberg LLP (Davies) as its Canadian counsel to assist in connection with the evaluation of a potential transaction. On April 24, 2018, as part of a general review of strategic initiatives, the Barrick Board received an update from management regarding the due diligence that had been completed on Randgold to date based on publicly available information.

On April 28, 2018, Barrick and Randgold entered into the Confidentiality Agreement to facilitate the exchange of technical and business information. From April 29 to May 2, 2018, meetings of the Barrick and Randgold technical teams were held in London, England, during which the companies exchanged technical information. Approximately two weeks later, Mr. Thornton and Mr. Bristow held several telephone meetings. During those meetings, Mr. Bristow indicated that Randgold was interested in pursuing a stock-for-stock merger rather than acquiring assets from Barrick. Over the course of the next few weeks, Messrs. Thornton and Bristow discussed a potential merger transaction and agreed, in meetings held in Washington, D.C. on June 5 and 6, 2018, that if any merger was to be pursued, it would have to be on a zero premium basis, with existing Shareholders owning approximately two-thirds of the Common Shares and Randgold Shareholders owning approximately one-third of the Common Shares upon completion, based on the relative valuation of each of the companies.

In the weeks following the execution of the Confidentiality Agreement, the Barrick directors were briefed by Barrick’s Executive Chairman and management on the potential transaction with Randgold and were invited by the Executive Chairman to speak to representatives of M. Klein and Co. for further information and to ask any questions regarding Randgold and the potential transaction. During the months of June, July and September, each of the Barrick directors spoke with representatives of M. Klein and Co. about the potential transaction.

Following the decision of Messrs. Thornton and Bristow to evaluate a no-premium stock-for-stock merger transaction, Barrick and Randgold shifted their focus from asset-level due diligence to more comprehensive corporate due diligence of one another. Shortly thereafter, Barrick engaged Freshfields Bruckhaus Deringer LLP as its UK legal advisor. On June 6 and 7, 2018, meetings of the Barrick and Randgold technical teams were held in London, England. This was followed, during the period between June 12 and June 17, 2018, by site visits of Barrick’s technical teams to

 

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Randgold’s Loulo-Gounkoto, Tongon and Kibali mines in Mali, Côte d’Ivoire and the Democratic Republic of Congo, respectively, to conduct on-site due diligence. During the period from June 12 to June 19, 2018, Randgold’s technical team visited Barrick’s Goldstrike, Cortez and Turquoise Ridge mines in Nevada, U.S.A., and the Pueblo Viejo mine in the Dominican Republic to conduct on-site due diligence. These site visits were followed by Mr. Bristow hosting two visits during the period between June 20 to 24, 2018 by certain members of Barrick’s Board of Directors and senior management to Randgold’s Kibali mine in the Democratic Republic of Congo to view the operation firsthand. The first visit was attended by Mr. Thornton, Graham Clow, Pablo Marcet, Rob Krcmarov (Barrick’s Executive Vice President, Exploration and Growth), Catherine Raw (Barrick’s Executive Vice President and Chief Financial Officer) and Greg Walker (Barrick’s Senior Vice President, Operations and Technical Excellence), and the second visit was attended by Mr. Thornton, Patricia Hatter, Nancy Lockhart, Steven Shapiro and Ernie Thrasher.

On July 20, 2018, Messrs. Thornton and Bristow hosted an all-day session at Barrick’s offices in Toronto for ten other senior officers of each of Barrick and Randgold. The meeting was attended in person by Barrick’s executive team and senior Barrick officers, as well as Graham Shuttleworth (Randgold’s Chief Financial Officer). Nine other Randgold senior officers participated in the meeting by teleconference. The eleven delegates from each company met to discuss the status of their respective operations, the opportunities for improvement and their collective vision for the future of a combined company.

On July 25, 2018, the Barrick Board met and was briefed by Barrick management on the technical analysis of the Randgold assets and received a preliminary financial overview of the contemplated transaction from M. Klein and Co. The Board also received a comprehensive briefing from management on the due diligence findings following completion of significant technical, financial, regulatory and legal due diligence by Barrick and its advisors. At the end of the meeting, the Board authorized management to continue its due diligence review of Randgold, and to have Barrick’s advisors commence preparation of transaction documentation, with a view to making a final decision on the Merger by mid- to late-September.

Over the course of the ensuing weeks, the Barrick and Randgold deal teams, together with their respective financial and legal advisors, finalized their due diligence and advanced the transaction documents with a view to completing the negotiations and, if desirable, seeking final Board approvals in the second half of September. Concurrently with this process, Barrick management together with its financial and legal advisors also explored and evaluated a number of other strategic options that were potentially available to Barrick.

Over the months of August and September, Barrick and Randgold also continued to negotiate the terms of the Cooperation Agreement and to advance the preparation of the Merger Announcement required under the Takeover Code. In early September 2018, Barrick engaged Morgan Stanley as an additional financial advisor to assist in connection with the transaction.

Barrick’s Board met for a full-day meeting on Friday, September 21, 2018 with representatives from M. Klein and Co., Morgan Stanley and Davies present. The meeting commenced with a detailed presentation by Mr. Bristow of his vision for the combined company. When Mr. Bristow left the meeting, the Barrick executive team together with the financial advisors provided the Board with an update on the status of discussions and exploration of potential transactions and strategic options available to Barrick, including the proposed Merger. In considering and assessing these opportunities, the Board received advice from its financial and legal advisors. With respect to the Merger in particular, the Board received financial analysis from M. Klein and Co. and Morgan Stanley. The Board then discussed due diligence considerations and reviewed the key terms of the Merger Announcement and the Cooperation Agreement with the assistance of its legal and financial advisors.

On the evening of September 23, 2018, the Board, with the exception of Nancy Lockhart, met again with Barrick’s financial advisors to consider the fairness of the exchange ratio for the proposed Merger. At this meeting, M. Klein and Co. and Morgan Stanley each delivered their oral opinions (which were later confirmed in writing) to the effect that, as of such date and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of review undertaken by each financial advisor as described in such opinions, the Exchange Ratio was fair from a financial point of view to Barrick. This summary of the Fairness Opinions is qualified in its entirety by the full text of each such opinion, which are attached as “Schedule E: M. Klein and Co. Fairness Opinion” and “Schedule F: Morgan Stanley Fairness Opinion”. Subsequently, having determined that the Merger was in the best interests of Barrick, all directors in attendance at the meeting unanimously passed a resolution approving the Merger and, subject to the approval of the Share Issuance Resolution by Shareholders, the issuance of the Merger Shares. Shortly following the September 23, 2018 Board meeting, Ms. Lockhart tendered her resignation from the Board of Directors, which resignation was accepted.

Throughout the week-end of September 22 and 23, Barrick and Randgold, assisted by their respective legal and financial advisors, continued to negotiate the final terms of the Merger Announcement, the Cooperation Agreement and other transaction documents. These documents were finalized in the early morning of September 24 and the Merger Announcement was authorized and the Cooperation Agreement was executed shortly thereafter. The Merger Announcement was released at 2:00 am (Toronto Time) before the financial markets opened in London, England.

Fairness Opinions

M. Klein and Co. Fairness Opinion

Barrick retained M. Klein and Co. as a financial advisor in connection with the Merger. In determining to approve the Merger, the Board considered, among other things, the fairness opinion of each of its financial advisors. The M. Klein and Co. fairness opinion concluded that, as of the date of the fairness opinion, subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of review undertaken by M. Klein and Co. as set forth therein, the Exchange Ratio was fair, from a financial point of view, to Barrick. The full text of the M. Klein and Co. fairness opinion setting out the assumptions made, matters considered and limitations and qualifications on the review

 

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undertaken in connection with the M. Klein and Co. fairness opinion is attached as “Schedule E: M. Klein and Co. Fairness Opinion”. The summary of the M. Klein and Co. fairness opinion in this Circular is qualified in its entirety by reference to the full text of the M. Klein and Co. fairness opinion.

M. Klein and Co. delivered its fairness opinion for the information and assistance of the Board in connection with its consideration of the Merger. The M. Klein and Co. fairness opinion is not a recommendation as to whether or not Shareholders should vote in favour of the Share Issuance Resolution or any other matter.

M. Klein and Co. was engaged by Barrick as a financial advisor to provide the Board with financial advisory services in connection with the Merger, including advice and assistance in evaluating the Merger. Pursuant to the terms of its engagement with Barrick, M. Klein and Co. is to be paid a fee for its services as financial advisor, including fees that are contingent on completion of the Merger or certain other events. Barrick has also agreed to reimburse M. Klein and Co. for its reasonable out-of-pocket expenses and to indemnify M. Klein and Co. in certain circumstances. Neither M. Klein and Co. nor any of its affiliates is an insider, associate or affiliate (as such terms are defined in the applicable Canadian securities laws) of Barrick or Randgold or any of their respective associates or affiliates.

Morgan Stanley Fairness Opinion

Barrick retained Morgan Stanley as a financial advisor in connection with the Merger. In determining to approve the Merger, the Board considered, among other things, the fairness opinion of each of its financial advisors. The Morgan Stanley fairness opinion concluded that, as of the date of the fairness opinion, subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of review undertaken by Morgan Stanley as set forth therein, the Exchange Ratio was fair, from a financial point of view, to Barrick. The full text of the Morgan Stanley fairness opinion setting out the assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the Morgan Stanley fairness opinion is attached as “Schedule F: Morgan Stanley Fairness Opinion”. The summary of the Morgan Stanley fairness opinion in this Circular is qualified in its entirety by reference to the full text of the Morgan Stanley fairness opinion.

Morgan Stanley delivered its fairness opinion for the information and assistance of the Board in connection with its consideration of the Merger. The Morgan Stanley fairness opinion is not a recommendation as to whether or not Shareholders should vote in favour of the Share Issuance Resolution or any other matter.

Morgan Stanley was engaged by Barrick as a financial advisor to provide the Board with financial advisory services in connection with the Merger, including advice and assistance in evaluating the Merger. Pursuant to the terms of its engagement with Barrick, Morgan Stanley is to be paid a fee for its services as financial advisor, including fees that are contingent on completion of the Merger or certain other events. Barrick has also agreed to reimburse Morgan Stanley for its reasonable out-of-pocket expenses and to indemnify Morgan Stanley in certain circumstances. Neither Morgan Stanley nor any of its affiliates is an insider, associate or affiliate (as such terms are defined in the applicable Canadian securities laws) of Barrick or Randgold or any of their respective associates or affiliates.

Recommendation of the Board

After careful consideration, including consideration of the comprehensive briefings from management on its due diligence findings, consultation with its legal and financial advisors, the receipt of fairness opinions of each of M. Klein and Co. and Morgan Stanley and other factors described below under “– Reasons for the Recommendation of the Board”, the Board determined that the Merger and the Continuance are in the best interests of Barrick and determined to recommend that Shareholders vote in favour of the Share Issuance Resolution and the Continuance Resolution. Accordingly, the Board approved and recommends that Shareholders vote FOR the Share Issuance Resolution and FOR the Continuance Resolution.

 

LOGO

 

The Board recommends a vote FOR the Share Issuance Resolution and FOR the Continuance Resolution.

 

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Reasons for the Recommendation of the Board

In reaching its conclusions and formulating its recommendation of the Merger to Shareholders, the Board considered a number of factors, including those listed below, with the benefit of input from Barrick’s management and financial and legal advisors.

The following is a summary of the principal reasons for the recommendation that Shareholders vote FOR the Share issuance Resolution and the Continuance Resolution:

 

   

Creation of industry-leading gold company. The Board believes that the Merger will create an industry-leading gold company with the greatest concentration of Tier One Gold Assets in the industry, the lowest total cash cost position among Senior Gold Peers,(12) and a diversified asset portfolio positioned for growth in many of the world’s most prolific gold districts.

 

   

Superior size and scale. Based on Barrick and Randgold’s respective closing prices on the NYSE and NASDAQ as of September 21, 2018 (being the last business day prior to the Announcement Date), Barrick would have an aggregate market capitalization of $18.3 billion. In addition, based on the 2017 financial results for both companies, Barrick would have generated aggregate revenue of approximately $9.7 billion, aggregate net income of approximately $1.9 billion, and aggregate Adjusted EBITDA(13) of approximately $4.7 billion.

 

   

Ownership of five of the world’s top ten Tier One Gold Assets, with two potential Tier One Gold Assets. Barrick will, on completion of the Merger, own the following:

 

   

Tier One Gold Assets: Cortez, Goldstrike, Kibali (45%), Loulo-Gounkoto (80%) and Pueblo Viejo (60%); and

 

   

potential to become Tier One Gold Assets: Goldrush/Fourmile and Turquoise Ridge (75%).

 

   

Superior financial position. Based on the 2017 financial results of Barrick and Randgold, Barrick would have had on a combined basis the highest Adjusted EBITDA,(12) the highest Adjusted EBITDA margin(12) and the lowest total cash cost position among Senior Gold Peers:(12)

 

   

combined Adjusted EBITDA margin(13) of 48% (for the financial year ended December 31, 2017); and

 

   

combined cost of sales related to gold products of $798 per ounce and total cash costs(13) of $538 per ounce (for the financial year ended December 31, 2017).

 

   

Proven management team. Barrick will have a proven management team of owners with the ability to operate successfully in complex jurisdictions:

 

   

continuation of Barrick’s strong partnership-ownership culture and deep experience operating across a range of geographies, mining methods and ore types; and

 

   

from January 1, 2008 to August 31, 2018, Randgold achieved the highest return on capital among Senior Gold Peers.(12) Randgold’s share price has also risen by 76% over the same period, while Senior Gold Peers’ share prices have declined by an average of 48%.

 

   

Strong cash flow generation to support robust investment and a greater ability to return cash to Shareholders.

 

   

Established partnerships with leading Chinese mining companies.

 

   

Superior scale and the largest gold reserves among Senior Gold Peers. Potential combined 78 million ounces of proven and probable gold reserves on an attributable basis (as at December 31, 2017).(14)

 

 

 

(12) 

Lowest total cash cost, highest Adjusted EBITDA, highest Adjusted EBITDA margin and highest return on capital are non-GAAP financial performance measures based on data from Bloomberg or Wood Mackenzie with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Bloomberg or Wood Mackenzie which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77 and “Other Information – Comparative Measures Based on Third Party Data” on page 79.

 

(13) 

Adjusted EBITDA, Adjusted EBITDA margin and total cash costs are non-GAAP financial performance measures with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. These financial metrics are presented on a combined or aggregate basis and do not include any pro forma adjustments. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77.

 

(14) 

See “Information in this Circular – Mineral Reserve and Mineral Resource Information” on page 16 and “Barrick Following the Merger – Combined Mineral Reserves” on page 61 for details regarding qualifications, assumptions, tonnage, grade and a breakdown of proven gold reserves and probable gold reserves.

 

42       Barrick Gold Corporation | Special Meeting Circular


   

Strong balance sheet with expected investment grade ratings:

 

   

the lowest ratio of gross debt (as of June 30, 2018) to Adjusted EBITDA (for the financial year ended December 31, 2017) of any Senior Gold Peer;(15)

 

   

on an aggregate basis as at June 30, 2018, Barrick and Randgold had a combined cash position of $2.7 billion and debt net of cash of $3.7 billion; and

 

   

Barrick currently has an investment grade rating of BBB and Baa2 from S&P and Moody’s, respectively. As at June 30, 2018, Randgold had a net cash balance of $604 million and strong cash generation from its underlying operations. This would provide additional flexibility to Barrick to service existing Barrick debt and may positively impact Barrick’s current credit ratings.

 

   

Continued exposure to copper. Continued ownership of a strategic Copper Business that produced 413 million pounds of copper in 2017.

 

   

Significant re-rating potential. Given the quality of the combined asset base and the proven management team, with the highest Adjusted EBITDA margin(15) and the lowest total cash cost for 2017 relative to the Senior Gold Peers,(15) there is significant potential for Barrick to re-rate over time.

 

   

Fairness opinions. The Board has received a fairness opinion from each of M. Klein and Co. and Morgan Stanley to the effect that as of September 23, 2018, and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the scope of review undertaken by each financial advisor as described in such opinions, the Exchange Ratio was fair, from a financial point of view, to Barrick. See “The Merger – Fairness Opinions”.

 

   

Support of Barrick directors. All of the directors of Barrick have entered into voting and support agreements pursuant to which they have agreed, among other things, to vote their Common Shares in favour of the Share Issuance Resolution and the Continuance Resolution. As of the Announcement Date, these directors collectively beneficially owned or exercised control or direction over an aggregate of 2,780,622 Common Shares, representing approximately 0.238% of the issued and outstanding Common Shares.

 

   

Other factors. The Board also considered the Merger with reference to current economics, industry and market trends affecting each of Barrick and Randgold in the gold market, information concerning mineral reserves and mineral resources, business, operations, properties, assets, financial condition, operating results and prospects of each of Barrick and Randgold and the then historical trading prices of the Common Shares and the Randgold Shares.

The Board also considered the risks relating to the Merger, including those matters described under the heading “Risk Factors”. The Board believes that, overall, the anticipated benefits of the Merger to Barrick outweigh these risks.

In making its determinations and recommendations, the Board also observed that a number of procedural safeguards were in place and are present to permit the Board to represent the interests of Barrick, our Shareholders and Barrick’s other stakeholders. These procedural safeguards include, among others:

 

   

Ability to respond to superior proposals. Notwithstanding the limitations contained in the Cooperation Agreement on Barrick’s ability to solicit interest from third parties, the Cooperation Agreement allows Barrick to engage in discussions or negotiations regarding any unsolicited Competing Proposal for Barrick received prior to the Meeting that constitutes or would reasonably be expected to result in a Barrick Superior Proposal (if failure to take such action would be inconsistent with the fiduciary duties of the Board under applicable law).

 

   

Reasonable Break Payment. The amount of the Break Payment, being $300 million, payable under certain circumstances described under “– Cooperation Agreement – Break Payment”, is reasonable.

 

   

Shareholder approval. The Share Issuance Resolution must be approved by the affirmative vote of at least a simple majority of the votes cast by Shareholders who vote in person or by proxy at the Meeting.

The information and factors described above and considered by the Board in reaching its determinations are not intended to be exhaustive, but include material factors considered by the Board. In view of the wide variety of factors considered in connection with the evaluation of the Merger and the complexity of these matters, the Board did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to these factors. In addition, individual members of the Board may have given different weight to different factors.

 

 

(15) 

Lowest total cash cost, highest Adjusted EBITDA margin and lowest ratio of gross debt to Adjusted EBITDA are non-GAAP financial performance measures based on data from Factset or Wood Mackenzie with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Factset or Wood Mackenzie which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. For further details see “Other Information – Use of Non-GAAP Financial Performance Measures” on page 77 and “Other Information – Comparative Measures Based on Third Party Data” on page 79.

 

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     43  


The Merger Announcement and the Scheme

The following is a summary of selected provisions of the Merger Announcement which describes the terms and conditions of the Merger, a copy of which is attached as Schedule 1 to the Cooperation Agreement which is attached to this Circular in “Schedule J: Cooperation Agreement”. While we believe this description covers the material terms of the Merger Announcement, it may not contain all of the information that is important to you and is qualified in its entirety by reference to the Merger Announcement. We urge you to read the Merger Announcement carefully and in its entirety.

It is intended that the Merger will be implemented by way of a court-sanctioned Scheme between Randgold and Randgold Shareholders under Article 125 of the Jersey Companies Law. The purpose of the Scheme is to provide for Barrick to become the owner of the entire issued and to be issued share capital of Randgold.

The procedure involves, among other things, an application by Randgold to the Jersey Court to sanction the Scheme, in consideration for which the Randgold Shareholders will receive the Merger Shares.

The issuance of the Merger Shares requires the Share Issuance Resolution to be approved by a simple majority of Common Shares voted in person or by proxy at the Meeting. The Board of Directors recommends that Shareholders vote in favour of the Share Issuance Resolution. See “– Reasons for the Recommendation of the Board” and “– Recommendation of the Board”. Completion of the Merger is subject to certain additional conditions and terms referred to in Appendix 1 to the Merger Announcement and summarized below, see “– Conditions to the Merger”.

The Scheme will be governed by Jersey law and will be subject to the jurisdiction of the Jersey courts and to the conditions and further terms set out in the Merger Announcement and in the Scheme Document. The Merger and the Scheme will be subject to the applicable requirements of the LSE, the UK Financial Conduct Authority, the Takeover Code, the TSX, the NYSE, NASDAQ and applicable securities laws in Canada and the United States.

Conditions to the Merger

Completion of the Merger is conditional upon, among other things, the satisfaction or waiver of the following closing conditions (assuming that the Merger is effected by means of the Scheme):

 

   

the Scheme becoming unconditional and effective, subject to the provisions of the Takeover Code, by no later than the Longstop Date;

 

   

approval of the Scheme at the Jersey Court Meeting by a majority in number of the Randgold Shareholders present and voting, either in person or by proxy, representing three-quarters or more of the voting rights of all Randgold Shares voted by those Randgold Shareholders;

 

   

all resolutions in connection with or required to approve and implement the Scheme as set out in the notice of the Randgold Extraordinary General Meeting (including, without limitation, the Randgold Special Resolution) being duly passed by the requisite majority at the Randgold Extraordinary General Meeting (which, in relation to the Randgold Special Resolution, will require the approval of Randgold Shareholders representing at least two-thirds of the votes cast at the Randgold Extraordinary General Meeting either in person or by proxy);

 

   

the sanction of the Scheme without modification or with modification on terms acceptable to Barrick and Randgold by the Jersey Court, and the delivery to the Registrar of Companies of the order sanctioning the Scheme; and

 

   

the Share Issuance Resolution being duly passed at the Meeting and remaining valid.

In addition, Barrick and Randgold have agreed that the Merger will be conditional upon the following conditions and, accordingly, the necessary actions to make the Merger effective will not be taken unless such conditions (as amended, if appropriate) have been satisfied or, to the extent capable of waiver, waived on or before the Longstop Date:

 

   

the Merger Shares being conditionally accepted for listing on the TSX and NYSE and such acceptances not having been withdrawn; and

 

   

receipt of any and all approvals of the South African competition authorities, and such approvals remaining in force and not having been revoked.

Barrick and Randgold have further agreed that the Merger will be conditional upon the satisfaction or waiver of certain other conditions on or before the Longstop Date relating to: (i) third party approvals and clearances; (ii) matters arising under contractual arrangements and agreements of the Wider Randgold Group or the Wider Barrick Group; (iii) subject to certain exceptions, no member of the Wider Randgold Group or the Wider Barrick Group having effected certain changes in its capital structure or other corporate actions; (iv) adverse changes, litigation or regulatory enquiries relating to the Wider Randgold Group or the Wider Barrick Group; (v) neither party having discovered that any financial or other information concerning the Wider Randgold Group or the Wider Barrick Group, as applicable, is misleading; (vi) neither party having discovered, except to the extent disclosed to the other party, any failure by the Wider Randgold Group or the Wider Barrick Group, as applicable, to comply with applicable laws relating to the environment or the health and safety of any person that would be likely to give rise to material liabilities or the existence of any material liability on the part of any member of the Wider Randgold Group or the Wider Barrick Group, as applicable, to clean-up or

 

44       Barrick Gold Corporation | Special Meeting Circular


rectify any damage to any property or any controlled waters now or previously owned, occupied or used by the Wider Randgold Group or the Wider Barrick Group, as applicable, or any potential liability of the Wider Randgold Group or the Wider Barrick Group, as applicable, in respect of any product or process of manufacture or materials; and (vii) Barrick not having discovered that any member of the Wider Randgold Group and Randgold not having discovered that any member of the Wider Barrick Group has violated any applicable anti-corruption, sanctions or criminal properties laws.

Other than the conditions relating to the Scheme becoming unconditional and effective by no later than the Longstop Date (subject to the provisions of the Takeover Code), the approval of the Scheme and all resolutions required to implement the Scheme at the Jersey Court Meeting and Randgold Extraordinary General Meeting by the Randgold Shareholders, the sanction of the Scheme by the Jersey Court, the approval of the Share Issuance Resolution by the Shareholders, and the admission of the Merger Shares to listing on the TSX and NYSE, Barrick may invoke a condition to the Merger to cause the Merger not to proceed only if the Panel is satisfied that the circumstances giving rise to the right to invoke that condition are of material significance to Barrick in the context of the Merger.

Effect of Approval of Scheme

Upon the Scheme becoming effective, it will be binding on all Randgold Shareholders (irrespective of whether or not they attended or voted at the Jersey Court Meeting or the Randgold Extraordinary General Meeting), and share certificates in respect of Randgold Shares will cease to be valid and entitlements to Randgold Shares held within the CREST system will be cancelled.

Timing for Completion of the Merger

Subject to receiving all required approvals, including the approval of the Share Issuance Resolution by Shareholders at the Meeting, and the satisfaction or waiver of all other conditions to Closing of the Merger, the Merger is expected to close by the end of the first quarter of 2019. It is possible that factors outside of Barrick’s control could delay or prevent completion of the Merger. See “Expected Timetable of Key Events”, “– Conditions to the Merger” and “Risk Factors”.

Randgold Share Plans

Barrick and Randgold have agreed that awards under the Randgold Share Plans will be treated as follows:

 

   

Restricted Share Scheme. Randgold has granted awards under this plan in respect of 915,502 Randgold Shares.

 

   

Except as set out below, awards granted under this plan will vest concurrently with Closing and the Randgold Shares issued to participants will be exchanged for Merger Shares at the Exchange Ratio.

 

   

The executive directors of Randgold have agreed that their awards under this plan will vest concurrently with Closing over a time pro-rated number of Randgold Shares to the extent the applicable performance conditions have been satisfied on the date of vesting (as determined by the Randgold remuneration committee), and such pro-rated number of Randgold Shares will be exchanged for Merger Shares at the Exchange Ratio. Barrick will assume the awards that do not vest in connection with Closing and will satisfy such awards on vesting through the issuance of Common Shares, taking into account the Exchange Ratio.

 

   

Co-Investment Plan. Randgold has granted awards under this plan in respect of 131,611 Randgold Shares. Awards granted under this plan will vest concurrently with Closing and the Randgold Shares issued to participants will be exchanged for Merger Shares at the Exchange Ratio.

 

   

Long-Term Incentive Plan. Randgold has granted awards under this plan in respect of 261,784 Randgold Shares. Barrick will assume the awards granted under this plan and will satisfy such awards on vesting through the issuance of Common Shares, taking into account the Exchange Ratio (in the case of participants other than executive directors of Randgold, adjusted downward by 25% for this purpose to reflect revised performance conditions for such participants).

Randgold ADS Program

Barrick and Randgold have agreed that they will put arrangements in place to allow holders of Randgold ADSs to participate in the Merger. At Closing, Randgold expects to terminate the Randgold ADS program. Concurrently with or following Closing, Barrick expects to take steps to effect the distribution of the Merger Shares issued in respect of Randgold Shares underlying the Randgold ADSs to the beneficial owners of such Merger Shares.

 

Barrick Gold Corporation | Special Meeting Circular

     45  


Dividends

Under the terms of the Merger, Barrick and Randgold have agreed that:

 

   

Randgold Shareholders will be entitled to receive and retain the anticipated 2018 Randgold dividend of $2.00 per Randgold Share on or around the Effective Date, subject to the approval of the board of Randgold. This Randgold Permitted Dividend is expected to be declared on or before the Effective Date, payable to Randgold Shareholders (by reference to a record date to be announced at the time of that declaration) on or around the Effective Date; and

 

   

subject to the discretion of the Board with respect to the declaration of dividends, Shareholders will receive a total 2018 annualized dividend of up to $0.14 per Common Share. Quarterly dividends of: (i) up to $0.03 per Common Share will be paid for the three month period ending September 30, 2018; and (ii) up to $0.05 per Common Share (with a record date prior to the Effective Date) will be paid for the three month period ending December 31, 2018, in each case if, as and when declared by the Board.

If, after the Announcement Date, any Non-Permitted Barrick Dividend is declared, made or paid or becomes payable in respect of the Common Shares with a record date before the Effective Date, then Randgold will be entitled (in addition to the Randgold Permitted Dividend) to declare and pay, and the Randgold Shareholders will be entitled to receive and retain, prior to the record time for the Scheme the Randgold Equalization Dividend in US dollars in respect of the Randgold Shares in an amount per Randgold Share equal to the amount of the Non-Permitted Barrick Dividend per Common Share multiplied by the Exchange Ratio (taking into account any reduction to the Exchange Ratio arising as a result of any Randgold Return of Capital).

Fractional Shares

Fractions of Merger Shares will not be issued to Randgold Shareholders. Instead, Randgold Shareholders who otherwise would have received a fraction of a Merger Share will receive an amount in cash in US dollars rounded to the nearest cent, based on the amount obtained by multiplying such fraction by the average closing price of the Common Shares on the NYSE on each of the five consecutive trading days ending on the trading day that is two trading days prior to the Effective Date, except that individual entitlements of less than $5.00 will not be paid but will be retained for the benefit of Barrick.

Confidentiality Agreement

Barrick and Randgold have entered into the Confidentiality Agreement, pursuant to which each of Barrick and Randgold has undertaken, among other things, to: (i) keep confidential information relating to the Merger and the other party and not to disclose such confidential information to third parties (other than certain permitted parties) unless required by law or regulation or certain other limited exceptions apply; and (ii) use the confidential information for the sole purpose of evaluating the other party’s group and/or the Merger and/or negotiating and/or advising on the Merger. These confidentiality obligations remain in force until April 28, 2020.

Expenses

Barrick and Randgold expect to incur, on a consolidated basis, up to approximately $117 million in estimated non-recurring costs in connection with the Merger, comprised of: (i) costs related to Randgold Share Plans; and (ii) expenses associated with financial advisory, consulting, accounting, tax, legal and other professional services, costs associated with change of control and integration, listing expenses, out-of-pocket costs and other costs of a non-recurring nature (including property transfer taxes).

Cooperation Agreement

The following is a summary of selected provisions of the Cooperation Agreement. While we believe this description covers the material terms of the Cooperation Agreement, it may not contain all of the information that is important to you and is qualified in its entirety by reference to the Cooperation Agreement. We urge you to read the Cooperation Agreement carefully and in its entirety. See “Schedule J: Cooperation Agreement”.

Regulatory Undertakings

Under the Cooperation Agreement, among other things, Barrick and Randgold will generally jointly determine the strategy for satisfying and obtaining the regulatory and other clearances necessary for the Merger, provided that in the event of any disagreement between Barrick and Randgold over the strategy and decisions for obtaining such clearances, Barrick shall solely determine such strategy and decisions and may solely determine the offer of Remedies, except where such Remedies would have a material adverse effect on the Barrick Group following the consummation of the Merger. Randgold will lead all communications with government authorities in the jurisdictions in which Randgold’s mines are located and Barrick has agreed that it will not contact any government authority in those jurisdictions without prior consultation with Randgold.

Barrick and Randgold have agreed to provide each other with such information and assistance as the other may reasonably require for the purposes of obtaining all clearances and making any submission, filing or notification to any governmental authority. Barrick and Randgold have agreed to keep each other promptly informed of all developments which are material or reasonably likely to be material to obtaining the regulatory clearances

 

46       Barrick Gold Corporation | Special Meeting Circular


required in relation to the Merger and to provide each other with copies of all notifications, filings, submissions, material correspondence and material communications, whether oral or in writing, relating thereto.

Barrick has also agreed to (i) take, or cause to be taken, all reasonable action and do, or cause to be done, all things reasonably necessary, proper or advisable to secure regulatory clearances and complete the COMESA filing by the Longstop Date or such earlier date as may be required by law; (ii) offer to the government authorities (and not withdraw) within a reasonable time period any Remedies necessary or desirable (in the reasonable opinion of Barrick) for the purpose of securing the regulatory clearances and completing the COMESA filing; (iii) perform or implement without undue delay any such Remedies that are offered to and accepted by the government authorities for the purpose of securing the regulatory clearances or to complete the COMESA filing; and (iv) use reasonable efforts to avoid (x) any declarations of incompleteness by any government authority and (y) any suspension of review period by a government authority, in each case in respect of the regulatory clearances or to complete the COMESA filing; (v) use reasonable efforts to ensure clearances required in relation to regulatory clearances or to complete the COMESA filing are obtained promptly by each government authority, including, if necessary, entering into any hold separate arrangement with a government authority; and (vi) use reasonable efforts to procure that no government authority in respect of regulatory clearances or to complete the COMESA filing seeks to issue, or issues any measure that prevents, or purports to prevent, completion of the Merger. Barrick has agreed to be responsible for the payment of all fees required in connection with obtaining the regulatory clearances or to complete the COMESA filing.

Termination

Barrick has the right to terminate the Cooperation Agreement if, prior to the Jersey Court Meeting or the Randgold Extraordinary General Meeting, any of the following occurs (a Randgold Board Adverse Recommendation Change):

 

   

if Randgold makes an announcement prior to the publication of the Merger Document that: (i) Randgold’s board of directors no longer intends to recommend the Merger or intends to modify or qualify such recommendation in any adverse way; (ii) except as contemplated in the Cooperation Agreement, it will not convene the Jersey Court Meeting or the Randgold Extraordinary General Meeting; or (iii) except as contemplated in the Cooperation Agreement, it intends not to mail the Scheme Document or (if different) the document convening the Randgold Extraordinary General Meeting;

 

   

if Randgold makes an announcement that it will delay the convening of, or will adjourn, the Jersey Court Meeting, the Randgold Extraordinary General Meeting or the court hearing to sanction the Scheme for more than 15 calendar days, in each case without the consent of Barrick, or fails to register the court order sanctioning the Scheme with the Registrar of Companies within two business days of its grant;

 

   

the recommendation of the Merger by Randgold’s board of directors is not included by Randgold in the Merger Document; or

 

   

Randgold’s board of directors in any way withdraws, adversely modifies or adversely qualifies its recommendation of the Merger.

Barrick also has the right to terminate the Cooperation Agreement prior to the Longstop Date if:

 

   

a Competing Proposal for Randgold is recommended by Randgold’s board of directors;

 

   

a Competing Proposal for Randgold completes, becomes effective or is declared or becomes unconditional in all respects;

 

   

with the consent of the Panel, any condition required to consummate the Merger which has not been waived is (or has become) incapable of satisfaction by the Longstop Date and, notwithstanding that Barrick has the right to waive such condition, Barrick will not do so; or

 

   

with the consent of the Panel, any condition required to complete the Merger which is incapable of waiver is incapable of satisfaction by the Longstop Date.

The Cooperation Agreement can be terminated by Randgold if any of the following occurs:

 

   

if prior to the Meeting, any of the following occurs (a Barrick Board Adverse Recommendation Change):

 

   

the Board withdraws (or modifies in any manner adverse to Randgold), or proposes publicly to withdraw (or modify in any manner adverse to Randgold), its recommendation of the Share Issuance Resolution;

 

   

the Board adopts, approves, recommends or declares advisable, or proposes publicly to adopt, approve, recommend or declare advisable, any Competing Proposal for Barrick; or

 

   

the Board fails to include its recommendation of the Share Issuance Resolution in this Circular;

 

   

subject to compliance by Randgold with its obligations to provide certain information for this Circular, if we adjourn or postpone the Meeting by more than 15 calendar days or fail to publish this Circular as contemplated by the Cooperation Agreement or this Circular does not contain our Board’s recommendation of the Share Issuance Resolution, which breach is ongoing following the date that is two calendar days following Randgold’s delivery of written notice to us of such breach or such breach is otherwise not curable; or

 

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     47  


   

if we breach certain of our obligations relating to Competing Proposals for Barrick in any material respect, which breach is ongoing following the date that is two calendar days following Randgold’s delivery of written notice to us of such breach or such breach is otherwise not curable, see “– Barrick Non-Solicit, Randgold Right to Match and Other Barrick Covenants”.

The Cooperation Agreement can be terminated by either Barrick or Randgold: if the Share Issuance Resolution is not approved by Shareholders; in certain circumstances where the requisite Randgold Shareholder approvals are not obtained at the Jersey Court Meeting or the Randgold Extraordinary General Meeting; if the Merger is withdrawn with the consent of the Panel or lapses on or before the Longstop Date (except where such withdrawal or lapse occurs in connection with a Takeover Offer by Barrick or is followed within five business days of an announcement by Barrick or a person acting in concert with Barrick of the implementation of the Merger by a different offer or scheme on substantially the same or improved terms); or if the parties agree in writing before the Effective Date. The Cooperation Agreement will terminate automatically unless otherwise agreed in writing by the parties if the Effective Date has not occurred by the Longstop Date or, if Barrick elects to implement the Merger by means of a Takeover Offer in accordance with the terms of the Cooperation Agreement, the date that the Takeover Offer becomes or is declared unconditional in all respects.

Competing Proposal for Barrick means a proposal, offer or expression of interest, whether or not in writing: (i) for an offer (including an exchange offer or take-over bid), merger, acquisition, dual-listed structure, amalgamation, statutory arrangement, recapitalization, reverse take-over, and/or business combination (or the announcement of a firm intention to do the same), the purpose of which is to acquire, directly or indirectly, 20% or more of the issued or to be issued common share capital of Barrick or any other class of voting or equity securities of Barrick or securities convertible into or exchangeable for such voting or equity securities (when aggregated with the shares already held by the acquirer and any person acting or presumed or deemed to be acting in concert with the acquirer) or any arrangement or series of arrangements which results in any party acquiring, consolidating or increasing ‘control’ (as defined in the Takeover Code) of Barrick; (ii) for the acquisition or disposal, directly or indirectly (and including by way of dilution as a result of share issuance by any Barrick Group member, excluding Acacia), of all or a significant proportion (being 20% or more) of the business, assets and/or undertakings of the Barrick Group calculated by reference to any of its revenue, profits or value taken as a whole; (iii) for a demerger and/or liquidation involving all or a significant portion (being 20% or more) of the Barrick Group calculated by reference to any of its revenue, profits or value taken as a whole; or (iv) for any other transaction which would be reasonably likely materially to preclude, impede or delay or otherwise prejudice, or be an alternative to or inconsistent with, the implementation of the Merger, in each case which is not effected by Randgold (or a person acting in concert with Randgold) or at Randgold’s direction or with Randgold’s agreement, and in each case whether implemented in a single transaction or a series of transactions and whether conditional or otherwise, excluding in each case the Strategic Investment Agreement.

Competing Proposal for Randgold means a proposal, offer or expression of interest, whether or not in writing: (i) for an offer (including a partial, exchange or tender offer), merger, acquisition, dual-listed structure, scheme of arrangement, reverse take-over, whitewash transaction and/or business combination (or the announcement of a firm intention to do the same), the purpose of which is to acquire, directly or indirectly, 20% or more of the issued or to be issued ordinary share capital of Randgold or any other class of voting or equity securities of Randgold or securities convertible into or exchangeable for such voting or equity securities (when aggregated with the shares already held by the acquirer and any person acting or presumed or deemed to be acting in concert with the acquirer) or any arrangement or series of arrangements which results in any party acquiring, consolidating or increasing ‘control’ (as defined in the Takeover Code) of Randgold; (ii) for the acquisition or disposal, directly or indirectly (and including by way of dilution as a result of share issuance by any Randgold Group member), of all or a significant proportion (being 20% or more) of the business, assets and/or undertakings of the Randgold Group calculated by reference to any of its revenue, profits or value taken as a whole; (iii) for a demerger and/or liquidation involving all or a significant portion (being 20% or more) of the Randgold Group calculated by reference to any of its revenue, profits or value taken as a whole; or (iv) for any other transaction which would be reasonably likely materially to preclude, impede or delay or otherwise prejudice, or be an alternative to or inconsistent with, the implementation of the Merger (including, for the avoidance of doubt, any transaction or arrangement which would constitute a Class 1 transaction for the purposes of the UK Listing Authority’s listing rules undertaken by Randgold), in each case which is not effected by Barrick (or a person acting in concert with Barrick) or at Barrick’s direction or with Barrick’s agreement, and in each case whether implemented in a single transaction or a series of transactions and whether conditional or otherwise.

Break Payment

Barrick will pay or cause to be paid to Randgold $300 million (Break Payment), being 2.46% of the market capitalization of Barrick as of the Announcement Date, in the event that:

 

   

the Cooperation Agreement is terminated because of a Barrick Board Adverse Recommendation Change or because Barrick has breached its obligations relating to Competing Proposals for Barrick in any material respect, which breach is ongoing following the date that is two calendar days following Randgold’s delivery of written notice to Barrick of such breach or such breach is otherwise not curable; provided, however, that no break payment shall be payable in the event that, prior to such termination (i) any person acting in concert with Randgold or at Randgold’s direction or with Randgold’s agreement made, solicited, initiated or otherwise entered into an agreement, assignment, commitment or understanding regarding a Competing Proposal for Barrick or (ii) a Randgold Board Adverse Recommendation Change has occurred; or

 

   

(w) a Competing Proposal for Barrick is made to Barrick or is made directly to Shareholders or otherwise becomes publicly known or any person has publicly announced an intention (whether or not conditional) to make a Competing Proposal for Barrick; (x) the Cooperation Agreement is terminated because the approval of the Share Issuance Resolution is not obtained at the Meeting or at any adjournment or

 

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postponement thereof or in certain circumstances where Barrick adjourns or postpones the Meeting for more than 15 days; (y) no Randgold Board Adverse Recommendation Change has occurred; and (z) within 12 months of the termination of the Cooperation Agreement Barrick enters into a definitive agreement to complete a Competing Proposal for Barrick, the Board (or any committee thereof) adopts, approves, recommends or declares advisable any Competing Proposal for Barrick, or a Competing Proposal for Barrick is completed. For purposes of the foregoing, the term Competing Proposal for Barrick shall have the meaning set forth above, except that references to “20% or more” are deemed to be references to “50% or more”.

Only one Break Payment can be made and such payment (plus certain additional amounts in respect of VAT) would be Randgold’s exclusive remedy in the relevant circumstance, except with respect to fraud.

Change in Merger Structure

Barrick may switch to a Takeover Offer structure (with the consent of the Panel) if:

 

   

Randgold provides its prior written consent;

 

   

a Randgold Board Adverse Recommendation Change occurs;

 

   

a Competing Proposal for Randgold is announced in accordance with Rule 2.7 of the Takeover Code, which is recommended in whole or in part by Randgold’s board of directors; or

 

   

Randgold announces its intention to proceed with a Competing Proposal for Randgold.

If Barrick elects to switch to a Takeover Offer for which Randgold provides its prior written consent, the acceptance condition to the Takeover Offer will be set at not less than 90% of the Randgold Shares to which the Takeover Offer relates (or such lesser percentage (being more than 50%) as the parties may agree in writing, or in certain circumstances where there is a Randgold Board Adverse Recommendation Change or a Competing Proposal for Randgold, as Barrick may decide, subject to the consent of the Panel, to the extent necessary). The Takeover Offer shall be on substantially the same or more favourable terms and conditions as the Scheme (other than with respect to the acceptance condition), subject only to appropriate amendments to reflect the switch to a Takeover Offer. Barrick may not take any action which would cause the Takeover Offer not to proceed, to lapse or to be withdrawn in each case for non-fulfilment of the acceptance condition prior to the earlier of (i) the 60th day after publication of the Offer Document and (ii) the Longstop Date, and Barrick must ensure that the Takeover Offer remains open for acceptances until such time. Additionally, Barrick and Randgold have agreed that Barrick must keep Randgold informed with respect to acceptances and withdrawals and that the provisions of the Cooperation Agreement will continue to apply, subject to appropriate amendments.

If the Merger is effected by way of a Takeover Offer (as described above) and such Takeover Offer becomes or is declared unconditional in all respects and sufficient acceptances are received, Barrick intends to:

 

   

make a request to the LSE to cancel trading in Randgold Shares on its market for listed securities;

 

   

make a request to the UK Listing Authority to cancel the listing of the Randgold Shares from the Official List; and

 

   

exercise its rights to apply the provisions of Part 18 of the Jersey Companies Law to acquire compulsorily the remaining Randgold Shares in respect of which the Takeover Offer has not been accepted.

Interim Operations

During the pendency of the Merger, Barrick has agreed to certain customary restrictions on its business. Except with Randgold’s prior written consent (not to be unreasonably withheld, conditioned or delayed), as required by law or to the extent otherwise permitted by the Cooperation Agreement or the Merger Announcement, Barrick shall not and shall procure that no member of the Barrick Group (excluding Acacia, provided its actions are not at the direction of Barrick) shall agree, resolve, commit or announce any agreement or intention to: (i) other than in the ordinary course consistent with past practice or pursuant to the terms of awards granted under Barrick’s incentive plans, allot or issue any Common Shares or any securities convertible into Common Shares, or grant any option over or right to subscribe for such shares or securities; (ii) other than in the ordinary course consistent with past practice or pursuant to the terms of Barrick’s incentive plans, vest or accelerate or waive any conditions relating to any awards thereunder; (iii) consolidate, sub-divide or reclassify any of the Common Shares, (iv) except in connection with the Continuance, amend Barrick’s constitutional documents; (v) authorize, declare or pay any distribution or reduction or return of capital on or with respect to the Common Shares (whether in cash, assets, shares or other securities); (v) directly or indirectly repurchase, redeem or otherwise acquire any Common Shares or any rights or options to acquire or subscribe for any Common Shares; (vi) take any action or fail to do any anything which could reasonably be expected to prejudice the listing of the Merger Shares on the TSX and NYSE; (vii) make any acquisitions or disposals of any assets of a material amount; or (viii) other than the Strategic Investment Agreement, enter into contracts otherwise than in the ordinary course of business.

By way of background, the Takeover Code contains certain restrictions that apply to Randgold during the offer period (as defined in the Takeover Code), including in respect of any acts which may result in an offer being frustrated or in denying its shareholders the opportunity to decide on its merits.

 

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     49  


Randgold Employee Arrangements

Mark Bristow and Graham Shuttleworth have agreed terms of employment with Barrick in relation to their appointments as the President and Chief Executive Officer and the Senior Executive Vice President and Chief Financial Officer, respectively, of Barrick, and, in respect of Mark Bristow, in relation to his appointment as a director of Barrick. The new employment arrangements will take effect from the day following the Effective Date. The compensation framework reflects the existing compensation framework of Barrick applicable to equivalent senior executives, with base salaries reflecting the existing arrangements approved by Randgold Shareholders at the 2018 annual general meeting. The level of benefits to which they will be entitled will be consistent with those afforded to other senior executives at Barrick.

Mark Bristow will receive an annual base salary of $1,800,000. Graham Shuttleworth will receive an annual base salary of GBP 575,000. Mark Bristow will not receive any additional remuneration in connection with his service as director of Barrick.

Variable compensation will be subject to performance criteria and capped at maximum salary multiples. The performance criteria that will be applied will be those applicable to Barrick’s Annual Performance Incentive Plan (API) and Long Term Incentive (LTI) award programs.

Mark Bristow and Graham Shuttleworth will be entitled to participate in Barrick’s API program pursuant to which they will be eligible to receive an annual cash bonus which will be capped at 300% of their respective annual base salaries. Any bonus will be discretionary and based on achievement of strategic priorities and goals developed each year. A maximum bonus of 300% of salary will only be made in cases of demonstrably superior performance across all categories.

Mark Bristow and Graham Shuttleworth will also be entitled to participate in Barrick’s LTI award program pursuant to which Mark Bristow and Graham Shuttleworth will be eligible to receive Barrick share awards of up to 600% (in respect of Mark Bristow) and 550% (in respect of Graham Shuttleworth) of their respective base salaries. Barrick share awards will be granted based on company performance in the form of Performance Granted Share Units (PGSUs). PGSUs are subject to the terms of the relevant plan, and ultimately granted at the discretion of the Board of Directors (and the Barrick Compensation Committee, in respect of Graham Shuttleworth). Barrick PGSUs will vest in Common Shares generally after thirty-three months and are required to be held until the date of employment termination (and potentially for up to two years beyond termination, depending on the circumstances of termination).

Incentive compensation paid out to Mark Bristow and Graham Shuttleworth under the API program or the LTI award program will be subject to clawback in accordance with Barrick’s Executive Incentive Compensation Recoupment Policy.

Mark Bristow and Graham Shuttleworth will have five years from the Effective Date to meet Barrick’s share ownership requirements of 10 times base salary (in respect of Mark Bristow) and 5 times base salary (in respect of Graham Shuttleworth).

Mark Bristow and Graham Shuttleworth will be eligible to participate in Barrick’s Senior Executive Retirement Plan pursuant to which Barrick will credit 15% of the respective executive’s base salary and API award into a notional account in their name on an annual basis. They will each be provided with medical, dental, vision care, life insurance and disability insurance as well as a company car allowance of $20,000 (in respect of Mark Bristow) and GBP 12,000 (in respect of Graham Shuttleworth).

In the event of his termination without cause or his resignation for good reason, each of Mark Bristow and Graham Shuttleworth will be entitled to receive a lump-sum payment equal to one times his annual base salary plus pension contributions together with (i) continuation of family, medical and dental benefits for a period of one year; (ii) a prorated API award in respect of the performance year in which termination occurs; and (iii) a prorated LTI award in respect of the performance year in which termination occurs.

It is intended that, following completion of the Merger, once Barrick and Randgold are better integrated, the severance arrangements will be revisited by Barrick to ensure they are appropriately aligned with the interests of all parties, and having regard to Barrick’s severance arrangements for its other senior officers.

Mark Bristow and Graham Shuttleworth will also be eligible to participate in Barrick’s Change in Control Plan pursuant to which they will be entitled to receive severance benefits in the event that their employment is terminated by Barrick (other than for cause or disability), or their employment is deemed to have been terminated for good reason at any time within two years following a change in control. In such circumstances, Mark Bristow and Graham Shuttleworth will receive, in addition to their earned base salary: (i) a time pro-rated maximum API bonus; (ii) their previous year’s base salary; and (iii) payouts equal to the three-year average of each of their API awards actually paid and PGSU awards actually granted. Such a “double trigger” change of control would also accelerate vesting of previously granted share awards and the lapsing of holding periods attaching to such awards.

In the event that the aggregate payments and benefits either of Mark Bristow or Graham Shuttleworth is entitled to receive pursuant to the Change in Control Plan are less than the aggregate payments and benefits he is entitled to receive pursuant to the severance arrangements described above, he will be entitled to receive the severance payments and benefits described above in lieu of the payments and benefits he otherwise would have been entitled to receive pursuant to the Change in Control Plan.

Each of Mark Bristow and Graham Shuttleworth will be subject to a confidentiality undertaking without limitation in time and to non-competition, non-solicitation and non-hiring restrictive covenants for a period of 12 months after the termination of his employment.

 

50       Barrick Gold Corporation | Special Meeting Circular


Mark Bristow and Graham Shuttleworth have also acknowledged and agreed to the treatment of their existing awards under the Randgold Share Plans in the manner described under “The Merger – The Merger Announcement and the Scheme – Randgold Share Plans”.

Barrick Non-Solicit, Randgold Right to Match and Other Barrick Covenants

Pursuant to the Cooperation Agreement, Barrick has agreed to take certain actions to obtain the approval by Shareholders of the Share Issuance Resolution. Barrick has agreed to hold the Meeting on the same date that the Jersey Court Meeting and Randgold Extraordinary General Meeting are held. In connection with the Meeting, the Board has agreed (subject to certain exceptions discussed below) to recommend, and Barrick has agreed to use its commercially reasonable efforts to solicit proxies from Shareholders in favor of, the approval of the Share Issuance Resolution. The obligations of Barrick described above are not affected by the commencement, public proposal, public disclosure or communication to Barrick of any Competing Proposal for Barrick or where there is a Barrick Board Adverse Recommendation Change, unless as a result of a Barrick Superior Proposal.

If the Board reasonably believes, after consulting with its outside counsel and Randgold, that (i) it is necessary to postpone or adjourn the Meeting to ensure that any required supplement or amendment to the Circular is provided to Shareholders within a reasonable amount of time in advance of the Meeting or (ii) either (A) it will not receive proxies sufficient to approve the Share Issuance Resolution, whether or not a quorum is present, or (B) it will not have sufficient Common Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Meeting, then Barrick may postpone or adjourn, or make one or more successive postponements or adjournments of the Meeting, as long as the date of the Meeting is not postponed or adjourned more than an aggregate of 15 calendar days.

Until the earliest of the Longstop Date or the date of termination of the Cooperation Agreement, Barrick has agreed that it will not, nor will it authorize any of its directors, officers or employees or any of its investment bankers, accountants, attorneys or other advisors, agents or representatives to, and will direct them not to: (i) directly or indirectly solicit, assist, initiate, encourage or knowingly facilitate (including by providing information to any person for the purpose of facilitating) any Competing Proposal for Barrick or any inquiry or proposal that may reasonably be expected to lead to a Competing Proposal for Barrick; or (ii) enter into or participate in any discussions or negotiations with, or furnish any information with respect to, or cooperate in any way with any person who is seeking to make or has made a Competing Proposal for Barrick or any inquiry or proposal that may reasonably be expected to lead to a Competing Proposal for Barrick.

At any time prior to the approval by Shareholders of the Share Issuance Resolution, in response to a bona fide written Competing Proposal for Barrick that the Board determines in good faith (after receiving advice from its outside counsel and its financial advisors) constitutes or would reasonably be expected to result in a Barrick Superior Proposal (as defined below), and which Competing Proposal for Barrick was made after the date of the Cooperation Agreement and did not otherwise result from a material breach of the provisions of the foregoing paragraph, if failure to take the following actions would be inconsistent with the fiduciary duties of the Board under applicable law, Barrick may (and may authorize its representatives to): (i) furnish information with respect to the Barrick Group to the person making such Competing Proposal for Barrick (and its representatives) (provided that all such information has previously been provided to Randgold or is provided to Randgold prior to or substantially concurrent with the time it is provided to such person) pursuant to a Barrick Acceptable Confidentiality Agreement (as defined below); and (ii) engage in discussions regarding the terms of such Competing Proposal for Barrick and the negotiation of such terms with, and only with, the person making such Competing Proposal for Barrick (and such person’s representatives), provided that Barrick shall promptly notify Randgold upon receipt of any Competing Proposal for Barrick and keep Randgold reasonably informed regarding the terms of the Competing Proposal for Barrick and if Barrick intends to furnish information or engage in discussions in connection with such Competing Proposal for Barrick.

Except as set forth in the paragraph that follows, neither the Board nor any committee thereof shall: (i) take any action which constitutes a Barrick Board Adverse Recommendation Change; or (ii) approve, recommend or declare advisable, or propose publicly to approve, recommend or declare advisable, or allow any member of the Barrick Group (excluding Acacia) (or their representatives) to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, or other similar or comparable contract (other than a Barrick Acceptable Confidentiality Agreement) constituting or relating to, or that is intended to or would reasonably be expected to lead to: (x) any Competing Proposal for Barrick; (y) requiring, or reasonably expected to cause, Barrick to abandon, terminate, adversely amend, delay or fail to complete, or that would otherwise prevent or materially impede, interfere with, hinder or delay the completion of, or be inconsistent with, the Merger or any of the other transactions contemplated by the Cooperation Agreement; or (z) requiring, or reasonably expected to cause, Barrick to fail to comply with the Cooperation Agreement in any material respect.

Notwithstanding the foregoing, at any time prior to the approval by Shareholders of the Share Issuance Resolution, the Board may make a Barrick Board Adverse Recommendation Change and enter into an acquisition agreement or other agreement with respect to a Barrick Superior Proposal if both: (i) Barrick receives a Barrick Superior Proposal; and (ii) the Board determines in good faith (after consultation with outside counsel and its financial advisors) that the failure to do so would be inconsistent with its fiduciary duties under applicable law; provided, however, that Barrick shall not be entitled to do so until: (A) after the fifth business day following Randgold’s receipt of written notice from Barrick advising Randgold that the Board intends to take such action, including the terms and conditions of any Barrick Superior Proposal that is the basis of the proposed action by the Board (with any amendment to the financial terms or any other material term of such Barrick Superior Proposal constituting a new Competing Proposal for Barrick and requiring a new notice, except that references to the five business day period above will be deemed to be references to a three business day period); and (B) Barrick has consulted with Randgold during such period and provided Randgold with a reasonable opportunity at its election to propose changes to the terms and conditions of the Merger or the Cooperation Agreement and, if Randgold has proposed to amend the terms of the Merger or the Cooperation Agreement, the Board shall have determined, in good faith, after consultation with its outside counsel and financial advisors, that the Competing Proposal for Barrick continues to be a Barrick Superior Proposal notwithstanding the proposed changes to the terms and conditions of the Merger or the Cooperation Agreement (if any).

 

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If the Board determines that, by reason of a material change from the information in this Circular, it is legally necessary for Barrick to have its Shareholders pass the Share Issuance Resolution a second time, Barrick and Randgold have agreed that the second shareholder meeting shall occur in accordance with the relevant provisions of the Cooperation Agreement.

In addition, for so long as the Merger is being implemented by way of a Scheme, Barrick and Randgold have agreed to use reasonable efforts to cause all Merger Shares which are issued to Randgold Shareholders upon the Scheme becoming effective to be issued in reliance on the exemption from the registration requirements provided by Section 3(a)(10) of the Securities Act. If for any reason the exemption is not available (as confirmed by its counsel), Barrick has agreed to use its commercially reasonable efforts to file and cause a registration statement to be declared effective by the SEC in such time so as to procure that the Effective Date of the Scheme occurs by no later than the Longstop Date.

For six years after the Effective Date, Barrick shall cause the members of the Randgold Group to honour and fulfil their respective obligations (if any) existing as at the date of the Cooperation Agreement to indemnify their respective directors and officers and to advance expenses, in each case with respect to matters existing or occurring at or prior to the Effective Date. Randgold is entitled to purchase customary “tail” directors’ and officers’ liability insurance cover for both current and former directors and officers of the Randgold Group who have held office within 12 months preceding the Announcement Date in the form of runoff cover for a period of six years following the Effective Date. Such insurance cover must be with reputable insurers and provide cover, in terms of amount and breadth, substantially equivalent to that provided under the Randgold Group’s directors’ and officers’ liability insurance as at the date of the Cooperation Agreement.

Barrick Acceptable Confidentiality Agreement means a confidentiality agreement between Barrick and a third party (other than Randgold or a person acting in concert with Randgold or at Randgold’s direction or with Randgold’s agreement) that: (i) is entered into in connection with a Competing Proposal for Barrick that the Board determines in good faith constitutes or would reasonably be expected to constitute a Barrick Superior Proposal; (ii) contains confidentiality restrictions no less favourable to Barrick than those set out in the Confidentiality Agreement; (iii) does not permit such third party to acquire any securities of the Barrick Group (excluding Acacia) other than in the manner contemplated in clause (iv); and (iv) contains customary standstill provisions that only permit the third party (other than Randgold or a person acting in concert with Randgold or at Randgold’s direction or with Randgold’s agreement) to, either alone or jointly with others, make a Competing Proposal for Barrick to the Board that is not publicly announced.

Barrick Superior Proposal means any unsolicited bona fide written Competing Proposal for Barrick that has not been withdrawn and that: (i) did not result from a breach by Barrick or any of its representatives of the relevant covenants in the Cooperation Agreement; (ii) is made by a third party or group pursuant to which such third party (or in a merger or consolidation involving such party, the stockholders of such third party) or group would acquire, directly or indirectly, by means of a merger, take-over bid, amalgamation, plan of arrangement, business combination, consolidation, liquidation, winding-up or similar transaction, 100% of the Common Shares or all or substantially all of the assets of the Barrick Group; (iii) complies with applicable law; (iv) is not subject to any financing contingency and in respect of which the Board has concluded, in good faith (after receiving the advice of its legal and financial advisors), adequate arrangements have been made to ensure that the required funds or other consideration will be available to effect payment in full; (v) is not subject to any due diligence and/or access condition; (vi) in respect of which the Board determines in good faith, after receiving the advice of its legal counsel and its financial advisors that: (A) failure to recommend such Competing Proposal for Barrick to Shareholders would be inconsistent with its fiduciary duties under applicable law; and (B) such Competing Proposal for Barrick is on terms more favourable from a financial point of view to Shareholders than the Merger, taking into account all the material terms and conditions of (x) such offer (including the material legal, financial and regulatory aspects of the proposal and any potential delay associated therewith) and (y) the Cooperation Agreement (including any changes proposed by Randgold to the terms of the Cooperation Agreement), and also taking into account the expected benefits and synergies arising from the Merger; and (vii) is otherwise reasonably capable of being completed on the terms proposed, taking into account all material legal, financial, regulatory and other aspects of such proposal, including conditionality.

Randgold Covenants

The Takeover Code prohibits an offeree company such as Randgold and any person acting in concert with it from entering into any offer-related arrangement with either an offeror or any person acting in concert with it during an offer period or when an offer is reasonably in contemplation, except with the consent of the Panel or if certain exceptions apply. The provisions of the Cooperation Agreement have therefore been agreed so as to ensure that obligations of Randgold fall within one or more of the exceptions to this prohibition, which permit:

 

   

commitments to provide information or assistance for the purposes of obtaining any official authorization or regulatory clearance;

 

   

commitments which impose obligations only on the offeror; and

 

   

agreements relating to any existing employee incentive arrangements.

As a result of the Takeover Code rules, Barrick cannot have the benefit of certain deal protection features commonly available in a North American context.

Governing Law

The Cooperation Agreement shall be governed by and construed in accordance with the laws of the State of New York.

 

52       Barrick Gold Corporation | Special Meeting Circular


Irrevocable Undertakings and Voting and Support Agreements

Undertakings in respect of Randgold Shares

Barrick has received irrevocable undertakings to vote in favour of the Scheme at the Jersey Court Meeting and Randgold Extraordinary General Meeting from the directors of Randgold in respect of their entire holdings amounting to 997,696 Randgold Shares representing approximately 1.06% of Randgold’s existing issued ordinary share capital. The undertakings from the directors of Randgold will cease to be binding only if Barrick announces (with the consent of the Panel) that it does not intend to make or proceed with the Merger or if the Scheme lapses or is withdrawn (other than where Barrick has elected to exercise its right to proceed by way of a Takeover Offer and such Takeover Offer has not lapsed or been withdrawn), but will remain binding in the event that a higher competing offer for Randgold is made.

Further details of these irrevocable undertakings and voting and support agreements are set out in Appendix 3 to the Merger Announcement which is attached as Schedule 1 to the Cooperation Agreement which is attached to this Circular in “Schedule J: Cooperation Agreement”.

Voting and Support Agreements in respect of Common Shares

Randgold has entered into voting and support agreements with the directors of Barrick to vote in favour of the Share Issuance Resolution and the Continuance Resolution at the Meeting in respect of their entire holdings currently amounting to 5,065,850 Common Shares representing approximately 0.434% of the issued and outstanding Common Shares. These voting and support agreements will cease to be binding only if Barrick announces (with the consent of the Panel) that it does not intend to make or proceed with the Merger or if the Scheme lapses or is withdrawn (other than where Barrick has elected to exercise its right to proceed by way of a Takeover Offer and such Takeover Offer has not lapsed or been withdrawn), but will remain binding in the event that a Barrick Superior Proposal is made.

Further details of these irrevocable undertakings and voting and support agreements are set out in Appendix 3 to the Merger Announcement which is attached as Schedule 1 to the Cooperation Agreement which is attached to this Circular in “Schedule J: Cooperation Agreement”.

Acacia

The Relationship Agreement, among other matters, grants Acacia the Pre-emption Right in the event that Barrick proposes to acquire any business or interest having more than 50% of its overall mining resources both located in Africa and in gold and/or silver. This would include Randgold. Notwithstanding the foregoing, any exercise of the Pre-emption Right by Acacia in respect of Randgold would require the approval, by ordinary resolution, of Acacia’s shareholders pursuant to the UK Listing Authority’s listing rules by virtue of the size of Randgold relative to Acacia. Barrick owns approximately 63.9% of the issued share capital of Acacia and therefore any exercise of the Pre-emption Right by Acacia in respect of Randgold would be contingent on Barrick’s support. Barrick has provided notice to Acacia of the Merger and has indicated to Acacia that it would not support an acquisition of Randgold by Acacia.

The Relationship Agreement may impair the future growth of Barrick’s African gold operations following the Merger. See “Risk Factors”.

Listing of the Merger Shares

Barrick has applied to list the Merger Shares on the TSX and NYSE, and has received conditional approval from the TSX. It is a condition of closing the Merger that the TSX and NYSE shall have conditionally approved the listing of the Merger Shares. Listing will be conditional on the satisfaction by Barrick of the conditions to listing imposed by each such exchange.

Pursuant to Section 611(c) of the TSX Manual, security holder approval is required where the number of securities issued or issuable in payment of the purchase price for an acquisition exceeds 25% of the number of securities of the listed issuer that are outstanding, on a non-diluted basis. Shareholders are being asked to approve the issuance of up to 616,000,000 Common Shares in connection with the Merger, representing approximately 52.8% of Barrick’s 1,167,593,272 issued and outstanding Common Shares (on a non-diluted basis). Accordingly, the TSX requires that the Share Issuance Resolution must be approved by an ordinary resolution of Shareholders, which requires approval by a majority of the votes (50% + 1) cast by or on behalf of Shareholders, either in person or by proxy, at the Meeting or any adjournment or postponement thereof. Barrick will not be able to satisfy the listing requirements of the TSX unless Shareholder approval of the Share Issuance Resolution is obtained.

Notwithstanding the fact that Shareholders are being asked to approve the issuance of up to 616,000,000 Common Shares in connection with the Merger, Barrick currently expects to issue up to 586,609,277 Common Shares as a result of the Merger (representing approximately 50% of the current issued and outstanding Common Shares), consisting of:

 

   

578,588,354 Common Shares issuable based on Randgold’s non-diluted ordinary share capital of 94,475,346 Randgold Shares, less 58,186 Randgold Shares and Randgold ADSs which are currently outstanding and held in trust and will be used to satisfy Randgold Share Plan awards that vest prior to Closing (as multiplied by the Exchange Ratio);

 

   

up to 5,610,197 Common Shares issuable on the vesting of Randgold’s 915,502 Restricted Share Scheme awards (as multiplied by the Exchange Ratio);

 

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up to 806,513 Common Shares issuable on the vesting of Randgold’s 131,611 Co-Investment Plan awards (as multiplied by the Exchange Ratio); and

 

   

up to 1,604,213 Common Shares issuable on the vesting of Randgold’s 261,784 Long-Term Incentive Plan awards (as multiplied by the Exchange Ratio).

The actual number of Common Shares that will be issued on the Effective Date will depend on the number of Randgold Shares issued and outstanding on the Effective Date, which will be affected by the number of Randgold Share Plan awards that vest prior to the date of Closing and the issuance of Randgold Shares prior to Closing for any reason. Certain of the Randgold Share Plan awards are subject to time-based proration in connection with the Merger and/or to performance conditions that will be evaluated by the Randgold remuneration committee prior to Closing. Certain of the Randgold Share Plan awards that do not vest prior to the Effective Date will be assumed by Barrick and may result in the issuance of Common Shares by Barrick following Closing. The Exchange Ratio applicable to certain Long-Term Incentive Plan awards assumed by Barrick on Closing will be adjusted downward by 25% to reflect revised post-Merger performance conditions for the relevant participants. See “The Merger – The Merger Announcement and the Scheme – Randgold Share Plans” on page 45.

If the Share Issuance Resolution is approved, the TSX will generally not require further security holder approval for the issuance of up to an additional 154,000,000 Common Shares in connection with the Merger, such number being 25% of the number of securities approved pursuant to the Share Issuance Resolution.

This Exchange Ratio of 6.1280 Common Shares per Randgold Share is based on the volume-weighted average prices of Common Shares traded on the NYSE, and Randgold ADSs traded on NASDAQ, respectively, over the 20 trading days ended on September 21, 2018 (being the last business day before the Announcement Date). The exchange ratio would have been 6.0082 Common Shares per Randgold Share, if calculated using a five-day volume-weighted average trading price.

Based on current information available to Barrick, after the Merger no current shareholder of Randgold will by virtue of the transaction own 10% or more of the Common Shares, and the Merger will not materially affect control of Barrick.

 

54       Barrick Gold Corporation | Special Meeting Circular


Information Concerning Randgold and Barrick

Barrick

Barrick is one of the world’s leading international gold companies, with annual gold production and gold mineral reserves that are among the largest in the industry. Barrick also produces significant amounts of copper, principally from its Zaldívar joint venture, Jabal Sayid joint venture and its Lumwana mine.

Barrick was founded in 1983 and is currently headquartered in Toronto, Canada. If the Continuance is approved at the Meeting, Barrick’s primary corporate office will remain in Toronto, Canada. During its first ten years, Barrick focused on acquiring and developing properties in North America, notably its Goldstrike property on the Carlin Trend in Nevada. Since 1994, Barrick has strategically expanded beyond its North American base and now operates on five continents. More than 75% of Barrick’s gold production comes from projects in the Americas. Barrick also has a presence in Australia, Chile, Saudi Arabia and Zambia. Barrick continues to strengthen its international presence through strategic relationships with external partners such as Shandong Gold, Zijin Mining, Antofagasta Plc and Ma’aden. Barrick has established a diverse portfolio of assets, with a combination of brownfield projects and a number of the world’s largest undeveloped greenfield projects.

Barrick’s shares trade on the TSX and NYSE under the symbol ABX.

For additional information relating to Barrick following the Merger and Continuance and the risk factors relating to the Merger and Continuance, see “Barrick Following the Merger”, “The Continuance”, and “Risk Factors”.

Recent Developments

Strategic Investment Agreement

On September 24, 2018, Barrick and Shandong Gold entered into the Strategic Investment Agreement. Under the Strategic Investment Agreement, Shandong Gold has agreed to purchase Common Shares with an aggregate value of up to $300 million, and Barrick has agreed to invest an equivalent amount in shares of Shandong Mining, a publicly listed company controlled by Shandong Gold. These mutual investments are required to be made within 12 months from the date of the Strategic Investment Agreement unless otherwise agreed, and will be made through the facilities of the stock exchanges on which the respective shares are listed. The Strategic Investment Agreement also contains consultation and orderly market obligations on each party in relation to certain disposals of shares acquired thereunder. The Strategic Investment Agreement does not confer any governance rights. In connection with the Strategic Investment Agreement, Shandong Gold delivered the Acknowledgment to Barrick, in which it acknowledged and undertook that both it and its affiliates would comply with certain restrictions on the acquisition of Common Shares and Randgold Shares imposed by Canadian and United States securities laws and the Takeover Code.

Additional Information

The information relating to Barrick included in this Circular should be read in conjunction with Barrick’s public disclosure documents, which are available free of charge on our website at www.barrick.com, and under our issuer profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Financial information contained in this Circular relating to Barrick is contained in the Company’s comparative annual financial statements and MD&A for its most recently completed financial year. The information contained on, or accessible through, any of these websites is not incorporated by reference into this Circular and is not, and should not be considered to be, a part of this Circular unless it is explicitly so incorporated. See “Information in this Circular”.

All material change reports (other than confidential reports), audited annual financial statements and management’s discussion and analysis, any other document of the type referred to in section 11.1 of Form 44-101F1 – Short Form Prospectus, and any other document which indicates on the cover page thereof that it is incorporated by reference in this Circular, that is filed by Barrick with Canadian securities regulators on SEDAR at www.sedar.com after the date of this Circular and before the Meeting are deemed to be incorporated by reference into this Circular. All such documents will also be filed with or furnished to the SEC by Barrick and will be available under Barrick’s issuer profile on EDGAR at www.sec.gov.

Any statement contained in this Circular or in any other document incorporated or deemed to be incorporated by reference in this Circular shall be deemed to be modified or superseded to the extent that a statement contained herein or in any other subsequently filed document which is deemed to be incorporated by reference in this Circular modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document which it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not constitute a part of this Circular except as so modified or superseded.

 

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Randgold

Randgold is a leading Africa-focused gold mining and exploration company, with an extensive portfolio of mines and greenfield and brownfield projects.

Randgold was founded in 1995 and is headquartered in Jersey, Channel Islands. Over the past 23 years, Randgold has established an extensive portfolio of mines and exploration programmes in West and Central Africa including two Tier One Gold Assets in Mali and the DRC. Randgold continues to expand its portfolio by developing mutually beneficial partnerships with host governments, communities and joint venture partners. Such partnerships include Randgold’s joint ventures with AngloGold Ashanti in the DRC and with Endeavour Mining and Newcrest in Côte d’Ivoire.

Randgold’s shares trade on the LSE under the symbol “RRS” and its ADSs trade on NASDAQ under the symbol “GOLD”. The registered office of Randgold is 3rd Floor, Unity Chambers, 28 Halkett Street, St Helier, Jersey, JE2 4WJ, Channel Islands.

For the financial year ended December 31, 2017, Randgold reported gold production of 1.315 million ounces, revenue of $1,280 million and comprehensive income of $335 million.

As of the business day prior to the Announcement Date, there were 94,475,346 Randgold Shares issued and outstanding and Randgold’s market capitalization was $6.1 billion, based on the closing price of the Randgold ADSs on NASDAQ on such date of $63.91.

Additional information regarding Randgold and its subsidiaries is included in “Schedule G: Additional Information Concerning Randgold” and “Schedule H: Randgold Historical Financial Statements” and in certain documents incorporated by reference herein, see “– Randgold Documents Incorporated by Reference”.

Recent Developments

Announcement by SOKIMO

Randgold holds a 45% interest in the Kibali mine in the DRC. In connection with the change of control of Randgold as a result of the Merger, SOKIMO, a DRC state-owned company which holds a 10% interest in the Kibali mine, issued a news release on September 28, 2018 stating that it intends to “assert its rights” under the Kibali joint venture arrangements. The DRC Ministry of Mines has also stated that the Merger requires approval by the DRC Government. Randgold has responded publicly that there are no provisions in the joint venture agreement and the related documentation which give SOKIMO any rights resulting from the Merger. See “Risk Factors”.

Selected Historical Consolidated Financial Data of Randgold

The following selected historical consolidated financial data prepared in accordance with IFRS is derived from Randgold’s audited consolidated financial statements for the year ended December 31, 2017 and unaudited special purpose interim financial statements for the six months ended June 30, 2018. The information set forth below is only a summary and should be read together with the historical audited consolidated financial statements of Randgold and the related notes attached in “Schedule H: Randgold Historical Financial Statements”, as well as the corresponding discussion and analysis contained in the Randgold 20-F and Randgold Interim Report which are incorporated by reference in this Circular. Historical results are not necessarily indicative of any results to be expected in the future.

Consolidated Statement of Comprehensive Income

 

     Unaudited      Audited  
(in thousands of United States dollars, except for per share data)    Six months ended June 30,      Year ended December 31,  
     2018      2017      2017      2016  

Total revenues

     $556,937        $653,506        $1,280,217        $1,200,777  

Total comprehensive income

     $124,892        $187,694        $335,030        $295,827  

Total comprehensive income attributable to owners of the parent

     $109,510        $153,831        $278,000        $249,080  

Total comprehensive income attributable to non-controlling interests

     $15,382        $33,863        $57,030        $46,747  

Basic earnings per share

     $1.16        $1.64        $2.96        $2.64  

Diluted earnings per share

     $1.14        $1.62        $2.92        $2.61  

Consolidated Statement of Financial Position

 

     Unaudited      Audited  
(in thousands of United States dollars)    As at June 30,      As at December 31,  
     2018      2017      2017      2016  

Total assets

     $4,196,231        $4,156,691        $4,303,469        $4,040,958  

Long-term debt1

     $–        $–        $–        $–  

 

  1

Long-term debt excludes the current portion of long-term debt, provisions for environmental rehabilitation, deferred income tax liabilities and other long-term liabilities, and includes capital leases.

 

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Additional Information

Randgold is a “foreign private issuer” under US Securities Laws and files with or furnishes to the SEC reports, including its annual report on Form 20-F, current reports on Form 6-K and amendments to those reports pursuant to Sections 13(a) and 15(d) of the Exchange Act. These reports and other information are available free of charge on its corporate website www.randgoldresources.com as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Materials filed with or furnished to the SEC are also made available to the public free of charge on EDGAR at www.sec.gov.

Randgold is a reporting issuer under the laws of the each of the provinces of Canada, other than Quebec, and files reports and other information with applicable securities regulatory authorities in each such province. These reports and information are available to the public free of charge under Randgold’s issuer profiles on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

The information contained on, or accessible through, any of these websites is not incorporated by reference into this Circular and is not, and should not be considered to be, a part of this Circular unless it is explicitly so incorporated. See “ – Randgold Documents Incorporated by Reference”.

Additional information regarding Randgold is included in “Schedule G: Additional Information Concerning Randgold” and “Schedule H: Randgold Historical Financial Statements”.

Randgold Documents Incorporated by Reference

Information regarding Randgold has been incorporated by reference in this Circular from documents filed with or furnished to the SEC. The documents listed below, which contain important information about Randgold, its business and its financial condition, and which were previously filed by Randgold with the SEC, are specifically incorporated by reference into, and form an integral part of, this Circular:

 

   

Randgold’s Annual Report on Form 20-F for the fiscal year ended December 31, 2017 filed with the SEC on March 29, 2018; and

 

   

Randgold’s Interim Report for the Second Quarter Ended June 30, 2018 on Form 6-K filed with the SEC on August 9, 2018.

Any statement contained in a document incorporated or deemed to be incorporated by reference herein that bears a date earlier than the date of this Circular shall be deemed to be modified or superseded, for the purposes of this Circular, to the extent that a statement contained herein, modifies or supersedes such statement. Any future filings made by Randgold with the SEC under Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of this Circular but before the Meeting will be automatically incorporated by reference into this Circular.

 

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Barrick Following the Merger

Following the Merger, Barrick’s new management team will be tasked with implementing a business plan that will focus on the following:

 

   

Asset Quality

 

   

Grow and invest in a portfolio of Tier One Gold Assets and Strategic Assets with an emphasis on organic growth. Near-term priorities include Goldrush/Fourmile, Turquoise Ridge and the strategic partnership with Shandong Gold in the El Indio belt.

 

   

Sell Non-Core Assets over time in a disciplined manner.

 

   

Invest in exploration across extensive land positions in many of the world’s most prolific gold districts.

 

   

Maximize the long-term value of a strategic Copper Business.

 

   

Operational Excellence

 

   

Fully implement a decentralized management ethos with a strong ownership culture.

 

   

Streamline management and operations, and eliminate non-essential costs.

 

   

Leverage innovation and technology to accelerate operational improvement.

 

   

Build trust-based partnerships with host governments and local communities to drive shared long-term value.

 

   

Strive for zero harm workplaces.

 

   

Sustainable Profitability

 

   

Disciplined approach to growth, emphasizing a partnership strategy.

 

   

Increased returns to shareholders driven by focus on return on capital, IRR and free cash flow per share growth.

Board of Directors

Following the Merger, two-thirds of the directors of the Board will be initially appointed by Barrick and one-third will be initially appointed by Randgold. The proposed members of the Board following the Merger, other than John L. Thornton and Mark Bristow, have not yet been identified.

Executive Officers

Following the Merger:

 

   

John L. Thornton will continue to serve as the Executive Chairman of Barrick;

 

   

Mark Bristow, the current Chief Executive Officer of Randgold, will serve as the President and Chief Executive Officer of Barrick;

 

   

Graham Shuttleworth, the current Finance Director and Chief Financial Officer of Randgold, will serve as the Senior Executive Vice President and Chief Financial Officer of Barrick; and

 

   

Kevin Thomson will continue to serve as the Senior Executive Vice President, Strategic Matters of Barrick.

Mark Bristow (59) (Mauritius). Mr. Bristow has been the Chief Executive Officer of Randgold since the incorporation of the company in 1995, which was founded on his pioneering exploration work in West Africa. He has subsequently led Randgold’s growth through the discovery and development of high quality assets into a major international gold mining business. Mr. Bristow has played a pivotal part in promoting the emergence of a sustainable mining industry in Africa. He has a proven track record of growing businesses in Africa and delivering considerable shareholder value. A geologist with a PhD from Natal University, South Africa, he has held board positions at a number of global mining companies and is currently the non-executive chairman of Rockwell Diamonds Inc.

Graham Shuttleworth (49) (Jersey). Mr. Shuttleworth joined Randgold as Chief Financial Officer and Finance Director in July 2007 but has been associated with Randgold since its inception, initially as part of its management team involved in listing the company on the LSE in 1997, and subsequently as an advisor. Mr. Shuttleworth brings significant financial and management experience to Randgold, combined with considerable knowledge of large scale international businesses which was developed initially as a chartered accountant qualifying with Deloitte, and then as managing director and the New York based head of metals and mining for the Americas in the global investment banking division of HSBC where

 

58       Barrick Gold Corporation | Special Meeting Circular


he advised numerous mining companies on listings, accessing the capital markets and mergers and acquisitions. Mr. Shuttleworth is a graduate of the University of Cape Town, South Africa, with a bachelor of commerce degree and an honors degree from the University of South Africa.

Corporate Offices

Following the Merger, Barrick’s head office and certain key functions will continue to be located at Brookfield Place, TD Canada Trust Tower Suite 3700, 161 Bay Street, Toronto, Ontario, Canada, M5J 2S1. If the Continuance is completed, Barrick’s registered and records office will be located at 1600 - 925 West Georgia Street, Vancouver, British Columbia V6C 3L2.

Trading of Common Shares

Following the Merger, the Common Shares will continue to trade on the TSX and NYSE under the symbol ABX. The Common Shares will not be listed on the LSE or any other exchange as a result of the Merger.

It is intended that dealings in Randgold Shares (including Randgold Shares underlying the Randgold ADSs) will be suspended at 5:00 p.m. (London time) on the business day prior to the Effective Date. It is further intended that an application will be made to the UK Listing Authority for the cancellation of the listing of the Randgold Shares (including Randgold Shares underlying the Randgold ADSs) on the Official List and to the LSE for the cancellation of trading of the Randgold Shares (including Randgold Shares underlying the Randgold ADSs) on the LSE’s main market for listed securities, with effect as of or shortly following the Effective Date. With respect to the Randgold ADSs, at least ten days before the Effective Date, Randgold will notify NASDAQ of its intention to delist and deregister the Randgold ADSs. Shortly after the Effective Date, Randgold will make the relevant filings to delist the Randgold ADSs from trading on NASDAQ and to deregister and terminate Randgold’s reporting obligations under the Exchange Act. See also “The Merger – The Merger Announcement and the Scheme – Randgold ADS Program”.

It is also intended that, following the Scheme becoming effective, Randgold will be re-registered as a private company under the relevant provisions of the Jersey Companies Law.

Intentions Regarding the Barrick Assets

Following Closing, the new executive management team of Barrick will be tasked with implementing a business plan to seek to maximize the opportunities for value enhancement of Barrick’s asset portfolio.

Following the Merger, Barrick will focus on the Tier One Gold Assets it will own, being Cortez, Goldstrike, Kibali (45%), Loulo-Gounkoto (80%) and Pueblo Viejo (60%), as well as all other Strategic Assets. In addition, the new executive management team will focus on enhancing Barrick’s strategic relationships.

The Tier One Gold Assets represent the majority of Barrick’s gold production and cash flow generation.

The new executive management team will operate Barrick’s assets in a manner consistent with maximizing sustainable profitability and operational efficiency over the life of each mine.

Within 12 months following completion of the Merger, the new executive management team will identify those Non-Core Assets whose profile is not expected to meet Barrick’s investment criteria and which Barrick will consider selling. Following completion of the Merger, Barrick may seek to dispose of one or more Non-Core Assets, either to existing joint venture partners, if applicable, or to other buyers. Any such disposals will only be effected if terms can be negotiated which the board of Barrick considers attractive. Such sales would allow the new executive management team to focus on operating mines and projects considered to deliver the most value to Barrick or which have the highest potential.

It is the intention of Barrick to invest in its combined portfolio of exploration and development assets and, while a full evaluation will take place following completion of the Merger, the Boards of Randgold and Barrick expect the initial focus will include the Fourmile/Goldrush project and the Turquoise Ridge (75%) expansion, which have the potential to develop into Tier One Gold Assets.

The new executive management team intends to grow the value of its existing portfolio of copper mines and projects, through development of its existing resources, through potential partnerships and joint ventures with third parties and, if market opportunities arise, through acquisitions.

Locations and Employees

Following completion of the Merger, Barrick’s head office and certain key functions will continue to be located in Toronto. Barrick does not intend to close any of Randgold’s existing offices. If the Continuance is approved by Shareholders, Barrick’s registered and records office will be located at 1600 - 925 West Georgia Street, Vancouver, British Columbia V6C 3L2. Barrick has no intention to make any changes with respect to the redeployment of Randgold’s existing fixed assets. Owing to the nature of its business, Randgold does not have a research and development function. However, Randgold has a portfolio of exploration assets and Barrick intends to leverage Randgold’s successful exploration expertise to drive value creation across Barrick’s enlarged asset portfolio.

 

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Following completion of the Merger, Mark Bristow, the Chief Executive Officer of Randgold, will become the President and Chief Executive Officer of Barrick, and Graham Shuttleworth, the Finance Director and Chief Financial Officer of Randgold, will become the Senior Executive Vice President and Chief Financial Officer of Barrick.

Details of their service contracts with Barrick, which will become effective upon completion of the Merger, are set out under “The Merger – Cooperation Agreement – Randgold Employee Arrangements”. No retention award or bonus will be granted to Mark Bristow or Graham Shuttleworth in connection with the Merger.

Following completion of the Merger, the operational management structure will be conducted through three regional teams, covering North America, South America and Africa & Middle East respectively. The North America and South America teams will be drawn primarily from the existing Barrick workforce.

Barrick does not anticipate any headcount reduction in Randgold’s workforce at the operational and management level as a result of the Merger. It is intended that existing Randgold employees will form the core of a regional African management team which will oversee the operations of the combined African & Middle East assets of Barrick. This will help Barrick benefit from economies of scale and the experience of a dedicated African-focused management team.

Following completion of the Merger, the new executive management team of Barrick will continue to implement a decentralized management and partnership structure which may result in some workforce reduction in respect of persons currently employed as part of the Barrick Group. These headcount reductions will be focused on reducing redundant roles between the operations, projects and the corporate centre. It is expected that any job reductions will be identified by the new executive management team of Barrick within the 12 months following completion of the Merger. Barrick does not intend to make any material change in the balance of skills and functions of the employees of the Randgold Group. Except as described above, Barrick does not intend to make any material change in the conditions of employment of the employees and management of the Randgold Group.

The Randgold Group does not provide company-funded pension plans; however, the Randgold Group provides a defined contribution plan under which the group pays fixed contributions into a separate entity. Barrick does not intend to make any changes to the Randgold Group’s pension arrangements in the 12 months which follow the Effective Date. Following completion of the Merger, the existing employment rights, including pension rights, of management and employees of the Randgold Group and the Barrick Group will be fully safeguarded in accordance with contractual and statutory requirements, as will the contractual rights of any directors and officers who are not employees.

There is no intention to redeploy material fixed assets of Barrick or, except as described above, make changes to locations of business of Barrick.

Dividends

Barrick intends to grow its dividend over time from the Barrick level for fiscal 2018, underpinned by stronger cash flow generation, additional overhead cost savings, asset sale proceeds and lower interest costs. Following completion of the Merger, the Board will review the dividend policy quarterly based on the cash requirements of Barrick’s operating assets, exploration and development activities, as well as potential acquisitions, combined with Barrick’s current and projected financial position.

 

60       Barrick Gold Corporation | Special Meeting Circular


Pro Forma Capitalization

The following table sets out the consolidated cash and cash equivalents and the consolidated capitalization of Barrick as at June 30, 2018 on an actual basis and on a pro forma basis, giving effect to the Merger (as if it had closed on June 30, 2018) and certain related adjustments. The following table should be read together with the unaudited pro forma consolidated financial statements included in “Schedule I: Pro Forma Financial Information”, the respective historical consolidated financial statements of Barrick and Randgold and the related management’s discussion and analysis.

 

     As at June 30, 2018
(in millions of US dollars)
 
     Actual      Pro Forma  

Cash and cash equivalents

   $ 2,085      $ 2,383  
  

 

 

    

 

 

 

Long-term debt1

   $ 5,712      $ 5,712  
  

 

 

    

 

 

 

Total equity

     

Capital stock (Common Shares authorized: unlimited; outstanding as at June 30, 2018, 1,166,892,835; as adjusted to give effect to the Merger, 1,753,768,039)

     20,900        27,042  

Deficit

     (11,701      (12,007

Accumulated and other comprehensive income

     (164      (164

Other

     321        321  

Non-controlling interests

     1,750        2,297  

Total equity

     11,106        17,489  
  

 

 

    

 

 

 

Total capitalization2

   $ 16,818      $ 23,201  
  

 

 

    

 

 

 

 

  1

Long-term debt excludes the current portion of long-term debt, provisions for environmental rehabilitation, deferred income tax liabilities and other long-term liabilities, and includes capital leases. Refer to note 14B in Barrick’s interim consolidated financial statements as at and for the six month period ended June 30, 2018 for more information regarding Barrick’s long-term debt.

  2

Total capitalization is long-term debt plus total equity.

The pro forma financial information in the table is derived from the unaudited pro forma consolidated financial statements included in “Schedule I: Pro Forma Financial Information”. This pro forma information is provided for illustrative purposes only and does not necessarily reflect what the consolidated capitalization of Barrick would have been on June 30, 2018 if the Merger had closed on that date. The pro forma adjustments applied to this information are based upon preliminary estimates, current available information and certain assumptions. It is expected that the actual adjustments will differ from these pro forma adjustments, and the differences may be material. See “Information in this Circular – Forward-Looking Information”, “Information in this Circular” – Pro Forma Financial Statements” and “Risk Factors”.

Combined Mineral Reserves

As at December 31, 2017, on a combined basis, after giving effect to the Merger (as if it had closed on December 31, 2017), Barrick’s post-Merger attributable proven and probable gold mineral reserves would have been 78 million ounces (rounded to the nearest million).

This figure was determined by aggregating Barrick’s attributable gold mineral reserves as of December 31, 2017 (comprising attributable proven gold mineral reserves of 398 million tonnes, at a grade of 1.91 grams/tonne, containing 24 million ounces, and attributable probable gold mineral reserves of 896 million tonnes, at a grade of 1.39 grams/tonne, containing 40 million ounces, for aggregate proven and probable gold mineral reserves of 1,295 million tonnes, at a grade of 1.55 grams/tonne, containing 64 million ounces) and Randgold’s gold ore reserves as of December 31, 2017 (comprising total proved gold ore reserves of 44 million tonnes, at a grade of 3.78 grams/tonne, containing 3.5 million attributable ounces and total probable gold ore reserves of 128 million tonnes, at a grade of 3.78 grams/tonne, containing 10 million attributable ounces, for aggregate proved and probable total gold ore reserves of 172 million tonnes, at a grade of 3.78 grams/tonne, containing 14 million attributable ounces). See “Information in this Circular – Mineral Reserve and Mineral Resource Information” and “– Barrick’s Gold Mineral Reserves”.

Barrick’s Gold Mineral Reserves

Except as noted below, 2017 mineral reserves of Barrick have been estimated based on an assumed gold price of $1,200 per ounce and long-term average exchange rates of Cdn $1.25:$1 and A$1:$0.75. Reserves at Kalgoorlie have been estimated based on an assumed gold price of A$1,600 and reserves at Bulyanhulu, North Mara and Buzwagi have been estimated based on an assumed gold price of $1,100. Reserve estimates incorporate current and/or expected mine plans and cost levels at each property. The price assumptions used to calculate mineral reserves in 2017 are consistent with those used by Barrick for mine planning, impairment testing and for the assessment of project economics.

In confirming its annual mineral reserves for each of its mineral properties, projects, and operations, Barrick conducts a reserve test on December 31 of each year to verify that the future undiscounted cash flow from mineral reserves is positive. The cash flow excludes all sunk costs and only considers future operating and closure expenses as well as any future capital costs.

 

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Unless otherwise noted, Barrick’s mineral reserves have been estimated as at December 31, 2017, in accordance with definitions adopted by the CIM and incorporated into NI 43-101. Varying cut-off grades have been used depending on the mine, methods of extraction and type of ore contained in the mineral reserves. Mineral resource metal grades and material densities have been estimated using industry-standard methods appropriate for each mineral project with support of various commercially available mining software packages. Barrick’s normal data verification procedures have been employed in connection with the estimations. Sampling, analytical and test data underlying the stated mineral resources and mineral reserves have been verified by employees of Barrick, its joint venture partners or its joint venture operating companies, as applicable, under the supervision of Qualified Persons, and/or independent Qualified Persons. Verification procedures include industry-standard quality control practices. Drill samples collected for use in geologic modeling and mineral resource estimation are under the direct supervision of the geology department at each of the Company’s properties and projects. All drill hole collar, survey and assay information used in modeling and resource estimation are manually verified and approved by the staff geologists prior to entry into the mine-wide database. Sample preparation and analyses are conducted by either independent laboratories or the laboratory onsite, in which case independent laboratories are used to verify results. Procedures are employed to ensure security of samples during their delivery from the drill rig to the laboratory. The quality assurance procedures, data verification and assay protocols used in connection with drilling and sampling at each property and project conform to industry accepted quality control methods. Regular internal auditing of the mineral reserve and mineral resource estimation processes and procedures are conducted.

Although the Company has carefully prepared and verified its mineral reserve figures presented below, such figures are estimates, which are, in part, based on forward-looking information and certain assumptions, and no assurance can be given that the indicated level of mineral will be produced. Barrick’s estimates of proven and probable gold mineral reserves may have to be recalculated based on actual production experience. Market price fluctuations of gold, copper and silver, as well as increased production costs or reduced recovery rates and other factors, may render the present proven and probable gold mineral reserves unprofitable to develop at a particular site or sites. See “Risk Factors” and “Information in this Circular – Forward-Looking Information” for additional details concerning factors and risks that could cause actual results to differ from those set out below.

 

GOLD MINERAL RESERVES1,2,3,4,5,8,9  
As at December 31, 2017      Proven        Probable        Total  

Based on attributable

ounces

     Tonnes
(Mt)
       Grade
(gm/t)
       Contained
ozs
(Moz)
       Tonnes
(Mt)
       Grade
(gm/t)
       Contained
ozs
(Moz)
       Tonnes
(Mt)
       Grade
(gm/t)
       Contained
ozs
(Moz)
 

NORTH AMERICA

                                            

Goldstrike Open Pit

       50          2.82          4.5          9.2          3.78          1.1          59          2.97          5.7  

Goldstrike Underground

       4.0          11.49          1.5          4.6          8.75          1.3          8.6          10.02          2.8  

Goldstrike Property Total

       54          3.46          6.0          14          5.44          2.4          68          3.86          8.4  

Pueblo Viejo (60.00%)

       62          2.67          5.3          19          3.06          1.9          81          2.76          7.2  

Cortez

       19          1.46          0.9          149          1.92          9.2          168          1.87          10  

Goldrush

                                  5.7          8.12          1.5          5.7          8.12          1.5  

Turquoise Ridge (75.00%)

       7.1          15.56          3.5          4.7          15.48          2.3          12          15.53          5.9  

South Arturo (60.00%)

       2.3          3.28          0.2          1.6          2.52          0.1          3.8          2.97          0.4  

Hemlo

       0.9          3.66          0.1          24          2.16          1.7          25          2.21          1.8  

Golden Sunlight

       0.3          1.15          0.01          0.2          3.42          0.02          0.45          2.06          0.03  

SOUTH AMERICA

                                            

Cerro Casale (50.00%)6

       115          0.65          2.4          484          0.59          9.2          599          0.60          12  

Veladero (50.00%)7

       14          0.72          0.3          100          0.78          2.5          114          0.77          2.8  

Lagunas Norte

       26          2.23          1.8          30          2.27          2.2          55          2.25          4.0  

AUSTRALIA PACIFIC

                                            

Porgera (47.50%)

       0.6          9.21          0.2          13          4.56          1.9          13          4.78          2.0  

Kalgoorlie (50.00%)

       75          0.89          2.2          24          2.21          1.7          99          1.21          3.9  

AFRICA

                                            

Bulyanhulu (63.90%)

       1.9          10.66          0.6          11          6.86          2.4          13          7.42          3.0  

North Mara (63.90%)

       5.3          2.40          0.4          12          2.89          1.1          17          2.73          1.5  

Buzwagi (63.90%)

       9.1          0.92          0.3          -          -          -          9.1          0.92          0.3  

OTHER                                                 

       5.6          0.21          0.04          6.3          0.25          0.1          12          0.23          0.1  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL                             

       398          1.91          24          896          1.39          40          1,295          1.55          64  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1

Reflects Barrick’s ownership share where ownership interest is less than 100%.

  2

Mineral reserves have been calculated as at December 31, 2017, unless otherwise indicated.

  3

In confirming Barrick’s annual mineral reserves for each of its mineral properties, projects, and operations it conducts a reserve test on December 31 of each year to verify that the future undiscounted cash flow from mineral reserves is positive. The cash flow excludes all sunk costs and only considers future operating and closure expenses as well as any future capital costs.

  4

Mineral reserves as at December 31, 2017 have been calculated using an assumed gold price of $1,200 per ounce, an assumed silver price of $16.50 per ounce and an assumed copper price of $2.75 per pound and long-term average exchange rates of Cdn $1.25:$1 and $0.75:A$1. Mineral reserve calculations incorporate current and/or expected mine plans and cost levels at each property. Mineral reserves at Kalgoorlie assumed a gold price of A$1,600 and Bulyanhulu, North Mara and Buzwagi assumed a gold price of $1,100.

  5

Mineral reserves and mineral resources have been estimated in accordance with NI 43-101, as required by Canadian securities regulatory authorities. For United States reporting purposes, Industry Guide 7 (under the Exchange Act), as interpreted by the Staff of the SEC, applies different standards in order to classify mineralization as a reserve. In addition, while the terms “measured”, “indicated” and “inferred” mineral resources are required pursuant to NI 43-101, the SEC does not recognize such terms. Canadian standards differ significantly from the requirements of the SEC, and mineral resource information contained herein is not comparable to similar information regarding mineral reserves disclosed in accordance with the requirements of the SEC. Readers should understand that “inferred” mineral resources have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. In addition, readers are cautioned not to assume that all or any part of Barrick’s mineral resources constitute or will be converted into reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

  6

On June 9, 2017, Barrick completed a transaction with Goldcorp Inc. to form a new partnership at the Cerro Casale project in Chile. Accordingly, 2017 mineral reserves represent Barrick’s 50% ownership of Cerro Casale as at December 31, 2017.

 

62       Barrick Gold Corporation | Special Meeting Circular


  7

On June 30, 2017, the Company divested 50% of its interest in the Veladero mine. Accordingly, 2017 mineral reserves represent Barrick’s 50% ownership of Veladero as at December 31, 2017.

  8

Grade represents an average, weighted by reference to tonnes of ore type where several recovery processes apply.

  9

Ounces estimated to be present in the tonnes of ore which would be mined and processed. Mill recovery rates have not been applied in calculating the contained ounces.

Randgold’s Gold Ore Reserves

GOLD ORE RESERVES1,2,3,4,5

As at December 31, 2017

 

    

Mine/Project

      

    

Category

         Tonnes
(Mt)
              Grade
(gm/t)
              Gold
(Moz)
             

Attributable

Gold

(Moz)

 

Kibali

                                            45%  
         Proved          19               4.07               2.5               1.1  
         Probable          47               4.10               6.2               2.8  
          Subtotal Proved and Probable          66               4.09               8.7               3.9  

Loulo

                                            80%  
         Proved          12               4.18               1.6               1.3  
         Probable          24               4.67               3.6               2.9  
          Subtotal Proved and Probable          36               4.50               5.2               4.1  

Gounkoto

                                            80%  
         Proved          6.1               3.95               0.78               0.6  
         Probable          14               4.85               2.2               1.7  
          Subtotal Proved and Probable          20               4.58               3.0               2.4  

Morila

                                            40%  
         Proved          -               0.00               -               -  
         Probable          11               0.56               0.19               0.08  
          Subtotal Proved and Probable          11               0.56               0.19               0.08  

Tongon

                                            90%  
         Proved          7.0               2.15               0.49               0.4  
         Probable          9.3               2.48               0.74               0.7  
          Subtotal Proved and Probable          16               2.34               1.2               1.1  

Massawa

                                            83%  
         Proved                                                             
         Probable          23               3.59               2.7               2.2  
          Subtotal Proved and Probable          23               3.59               2.7               2.2  

Total

                                         
         Proved          44               3.78               5.4               3.5  
         Probable          128               3.78               16               10  
         Proved and Probable          172               3.78               21               14  

 

  1

Tonnage, grade and gold reflect 100% of the mine or project. Attributable gold reflects Randgold’s ownership share.

  2

Mineral reserves have been calculated as at December 31, 2017, unless otherwise indicated.

  3

Randgold reports its mineral reserves in accordance with the JORC Code and as such are reported to the second significant digit. Reporting standards are equivalent to NI 43-101. The reporting of mineral reserves is also in accordance with Industry Guide 7.

  4

Reserve pit optimizations are carried out at a gold price of $1,000/oz for all pits except for KCD pit in Kibali which is carried out at a gold price of $1,100/oz.

  5

Underground mineral reserves are also based on a gold price of US$1,000/oz. Dilution and ore loss are incorporated into the calculation of mineral reserves.

See “Schedule G: Additional Information Concerning Randgold” for further information regarding Kibali and Loulo-Gounkoto.

Selected Unaudited Pro Forma Financial Information

Certain selected unaudited pro forma combined financial information is set forth in the following table. Such information should be read in conjunction with the unaudited pro forma consolidated financial information of Barrick and Randgold after giving effect to the Merger for the year ended December 31, 2017 and as at and for the six months ended June 30, 2018, included in “Schedule I: Pro Forma Financial Information”. Adjustments have been made to prepare the unaudited pro forma consolidated financial information of Barrick and Randgold, which adjustments are based on certain assumptions. Both the adjustments and the assumptions made in respect thereof are described in the notes to the unaudited pro forma consolidated financial information set forth in “Schedule I: Pro Forma Financial Information”.

The unaudited pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of the operating or financial results that would have occurred had the Merger actually occurred at the times contemplated by the notes to the unaudited pro forma combined financial information set forth in “Schedule I: Pro Forma Financial Information”, or of the results expected in future periods.

 

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Pro Forma Consolidated Balance Sheet

 

As at June 30, 2018                           
(in millions of United States dollars) (Unaudited)  
      Barrick      Randgold      Pro Forma
Adjustments
    Pro Forma
Consolidated
 

ASSETS

          

Current assets

          

Cash and equivalents

     $2,085        $604        (306     $2,383  

Accounts receivable

     194        209          403  

Inventories

     1,940        136          2,076  

Other current assets

     356        -          356  

Total current assets

     $4,575        $948          $5,217  

Non-current assets

          

Equity in investees

     1,214        1,481        388       3,083  

Property, plant and equipment

     13,727        1,562        1,889       17,178  

Goodwill

     1,330        -        1,146       2,476  

Intangible assets

     230        -          230  

Deferred income tax assets

     1,072        -          1,072  

Non-current portion of inventory

     1,781        152          1,933  

Other assets

     1,193        53          1,246  

Total non-current assets

     $20,547        $3,248          $27,218  

Total assets

     $25,122        $4,196          $32,435  

LIABILITIES AND EQUITY

          

Current liabilities

          

Accounts payable

     $944        $128          $1,072  

Debt

     680        -          680  

Current income tax liabilities

     270        13          283  

Other current liabilities

     266        -          266  

Total current liabilities

     $2,160        $140          $2,300  

Non-current liabilities

          

Debt

     5,712        -          5,712  

Provisions

     3,108        56          3,164  

Deferred income tax liabilities

     1,341        58        673       2,072  

Other liabilities

     1,695        3          1,698  

Total non-current liabilities

     $11,856        $117          $12,646  

Total liabilities

     $14,016        $257          $14,946  

Total equity attributable to Barrick Gold Corporation shareholders

     $9,356        $3,642        2,194       $15,192  

Non-controlling interests

     1,750        297        250       2,297  

Total equity

     $11,106        $3,939          $17,489  

    

                            

Total liabilities and equity

     $25,122        $4,196          $32,435  

See “Information in this Circular – Forward-Looking Information”, “Information in this Circular – Pro Forma Financial Statements” and “Risk Factors” and “Schedule I: Pro Forma Financial Information”.

 

64       Barrick Gold Corporation | Special Meeting Circular


The Continuance

The Board should represent a mosaic of skills and experience relevant to our business. We seek individuals who will serve as a voice for owners, by crafting policies to create long-term value per share and ensuring that Barrick successfully carries out those policies. We have undertaken significant Board renewal over the past five years, which has increased the independence of the Board from just over 50% in 2013 to 92% today. It has also strengthened the diversity of the experience and skills represented on the Board. Nine of our 13 directors are new to the Board since April 2014. Each member of the Board brings specific and relevant experience to our business.

In connection with the Merger and the changes to the Board contemplated in relation to the Merger, Barrick believes it is appropriate at this time to continue to British Columbia, which has a more modern corporate statute that provides additional flexibility to Barrick in a number of areas, including increased flexibility with respect to capital management and in the composition of the Board. In British Columbia, Barrick will have greater flexibility to attract the most qualified and experienced directors from a global talent pool, who have the expertise and skills required by Barrick’s global business, that will operate in a diverse range of jurisdictions across five continents. The British Columbia corporate statute also provides increased flexibility with respect to capital management, resulting from more flexible rules relating to dividends, share purchases and redemptions, and accounting for capital. In addition, harmonization of the BCBCA with applicable securities laws has reduced the regulatory burden as compared to other Canadian jurisdictions.

The Board approved and recommends that Shareholders vote FOR the Continuance Resolution.

 

LOGO      The Board recommends a vote FOR the Continuance Resolution.

The Continuance Resolution confers discretionary authority on the Board to revoke the Continuance Resolution before the Continuance occurs. The Board may exercise its discretion and elect not to proceed with the Continuance, notwithstanding Shareholder approval, for any number of reasons, including, for example, the number of Registered Shareholders that dissent in respect of the Continuance Resolution or if the Merger is not completed.

Effect of Continuance

Upon completion of the Continuance, the OBCA will cease to apply to Barrick and Barrick will become subject to the BCBCA, as if it had been originally incorporated under the BCBCA. The articles of amalgamation and the by-laws of Barrick will be replaced by notice of articles and articles, the proposed form of which are attached as “Schedule K: Proposed Articles”. The registration of the Continuance does not create a new legal entity, nor does it prejudice or affect the continuity of Barrick; however, the Continuance of Barrick under the BCBCA will affect certain rights of Shareholders as they currently exist under the OBCA and the Barrick by-laws. Set out below under “– Corporate Law Differences” is a summary of some of the key differences in corporate law between the OBCA and BCBCA. A description of the key differences between the current articles and by-laws of Barrick and the proposed articles can be found under “– Comparison of Barrick’s Existing Articles and By-Laws and the Proposed Articles”.

These summaries are not intended to be exhaustive and Shareholders should consult their legal advisors regarding the implications of the Continuance, which may be of particular importance to them.

Procedure for Continuance

In order to effect the Continuance, the Continuance Resolution must be approved by at least two-thirds of the votes cast by Shareholders present in person or represented by proxy at the Meeting. If the Continuance Resolution is approved, the Company will apply to the Director appointed under the OBCA to continue under the BCBCA. The Director will generally authorize a continuance from the OBCA to the BCBCA upon: (i) receipt of an application for authorization to continue into another jurisdiction; (ii) being satisfied that certain rights, obligations, liabilities and responsibilities of the Company as set out in Section 181(9) of the OBCA will remain unaffected as a result of the Continuance; and (iii) receipt of the consent of the Ontario Securities Commission and the Ministry of Finance (Ontario) with respect to the Continuance. After the authorization from the Director is obtained, one or more of the directors of the Company signs the proposed articles of the Company, the Company applies to the BC Registrar to continue under the BCBCA, and the BC Registrar issues a certificate of continuation, at which time the Continuance will be effective. The Company then files the certificate of continuation with the Director under the OBCA and the Director issues a certificate of discontinuance under the OBCA.

If the Continuance Resolution is approved at the Meeting, the Continuance is expected to be effected on or prior to completion of the Merger. Even if the Merger is not completed, Barrick may nevertheless complete the Continuance.

Corporate Law Differences

The BCBCA provides shareholders with substantially the same rights as are available to shareholders under the OBCA, including approval rights over fundamental changes, rights of dissent and appraisal and rights to bring derivative actions and oppression actions; however, there are certain differences between the two statutes and the regulations made thereunder, which may be relevant to Shareholders.

 

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The following is a summary of certain differences between the BCBCA and the OBCA, but it is not intended to be a comprehensive review of the two statutes. Reference should be made to the full text of both statutes and the regulations thereunder for particulars of any differences between them, and Shareholders should consult their legal or other professional advisors with regard to all of the implications of the Continuance which may be of importance to them.

Charter Documents

Under the OBCA, a corporation’s charter documents consist of (i) “articles of incorporation,” which set forth, among other things, the name of the corporation, the amount and type of authorized capital and the terms (including any special rights and restrictions) attaching thereto, and the minimum and maximum number of directors of the corporation; and (ii) the “by-laws,” which govern the management of the corporation’s affairs. The articles are filed with the Director under the OBCA and the by-laws are filed with the corporation’s registered office, or at another location designated by the corporation’s directors.

Under the BCBCA, a corporation’s charter documents consist of (i) a “notice of articles,” which sets forth, among other things, the name of the corporation, the amount and type of authorized capital and whether any special rights and restrictions are attached to each class or series thereof, and certain information about the directors of the corporation; and (ii) the “articles” which govern the management of the corporation’s affairs and set forth the special rights and restrictions attached to each authorized class or series of shares. The notice of articles is filed with the BC Registrar, while articles are filed only with the corporation’s records office.

Sale of Business or Assets

Under the OBCA a sale, lease or exchange of all or substantially all the property of a corporation other than in the ordinary course of business requires a special resolution passed by two-thirds of votes cast by shareholders at a meeting called to approve such transaction. If such a transaction would affect a particular class or series of shares of the corporation in a manner different from the shares of another class or series of the corporation entitled to vote on such transaction, the holders of such first mentioned class or series of shares, whether or not they are otherwise entitled to vote, are entitled to vote separately as a class or series.

The BCBCA requires the sale, lease or other disposition of all or substantially all of a corporation’s undertaking, other than in the ordinary course of its business, to be authorized by special resolution, being a resolution passed by shareholders where the majority of the votes cast by shareholders entitled to vote on the resolution constitutes a special majority (i.e., two-thirds of the votes cast, unless a greater majority of up to three-quarters is required by the articles). The BCBCA contains a number of exceptions that are not included in the OBCA, such as with respect to dispositions by way of security interests, certain kinds of leases and dispositions to related corporations or entities.

Amendments to the Charter Documents

Any substantive change to the articles of a corporation under the OBCA, such as alteration of the restrictions, if any, on the business that may be carried on by the corporation, a change in the name of the corporation or an increase or reduction of the authorized capital of the corporation requires a special resolution passed by not less than two-thirds of the votes cast by shareholders at a meeting called to approve such change. Other fundamental changes such as an alteration of special rights and restrictions attached to the issued shares or a proposed amalgamation or continuation of a corporation out of the jurisdiction also require a special resolution passed by not less than two-thirds of the votes cast by the holders of shares of each class entitled to vote at a general meeting of the corporation. The holders of shares of a class or of a series are, in certain situations and unless the articles provide otherwise, entitled to vote separately as a class or series upon a proposal to amend the articles.

Pursuant to the BCBCA, fundamental changes generally require a resolution passed by a special majority of the votes cast by shareholders entitled to vote on the resolution (i.e., two-thirds of the votes cast, unless a greater majority of up to three-quarters is required by the articles), unless the BCBCA or the articles require a different type of resolution to make such change. Accordingly, certain alterations to a BCBCA corporation, such as a name change or certain changes in its authorized share structure, can be approved by a different type of resolution where specified in the articles, subject always to the requirement that a right or special right attached to issued shares must not be prejudiced or interfered with under the BCBCA or under the notice of articles or articles unless the shareholders holding shares of the class or series of shares to which such right or special right is attached consent by a special separate resolution of those shareholders. Barrick has formulated the proposed articles to ensure the continuity of the rights of Shareholders, and therefore, the proposed articles contemplate that fundamental changes will still require Shareholder approval from not less than two-thirds of the votes cast by Shareholders at a meeting called to approve such changes.

Rights of Dissent and Appraisal

The OBCA provides that registered shareholders who dissent to certain actions being taken by a corporation may exercise a right of dissent and require the corporation to purchase the shares held by such shareholder at the fair value of such shares. The dissent right is applicable where the corporation proposes to: (i) amend its articles under Section 168 of the OBCA to add, change or remove restrictions on the issue, transfer or ownership of shares of a class or a series of shares of a corporation; (ii) amend its articles under Section 168 of the OBCA to add, change or remove any restriction on the business or businesses that the corporation may carry on or upon the powers that the corporation may exercise; (iii) amalgamate with another corporation under Section 175 or 176 of the OBCA; (iv) be continued under the laws of another jurisdiction under Section 181 of the OBCA; or (v) sell, lease or exchange all or substantially all of its property under Subsection 184(3) of the OBCA.

 

66       Barrick Gold Corporation | Special Meeting Circular


The BCBCA contains a similar dissent remedy, although the triggering events and procedure for exercising this remedy are slightly different from those contained in the OBCA. Pursuant to the BCBCA, the dissent right is also available with respect to a resolution to approve an arrangement, if the terms of the arrangement permit dissent, any other resolution if dissent is authorized by the resolution, and with respect to any court order that permits dissent, but is not available with respect to an alteration to the articles to add, change or remove restrictions on the issue, transfer or ownership of shares. In addition, under the BCBCA, such dissent must be exercised with respect to all of the shares to which the dissenting shareholder is the registered and beneficial owner (and cause the registered owner of any such shares beneficially owned by the dissenting shareholder to dissent with respect to all such shares).

Oppression Remedies

Pursuant to the OBCA, a registered holder, beneficial holder or former registered holder or beneficial holder of a security of a corporation or its affiliates, a director, former director, officer or former officer of a corporation or any of its affiliates, or any other person who, in the discretion of a court, is a proper person to seek an oppression remedy (each, a complainant), and in the case of an offering corporation, the Ontario Securities Commission, may apply to a court for an order to rectify the matters complained of where, in respect of a corporation or any of its affiliates:

 

   

any act or omission of a corporation or its affiliates effects or threatens to effect a result;

 

   

the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

 

   

the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation. On such an application, the court may make such order as it sees fit, including but not limited to, an order restraining the conduct complained of.

The BCBCA contains a similar oppression remedy. The remedy under the BCBCA is not expressly available for “unfairly disregarding the interests” of the shareholder. Also, in British Columbia, the oppression remedy is only available to shareholders (although in connection with an oppression action, the term “shareholder” includes beneficial shareholders and any other person whom a court considers to be an appropriate person to make such an application). Under the OBCA, the complainant can complain not only about acts of the corporation and its directors but also acts of an affiliate of the corporation and the affiliate’s directors, whereas under the BCBCA, the shareholder can complain only of oppressive conduct of the corporation. Pursuant to the BCBCA the applicant must bring the application in a timely manner, which is not required under the OBCA, and the court may make an order in respect of the complaint if it is satisfied that the application was brought by the shareholder in a timely manner. As with the OBCA, under the BCBCA the court may make such order as it sees fit, including an order to prohibit any act proposed by the corporation. Pursuant to the OBCA, a corporation is prohibited from making a payment to a successful applicant in an oppression claim if there are reasonable grounds for believing that (i) the corporation is, or after the payment, would be unable to pay its liabilities as they become due, or (ii) the realization value of the corporation’s assets would thereby be less than the aggregate of its liabilities. Under the BCBCA, if there are reasonable grounds for believing that the corporation is, or after a payment to a successful applicant in an oppression claim would be, unable to pay its debts as they become due in the ordinary course of business, the corporation must make as much of the payment as possible and pay the balance when the corporation is able to do so.

Shareholder Derivative Actions

Under the OBCA, a complainant may, with judicial leave, bring an action in the name and on behalf of the corporation or any of its subsidiaries or intervene in an action to which a corporation or any of its subsidiaries is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the corporation or subsidiary.

Similar rights to bring a derivative action are contained in the BCBCA, but these rights extend only to shareholders (although in connection with a derivative action, the term “shareholder” includes beneficial shareholders and any other person whom the court considers to be an appropriate person to make such an application) and directors.

Shareholder Proposals

Both the OBCA and the BCBCA contain provisions with respect to shareholder proposals.

Under the OBCA, a shareholder entitled to vote at a meeting of shareholders may (i) submit to the corporation notice of a proposal and (ii) discuss at the meeting any matter in respect of which such shareholder would have been entitled to submit a proposal. A corporation that solicits proxies shall send the proposal in the information circular or attach the proposal to the circular. If requested by the shareholder, management must also enclose with the information circular a statement by the shareholder in support of the proposal provided such statement meets certain criteria. In addition, a proposal may include nominations for the election of directors if the proposal is signed by one or more holders of shares representing in the aggregate not less than 5% of the shares or 5% of the shares of a class or series of shares of the corporation entitled to vote at the meeting to which the proposal is to be presented. Management is not required to send the proposal or supporting statement with the management information circular where:

 

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notice of the proposal is submitted (i) less than 60 days before the anniversary date of the previous annual meeting, if the matter is proposed to be raised at an annual meeting, or (ii) less than 60 days before a meeting other than the annual meeting, if the matter is proposed to be raised at a meeting other than the annual meeting;

 

   

it clearly appears that the primary purpose of the proposal is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or security holders;

 

   

it clearly appears that the proposal does not relate in a significant way to the business or affairs of the corporation;

 

   

within two years before the receipt by the corporation of a person’s notice of proposal, the person failed to present, in person or by proxy, at a meeting of the corporation’s shareholders, a proposal which had been submitted by the person and had been included in a management information circular or a notice of meeting relating to that shareholders’ meeting; or

 

   

substantially the same proposal was submitted to shareholders in a management information circular, dissident’s information circular, or notice of a meeting relating to a previous meeting of shareholders, and the previous meeting was held within five years before the receipt by the corporation of the person’s current notice of proposal, and at that previous meeting, the proposal did not receive the requisite support.

Pursuant to the BCBCA, a proposal may only be submitted by qualified shareholders, which means an owner (whether registered or beneficial) of shares that carry the right to vote at a general meeting who has been such a shareholder for an uninterrupted period of at least two years before the date of signing the proposal, provided that such shareholder has not, within two years before the date of the signing of the proposal, failed to present, in person or by proxy, at any annual general meeting, an earlier proposal submitted by such shareholder in respect of which the corporation complied with its obligations under the BCBCA.

The proposal must meet certain criteria and must be supported by qualified shareholders who, together with the submitter, are registered or beneficial owners of shares that, in the aggregate, constitute at least 1% of the issued shares of the corporation that carry the right to vote at general meetings, or that have a fair market value in excess of Cdn $2,000.

A corporation that receives such a proposal must send the text of the proposal, the names and mailing addresses of the submitter and supporting shareholders, and the text of any supporting statement accompanying the proposal to all of the persons who are entitled to notice of the annual general meeting in relation to which the proposal is made. Such information must be sent in, or within the time for sending of, the notice of the applicable annual general meeting, or in the corporation’s information circular, if any, sent in respect of the applicable annual general meeting. If the submitter is a qualified shareholder at the time of the annual general meeting to which its proposal relates, the corporation must allow the submitter to present the proposal, in person or by proxy, at such meeting. If two or more proposals received by the corporation in relation to the same annual general meeting are substantially the same, the corporation needs to comply only with such requirements in relation to the first proposal received and not any others. The corporation may also refuse to process a proposal in certain other circumstances, which are similar to those exceptions provided under the OBCA, but under the BCBCA, a corporation may also refuse to process a proposal that deals with matters beyond the corporation’s power to implement.

Requisition of Meeting

The OBCA permits the holders of not less than 5% of the issued shares that carry the right to vote at a meeting to require the directors to call a meeting of shareholders of a corporation for the purposes stated in the requisition. If the directors do not call a meeting within 21 days of receiving the requisition, any shareholder who signed the requisition may call the meeting.

The BCBCA provides that one or more shareholders of a corporation holding not less than 5% of the issued voting shares of the corporation may give notice to the directors requiring them to call and hold a general meeting within four months.

Form of Proxy and Information Circular

The OBCA requires an offering corporation, currently with or prior to sending notice of a meeting of shareholders, to send a form of proxy to each shareholder who is entitled to receive notice of the meeting, and to provide a management information circular containing prescribed information regarding the matters to be dealt with at, and the conduct of, the meeting.

The BCBCA does not contain provisions that require the mandatory solicitation of proxies and delivery of a management information circular as these matters are governed by applicable securities laws.

Place of Meetings

The OBCA requires all meetings of shareholders, subject to the articles and any unanimous shareholder agreement, to be held at the place within or outside Ontario as determined by the directors or, in the absence of such a determination, at the place where the registered office of the corporation is located.

 

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The BCBCA provides that meetings of shareholders must be held in British Columbia, unless (i) the articles provide for a location outside British Columbia, or the articles do not restrict the corporation from approving a location outside British Columbia and the location is approved by the resolution required by the articles for that purpose (or if no resolution is required for that purpose by the articles, by an ordinary resolution), or (ii) the location is approved in writing by the BC Registrar before the meeting is held. The proposed articles contemplate that shareholder meetings can be held within or outside of British Columbia.

Directors’ Residency Requirements

The OBCA requires that at least 25% of directors be resident Canadians, unless the corporation has less than four directors, in which case at least one director must be a resident Canadian.

The BCBCA provides that a public corporation must have at least three directors but does not have any residency requirements for directors.

Removal of Directors

The OBCA provides that the shareholders of a corporation may by ordinary resolution at an annual or special meeting remove any director or directors from office. An ordinary resolution under the OBCA requires the resolution to be passed, with or without amendment, at the meeting by at least a majority of the votes cast. The OBCA further provides that where the holders of any class or series of shares of a corporation have an exclusive right to elect one or more directors, a director so elected may only be removed by an ordinary resolution at a meeting of the shareholders of that class or series.

The BCBCA provides that the shareholders of a corporation may remove one or more directors by a special resolution or, if the articles provide that a director may be removed by a resolution of the shareholders entitled to vote at general meetings passed by less than a special majority or may be removed by some other method, by the resolution or method specified in the articles. Barrick has formulated the proposed articles to ensure the continuity of the rights of Shareholders, and therefore, in the proposed articles Barrick has reduced this threshold to permit Shareholders to remove a director by ordinary resolution. If holders of a class or series of shares have the exclusive right to elect or appoint one or more directors, a director so elected or appointed may only be removed by a special separate resolution of the shareholders of that class or series or, if the articles provide that such a director may be removed by a separate resolution of those shareholders passed by a majority of votes that is less than the majority of votes required to pass a special separate resolution or may be removed by some other method, by the resolution or method specified in the articles.

Appointment of Directors between Meetings

Pursuant to the OBCA, a quorum of directors may generally fill a vacancy among directors, except a vacancy resulting from (i) an increase in the number of directors or (ii) a failure to elect the number of directors required to be elected at any meeting of shareholders. Notwithstanding the foregoing, where a special resolution of shareholders has been passed that empowers the directors of a corporation to determine the number of directors, the directors may, between meetings of shareholders, appoint additional directors if, after such appointment, the total number of directors would not be greater than one and one-third times the number of directors required to have been elected at the last annual meeting of shareholders.

Pursuant to the BCBCA, if a corporation’s articles so provide, the directors may appoint one or more additional directors, provided that the number of additional directors so appointed may not exceed one-third of the number of the current directors who were elected or appointed (excluding any such additional directors). Where a quorum of directors exists, the remaining directors are generally entitled to fill a casual vacancy on the board.

Restrictions on Share Transfers

Under the OBCA, only certain limited restrictions on the transfer of shares are permitted if the corporation offers its shares to the public.

The BCBCA does not prohibit share transfer restrictions.

Solvency – Dividends, Repurchases and Redemptions

Under the OBCA, a corporation may not pay dividends or purchase or redeem its shares if there are reasonable grounds for believing (i) it is or would be unable to pay its liabilities as they become due; or (ii) it would not meet a net asset solvency test. The net asset solvency tests for different purposes vary somewhat.

Under the BCBCA, a corporation may not declare or pay dividends or purchase or redeem its shares if there are reasonable grounds for believing that the corporation is insolvent or the action would render the corporation insolvent. Insolvent is defined to mean that a corporation is unable to pay its debts as they become due in the ordinary course of its business. Unlike the OBCA, the BCBCA does not impose a net asset solvency test for these purposes.

 

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Reduction of Capital

Under the OBCA, capital may be reduced by special resolution of shareholders but not if there are reasonable grounds for believing that, after the reduction, (i) the corporation would be unable to pay its liabilities as they become due; or (ii) the realizable value of the corporation’s assets would be less than the aggregate of its liabilities.

Under the BCBCA, capital may be reduced by special resolution of shareholders or court order. A court order is required if the realizable value of the corporation’s assets would, after the reduction of capital, be less than the aggregate of its liabilities.

Compulsory Acquisition

The OBCA provides a right of compulsory acquisition for an offeror that acquires 90% of the target securities pursuant to a take-over bid or issuer bid, other than securities held at the date of the bid by or on behalf of the offeror. The OBCA also provides that where an offeror acquires 90% or more of the target securities, a security holder who did not accept the original offer may require the corporation to acquire the security holder’s securities in accordance with the procedure set out in the OBCA.

The BCBCA provides a substantively similar right, although the BCBCA is limited in its application to the acquisition of shares and there are differences in the procedures and process. The BCBCA provides that where an offeror does not use the compulsory acquisition right when entitled to do so, a shareholder who did not accept the original offer may require the offeror to acquire the shareholder’s shares on the same terms contained in the original offer.

Investigation/Appointment of Inspectors

Under the OBCA, shareholders can apply to the court for the appointment of an inspector to conduct an investigation of the corporation where (i) the business of the corporation or any of its affiliates is or has been carried on with intent to defraud any person; (ii) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted, or the powers of the directors are or have been exercised, in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards, the interests of a security holder; (iii) the corporation or any of its affiliates was formed for a fraudulent or unlawful purpose or is to be dissolved for a fraudulent or unlawful purpose; or (iv) persons concerned with the formation, business or affairs of the corporation or any of its affiliates have in connection therewith acted fraudulently or dishonestly. Unlike the BCBCA, the OBCA does not require an applicant to hold a specified number of shares.

Under the BCBCA, a corporation may by special resolution, appoint an inspector to conduct an investigation of the affairs and management of the corporation and to report in the manner and to the persons the resolution directs. Shareholders holding, in the aggregate, at least 20% of the issued shares of a corporation may apply to the court for the appointment of an inspector. The court must consider whether there are reasonable grounds for believing that (i) the affairs of the corporation are being or have been conducted, or the powers of the directors are being or have been exercised, in a manner that is oppressive or unfairly prejudicial to one or more shareholders; (ii) the business of the corporation is being or has been carried on with intent to defraud any person; (iii) the corporation was formed for a fraudulent or unlawful purpose or is to be dissolved for a fraudulent or unlawful purpose; or (iv) persons concerned with the formation, business or affairs of the corporation have, in connection with it, acted fraudulently or dishonestly.

Comparison of Barrick’s Existing Articles and By-Laws and the Proposed Articles

The articles of Barrick proposed to be adopted in connection with the Continuance are substantially analogous to the articles and by-laws of Barrick in force today. The proposed articles have been prepared with a view to corporate governance best practices under the BCBCA, the articles of certain large British Columbia incorporated public corporations and continuity of rights of Shareholders. It is customary under the BCBCA to not duplicate in the articles provisions of applicable law contained in such legislation, which results in the articles of British Columbia corporations being less duplicative than the by-laws of corporations existing under the OBCA. The omission of certain provisions of the current Barrick by-laws from the proposed articles as a result of such matters being governed by the provisions of the BCBCA will not materially affect the substantive rights of Shareholders or the procedural aspects of the Barrick by-laws, except to the extent described below or as a result of the differences in the BCBCA and the OBCA, as discussed above under “– Corporate Law Differences”.

Set out below is a summary of the key differences between the Barrick articles and by-laws, as they exist today, and the provisions of the proposed articles. The proposed articles are attached as “Schedule K: Proposed Articles”. Barrick’s current articles and by-laws can be found on its website at www.barrick.com. Shareholders are urged to review all such documents before determining whether to vote in favour of the Continuance Resolution. The summary of the provisions of such documents included below is qualified in its entirety by the complete text of such documents.

Advance Notice of Director Nominations

Barrick’s existing by-laws set out advance notice requirements for director nominations. Among other things, the by-laws fix a deadline by which Shareholders must notify Barrick of their intention to nominate directors and sets out the information that Shareholders must provide in the notice for it to be valid. These requirements are intended to provide all Shareholders with the opportunity to evaluate and review all proposed nominees and vote in an informed and timely manner regarding those nominees.

 

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After the Continuance, these advance notice requirements will be incorporated directly into Barrick’s new articles. These requirements will be substantially the same as the existing requirements, except for amendments made to reflect current Canadian proxy voting guidelines established by proxy advisory firms and the rules of the TSX. For example, under the existing by-laws, the nomination window is not affected by a postponement or adjournment of the relevant meeting, but under Barrick’s new articles, the nomination window will be extended by any such postponement or adjournment. In addition, under the new articles, the information that Barrick can require a proposed nominee or nominator to provide is more limited. Barrick will generally be restricted to receiving only the information that a proposed nominee or nominator would be required to include in a dissident proxy circular under applicable Canadian securities laws.

Amendments to Articles

Under the OBCA, a corporation’s articles are amended by a special resolution approved by two-thirds of the votes cast by shareholders on the resolution, while the corporation’s by-laws are amended by ordinary resolution. Because of the dual nature of articles under the BCBCA, which contain provisions from both the articles and by-laws of an OBCA corporation, it is customary for the approval requirements for amendments to articles under the BCBCA to be bifurcated into special resolutions for certain matters (i.e., fundamental changes to the corporation), and ordinary resolutions for other matters (e.g., procedural matters that would be regulated under the by-laws of an OBCA corporation, such as advance notice requirements for director nominations). Consistent with other public companies, and to ensure continuity of the rights of Shareholders, Barrick has adopted this bifurcated approach to Shareholder approval thresholds for amendments in the proposed articles.

Share Capital

Barrick currently has three classes of authorized capital, being Common Shares, First Preferred Shares and Second Preferred Shares. Since no shares of any class or series of First Preferred Shares or Second Preferred Shares are outstanding, in order to simplify Barrick’s authorized share capital, following the Continuance, Barrick’s notice of articles will provide for only one class of shares comprised of an unlimited number of Common Shares.

Shareholder Meetings

The existing Barrick by-laws replicate the provisions in the OBCA related to the fixing of record dates and giving of notice in connection with Shareholder meetings. Currently, if Barrick fixes a record date for a Shareholder meeting, the meeting cannot be held for a minimum of 30 days after the record date for the meeting. Under the BCBCA, Barrick will be permitted to convene a Shareholder meeting a minimum of 21 days after the record date for such meeting.

Dissent Right of Shareholders

A Registered Shareholder is entitled to dissent from the Continuance Resolution in the manner provided in Section 185 of the OBCA. Section 185 of the OBCA is reprinted in its entirety in Schedule H to this Circular. Set out in “Schedule C: Dissent Procedures” is a summary of the dissent procedure.

 

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Risk Factors

In assessing the Merger, Shareholders should carefully consider the risks described below which relate to the Merger, the failure to complete the Merger and the post-Merger business and operations of Barrick and Randgold. Shareholders should also carefully consider the additional risks described under the heading “Risk Factors” in Barrick’s latest annual information form. In addition, Shareholders should carefully consider the risk factors which relate to Randgold under the heading “Risk Factors” in the Randgold 20-F and under the heading “Principal Risk Factors and Uncertainties” in the Randgold Interim Report, each of which is incorporated herein by reference. Readers are cautioned that such risk factors are not exhaustive and additional risks and uncertainties, including those currently unknown or considered immaterial to Barrick may also adversely affect Barrick or Randgold prior to the Merger, or the combined business of Barrick and Randgold following the Merger.

Risk Factors Relating to the Merger

The Merger is subject to satisfaction or waiver of several conditions

The Merger is conditional upon, among other things, approval of the Share Issuance Resolution by Shareholders, approval of the Merger by Randgold Shareholders, and Barrick and Randgold having obtained all government or regulatory approvals required by law, policy or practice, including approval of the South African competition authorities. There can be no assurance that any or all such approvals will be obtained. A substantial delay in obtaining satisfactory approvals or the imposition of unfavourable terms or conditions in any government or regulatory approvals could have an adverse effect on the business, financial condition or results of operations of Barrick and Randgold.

It is also a condition of closing the Merger that the TSX and the NYSE shall have conditionally approved the listing of the Merger Shares, subject to official notice of issuance and the satisfaction of customary conditions required by such exchanges. Barrick has applied to the TSX and the NYSE to list the Merger Shares issuable under the Merger and has received conditional approval from the TSX. Receipt of listing approval of the TSX and NYSE will be conditional on the approval by Shareholders of the Share Issuance Resolution.

Barrick’s ability to invoke certain conditions of the Merger may be limited by the Takeover Code

The Cooperation Agreement includes a number of conditions in Barrick’s favour, including conditions that relate to the Scheme becoming unconditional and effective by no later than the Longstop Date (subject to the provisions of the Takeover Code), the approval of the Scheme and all resolutions required to implement the Scheme at the Jersey Court Meeting and Randgold Extraordinary General Meeting by the Randgold Shareholders, the sanction of the Scheme by the Jersey Court, the approval of the Share Issuance Resolution by the Shareholders, and the conditional listing of the Merger Shares on the TSX and the NYSE, as well as other conditions relating to events that may have a material impact on Barrick if the Merger is completed. The Panel imposes certain restrictions on the invocation of conditions to ensure that the relevant circumstances on which Barrick is seeking to rely are of material significance in the context of the Merger. In the event that Barrick determines that a condition in its favour has not been satisfied, there can be no assurance that the Panel will not attempt to restrict Barrick’s ability to invoke such condition.

The Cooperation Agreement may be terminated in certain circumstances

Each of Barrick and Randgold has the right to terminate the Cooperation Agreement in certain circumstances. Notwithstanding the termination of the Cooperation Agreement, Barrick will be required to implement the Merger without certain of the protections provided to it under the Cooperation Agreement unless the Merger lapses in accordance with the terms or the Panel consents otherwise.

Furthermore, even if the Cooperation Agreement is terminated, Barrick may proceed to attempt to acquire Randgold by way of a Takeover Offer without certain of the protections provided to it under the Cooperation Agreement, which offer may or may not be successful. Failure to complete the Merger could negatively impact the trading price of the Common Shares or otherwise adversely affect Barrick’s business.

The issuance of a significant number of Common Shares and a resulting “market overhang” could adversely affect the market price of Common Shares after completion of the Merger

On completion of the Merger, a significant number of additional Common Shares will be issued and available for trading in the public market. The increase in the number of Common Shares may lead to sales of such shares or the perception that such sales may occur (commonly referred to as “market overhang”), either of which may adversely affect the market for, and the market price of, Common Shares.

Barrick does not currently control Randgold and its subsidiaries

The Takeover Code prevents Randgold from entering into covenants regarding the operation of its business prior to Closing, though the Takeover Code does contain certain restrictions which would limit Randgold’s ability to undertake actions which could frustrate the Merger. Barrick will not control Randgold and its subsidiaries until completion of the Merger and the business and results of operations of Randgold may be adversely affected by events that are outside of Barrick’s control during the intervening period. Historic and current performance of Randgold’s business and operations may not be indicative of success in future periods. The future performance of Randgold may be influenced by, among other factors, economic downturns, changes in gold prices, political instability in the countries in which it operates, changes in applicable laws, expropriation, increased environmental regulation, turmoil in financial markets, unfavourable regulatory decisions, litigation, rising costs, labour unrest, difficulties with joint venture partners, delays in ongoing exploration and development projects and other factors beyond Barrick’s control. As a result of any

 

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one or more of these factors, among others, the operations and financial performance of Randgold may be negatively affected, which may adversely affect the future financial results of Barrick.

Barrick and Randgold will incur substantial transaction fees and costs in connection with the proposed Merger

Barrick and Randgold have incurred and expect to incur additional material non-recurring expenses in connection with the Merger and completion of the transactions contemplated by the Cooperation Agreement, including costs relating to obtaining required shareholder and regulatory approvals. Additional unanticipated costs may be incurred in the course of coordinating the businesses of Barrick and Randgold after completion of the Merger. Even if the Merger is not completed, Barrick and Randgold will need to pay certain costs relating to the Merger incurred prior to the date the Merger was abandoned, such as legal, accounting, financial advisory, proxy solicitation and printing fees. Such costs may be significant and could have an adverse effect on the parties’ future results of operations, cash flows and financial condition.

Break Payment may be payable by Barrick

If the Merger is not completed for any of the reasons discussed under the heading “The Merger – Cooperation Agreement – Break Payment”, Barrick will be required to make the Break Payment of $300 million to Randgold in connection with the termination of the Cooperation Agreement. If a Break Payment is ultimately required to be paid by Barrick to Randgold, the payment of such fee will have a significant adverse impact on the financial results of Barrick in the fiscal quarter in which such Break Payment is paid.

Randgold and Barrick may be the targets of legal claims, securities class action, derivative lawsuits and other claims

Randgold and Barrick may be the target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed. Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into an agreement to acquire a public company or to be acquired. Third parties may also attempt to bring claims against Barrick or Randgold seeking to restrain the Merger or seeking monetary compensation or other redress. SOKIMO, a DRC state-owned company which holds a 10% interest in the Kibali mine, has stated that it intends to “assert its rights” under the Kibali joint venture arrangements and the DRC Ministry of Mines has stated that the Merger requires approval by the DRC Government. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the Merger, then that injunction may delay or prevent the Merger from being completed.

Risk Factors on Completion of the Merger

Significant demands will be placed on Barrick and Randgold as a result of the Merger

As a result of the pursuit and completion of the Merger, significant demands will be placed on the managerial, operational and financial personnel and systems of Barrick and Randgold. Barrick and Randgold cannot provide any assurance that their systems, procedures and controls will be adequate to support the expansion of operations and associated increased costs and complexity following and resulting from the Merger. The future operating results of Barrick and the combined company will be affected by the ability of its officers and key employees to manage changing business conditions, to integrate the acquisition of Randgold, to implement a new business strategy and to improve its operational and financial controls and reporting systems.

The integration of Randgold may not occur as planned

The Merger has been agreed with the expectation that its completion will result in an increase in sustained profitability, cost savings and enhanced growth opportunities for Barrick. These anticipated benefits will depend in part on whether Randgold’s and Barrick’s operations can be integrated in an efficient and effective manner. Most operational and strategic decisions and certain staffing decisions with respect to integration have not yet been made. These decisions and the integration of the two companies will present challenges to management, including the integration of systems and personnel of the two companies which may be geographically separated, unanticipated liabilities, unanticipated costs, and the loss of key employees. The performance of Barrick’s operations after completion of the Merger could be adversely affected if Barrick cannot retain key employees to assist in the integration and operation of Randgold and Barrick. In addition, the integration process could result in diversion of the attention of management and disruption of existing relationships with suppliers, employees, customers and other constituencies of each company. As a result of these factors, it is possible that certain benefits expected from the combination of Randgold and Barrick may not be realized.

The new management team may not be successful in implementing the business strategy

Upon completion of the Merger, Mark Bristow will be appointed as the new President and Chief Executive Officer of Barrick and Graham Shuttleworth will be appointed as the new Senior Executive Vice President and Chief Financial Officer of Barrick. Kevin Thomson will remain the Senior Executive Vice President, Strategic Matters of Barrick. The remainder of the management team of Barrick will be drawn from the combined talents of Randgold and Barrick. Following completion of the Merger, the management team will be tasked with implementing a business plan that would focus on asset quality, operational excellence and sustainable profitability as further set out under “Barrick Following the Merger”. There can be no assurance that the new management team will be successful in implementing the business strategy or that past results of the Randgold management team will be reproduced by the new Barrick management team. The management team may experience difficulties in effecting key strategic goals such as the growth and investment in Tier One Gold Assets and Strategic Assets, the sale of Non-Core Assets or the development of exploration projects. The performance of Barrick’s operations after completion of the Merger could be adversely affected if the new Barrick

 

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management team cannot implement the stated business strategy effectively and certain benefits expected from the combination of Randgold and Barrick may not be realized.

Political risks in new jurisdictions

Randgold’s principal operations, development and exploration activities are held in Côte d’Ivoire, Mali, the DRC and Senegal, which may be considered to have an increased degree of political and sovereign risk. Any material adverse changes in government policies or legislation of Côte d’Ivoire, Mali, the DRC or any other country that Randgold has economic interests in that affect mining or mineral exploration activities, may affect the viability and profitability of Barrick following the Merger.

While the governments in Côte d’Ivoire, Mali and the DRC and in other African countries in which Randgold has mining operations or development or exploration projects have historically supported the development of natural resources by foreign companies, there is no assurance that such governments will not in the future adopt different regulations policies or interpretations with respect to, but not limited to, foreign ownership of mineral resources, royalty rates, taxation, rates of exchange, environmental protection, labour relations, repatriation of income or return of capital, restrictions on production or processing, price controls, export controls, currency remittance, or the obligations of Randgold under its respective mining codes and stability conventions. The possibility that such governments may adopt substantially different policies or interpretations, which might extend to the expropriation of assets, may have a material adverse effect on Barrick following the Merger. Political risk also includes the possibility of terrorism, civil or labour disturbances and political instability. No assurance can be given that applicable governments will not revoke or significantly alter the conditions of the applicable exploration and mining authorizations nor can assurance be given that such exploration and mining authorizations will not be challenged or impugned by third parties. The effect of any of these factors cannot be accurately predicted.

Increased foreign exchange exposure may adversely affect Barrick’s earnings and the value of some of Barrick’s assets

Barrick’s reporting currency is the US dollar and the majority of its earnings and cash flows are denominated in US dollars. The operations of Randgold are also conducted in US dollars, but Randgold carries on some of its business in currencies other than the US dollar and, as a result, following the Merger, Barrick’s consolidated earnings and cash flows may be impacted by movements in the exchange rates to a greater extent than prior to the Merger. In particular, any change in the value of the currencies of Mali, the DRC, Côte d’Ivoire or Senegal versus the US dollar following the Merger could negatively impact Barrick’s earnings, and could negatively impact Barrick’s ability to realize all of the anticipated benefits of the Merger. Any such negative impact could be material.

The unaudited pro forma consolidated financial information of Barrick and Randgold is presented for illustrative purposes only and may not be indicative of the results of operations or financial condition of Barrick following the Merger

The unaudited pro forma consolidated financial statements included in this Circular are presented for illustrative purposes only to show the effect of the Merger, and should not be considered to be an indication of the financial condition or results of operations of Barrick following the Merger. For example, the pro forma consolidated financial statements have been prepared using the consolidated historical financial statements of Barrick and of Randgold and do not represent a financial forecast or projection. In addition, the pro forma consolidated financial statements included in this Circular are based in part on certain assumptions regarding the Merger. These assumptions may not prove to be accurate, and other factors may affect Barrick’s results of operations or financial condition following the Merger. Accordingly, the historical and pro forma consolidated financial information included in this Circular does not necessarily represent Barrick’s results of operations and financial condition had Barrick and Randgold operated as a combined entity during the periods presented, or of Barrick’s results of operations and financial condition following the Merger.

In preparing the pro forma consolidated financial information contained in this Circular, Barrick has given effect to, among other items, the completion of the Merger and the issuance of the Merger Shares. The unaudited pro forma consolidated financial information does not reflect all of the costs that are expected to be incurred by Barrick in connection with the Merger. For example, the impact of any incremental costs incurred in integrating Barrick and Randgold is not reflected in the pro forma consolidated financial information. In addition, while an amount has been recorded for land transfer tax in Zambia, no amounts have been recorded for any additional transaction taxes that may become payable in Randgold’s operating jurisdictions. See also the notes to the unaudited pro forma consolidated financial statements of Barrick and Randgold included in “Schedule I: Pro Forma Financial Information”.

New legislation and tax risks in certain Randgold operating jurisdictions

Randgold has operations and conducts business in a number of new jurisdictions for Barrick and is subject to the taxation laws of these jurisdictions. These taxation laws are complex, subject to varying interpretations and applications by the relevant tax authorities and subject to changes and revisions in the ordinary course.

In 2018 the DRC government amended the 2002 Mining Code with an updated Mining Code and related regulations. The updated law and regulations include changes with respect to stability, royalty rates, income taxes, import and other duties, VAT, indirect capital gains taxes and local content. The application of these new provisions is the subject of continued discussions among the DRC government, industry groups and investors. As a result, significant uncertainty exists regarding the interpretation and application of these new provisions and their economic impact on Randgold. Although the Wider Randgold Group has stabilization protection for ten years in respect of a number of these new provisions, both pursuant to the Mining Code of 2002 and a separate declaration from the DRC Government containing stabilization protections, there can be no certainty that the DRC Government will not challenge such stabilization protections. Any unexpected taxes imposed on Barrick or the Wider

 

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Randgold Group could have a material and adverse impact on ongoing operations of Randgold subsidiaries or joint ventures located in the DRC or Barrick.

In Mali, the Randgold Group operates under mining conventions entered into with the Government of Mali. These mining conventions contain stabilization provisions to protect various members of the Randgold Group from adverse amendments to the Mali tax codes. The Mali tax code was amended in 2017 to, among other things, introduce indirect capital gains taxes. Although the Randgold Group has stabilization protection in respect of these provisions and the Mali tax authorities have not sought to apply these provisions in relation to Randgold, there can be no certainty that the Mali tax authorities will not seek to challenge such stabilization protection or refuse to extend such stabilization protection to persons beyond the Randgold Group. There are also further proposed amendments to Mali’s laws regarding the imposition of indirect capital gains taxes, which may provide relief from the imposition of the indirect capital gains tax in certain circumstances. However, these amendments may or may not come into force. There is significant uncertainty surrounding these provisions on indirect capital gains tax, including how the Mali government may seek to determine and attempt to collect any liability it sought to impose on persons outside Mali. Any unexpected taxes imposed on Barrick or the Wider Randgold Group could have a material and adverse impact on Barrick or Randgold.

The Relationship Agreement may impair the future growth of Barrick’s African gold operations following the Merger

The Relationship Agreement between Barrick and Acacia provides that neither Barrick nor its subsidiaries may pursue any gold or silver mining opportunity in Africa without first offering the opportunity to Acacia. Aside from any exploration projects of Randgold at the date of the Merger, following the Merger, the entire Barrick Group (including Randgold) will be restricted from carrying on new exploration for gold or silver in Africa or from acquiring any business or interest in an African gold or silver mining business without first offering the opportunity to Acacia. As a result, the Relationship Agreement may impair the ability of Barrick to expand its gold and silver mining operations in Africa following the Merger.

Failure by Randgold to comply with applicable laws prior to the Merger could subject Barrick to penalties and other adverse consequences following the Merger

Barrick is subject to the provisions of the US Foreign Corrupt Practices Act and the Corruption of Foreign Public Officials Act (Canada). Randgold is subject to the US Foreign Corrupt Practices Act, the Corruption (Jersey) Law and the UK Bribery Act. The foregoing laws prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. In addition, such laws require the maintenance of records relating to transactions and an adequate system of internal controls over accounting. There can be no assurance that either party’s internal control policies and procedures, compliance mechanisms or monitoring programs will protect it from recklessness, fraudulent behaviour, dishonesty or other inappropriate acts or adequately prevent or detect possible violations under applicable anti-bribery and anti-corruption legislation. Following the Merger, Barrick may be responsible for any liability in respect of any of the foregoing attributable to Randgold prior to the Merger. A failure by Barrick or Randgold to comply with anti-bribery and anti-corruption legislation could result in severe criminal or civil sanctions, and may subject the Barrick Group to other liabilities, including fines, prosecution, potential debarment from public procurement and reputational damage, all of which could have a material adverse effect on the business, consolidated results of operations and consolidated financial condition of Barrick following the Merger. Investigations by governmental authorities could have a material adverse effect on the business, consolidated results of operations, and consolidated financial condition of Barrick following the Merger.

Randgold is also subject to a wide variety of laws relating to the environment, health and safety, employment, labour standards, money laundering, terrorist financing and other matters in the jurisdictions in which it operates. A failure by Randgold to comply with any such legislation prior to the Merger could result in severe criminal or civil sanctions, and may subject the Barrick Group to other liabilities, including fines, prosecution and reputational damage, all of which could have a material adverse effect on the business, consolidated results of operations and consolidated financial condition of Barrick following the Merger. The compliance mechanisms and monitoring programs adopted and implemented by Randgold prior to the Merger may not adequately prevent or detect possible violations of such applicable laws. Investigations by governmental authorities could also have a material adverse effect on the business, consolidated results of operations, and consolidated financial condition of Barrick following the Merger. The risks of legal non-compliance by Randgold prior to the Merger are addressed in more detail under the heading “Risk Factors” in the Randgold 20-F and under the heading “Principal Risk Factors and Uncertainties” in the Randgold Interim Report.

 

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Other Information

Interest of Informed Persons in Material Transactions

Since January 1, 2017, no director or officer of Barrick or any associate or affiliate of any such person, has or had any material interest, direct or indirect, in any transaction or any arrangement which has materially affected or will materially affect Barrick or any of its subsidiaries.

Interest of Informed Persons in Matters to be Acted Upon

Other than as set forth in this Circular, no director or officer of Barrick or any associate or affiliate of any such person, has or had any material interest, direct or indirect, in any matter to be acted on at the Meeting, except for any interest arising from the ownership of Common Shares where the Shareholder will receive no extra or special benefit or advantage not shared on a pro rata basis by all holders of Common Shares.

The TSX Manual and applicable Canadian securities laws provide in certain instances that certain insiders or related parties are not entitled to vote on transactions that are required to be approved by a company’s security holders. To the knowledge of the directors and executive officers of Barrick, after reasonable inquiry, no votes attached to the Common Shares will be excluded in determining whether Shareholder approval of the Share Issuance Resolution has been obtained.

Auditors

The auditors of Barrick are PricewaterhouseCoopers LLP, located in Toronto, Ontario, Canada.

The auditors of Randgold are BDO LLP, located in London, England. BDO LLP has audited the financial statements of Randgold incorporated by reference in this Circular. BDO LLP, certified public accountants, are independent with respect to Randgold within the meaning of the Securities Act, and the applicable rules and regulations thereunder adopted by the SEC and the Public Company Accounting Oversight Board (United States).

Interests of Experts

Each of M. Klein and Co. and Morgan Stanley is named as having prepared or certified a report, statement or opinion in this Circular, specifically their respective fairness opinions. See “The Merger – Fairness Opinions”. Except as noted below and except for the fees to be paid to the financial advisors, a substantial portion of which is contingent on completion of the Merger, to the knowledge of Barrick, none of the financial advisors, the directors, officers, employees and partners, as applicable, or their respective associates or affiliates, beneficially owns, directly or indirectly, 1% or more of the securities of Barrick or any of its associates or affiliates, has received or will receive any direct or indirect interests in the property of Barrick or any of its associates or affiliates, or is expected to be elected, appointed or employed as a director, officer or employee of Barrick or any associate or affiliate thereof. Morgan Stanley, as of October 2, 2018, holds approximately 1.9% of the Common Shares and approximately 1.2% of the common shares of Acacia.

See also “Information in this Circular – Scientific and Technical Information”.

Directors’ and Officers’ Insurance and Indemnification

During 2018, we purchased insurance for the benefit of our directors and officers, and those of our subsidiaries, against liabilities incurred by them in their capacity as directors and officers, subject to certain limitations contained in the OBCA. The premium for such insurance was $4.2 million. The policy provides coverage to each director and officer of $260 million in the policy year from July 12, 2018 to July 12, 2019.

In accordance with the provisions of the OBCA, our by-laws provide that we will indemnify a director or officer, a former director or officer, or another individual who acts or acted at the Company’s request as a director or officer (or in a similar capacity) of another entity against all costs, charges, and expenses, including amounts paid to settle an action or to satisfy a judgment reasonably incurred in respect of any civil, criminal, administrative, investigative, or other proceeding in which the individual is involved because of the association with the Company or other entity if the individual acted honestly and in good faith with a view to the best interests of the Company or, as the case may be, to the best interests of the other entity for which the individual acted as a director or officer (or in a similar capacity) at the Company’s request. If we become liable under the terms of our by-laws, our insurance coverage will extend to our liability; however, each claim will be subject to a deductible of $2.5 million or $5 million, depending on the nature of the claim.

Responsibility Statement Required by the Takeover Code

The directors of Barrick and Catherine Raw (in her capacity as Chief Financial Officer of Barrick) (collectively, the Responsible Persons) each accept responsibility for the information contained in this document relating to Barrick, the Barrick Responsible Persons and their immediate families and related trusts. To the best of the knowledge and belief of the Responsible Persons (who have taken all reasonable care to ensure that such is the

 

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case), the information contained in this document for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information.

Use of Non-GAAP Financial Performance Measures

This Circular refers to “Adjusted EBITDA”, “Adjusted EBITDA margin”, “highest Adjusted EBITDA”, “highest Adjusted EBITDA margin”, “highest return on capital”, “lowest gross debt to Adjusted EBITDA ratio”, “lowest total cash cost”, “total cash costs”, and “total cash costs per ounce”, each of which is a non-GAAP financial performance measure without a standard meaning under IFRS. These measures may therefore not be comparable to similar measures presented by other companies. Where a component of the aggregated non-GAAP financial performance measure has been previously reported by Barrick or Randgold, we have included details regarding the manner in which such non-GAAP financial performance measures have been aggregated for purposes of this Circular, as well as reconciliations to the most directly comparable measures under IFRS.

Adjusted EBITDA

EBITDA is a non-GAAP financial performance measure, which excludes the following from net earnings: (i) income tax expense; (ii) finance costs; (iii) finance income; and (iv) depreciation. Barrick and Randgold believe that EBITDA is a valuable indicator of their ability to generate liquidity by producing operating cash flow to fund working capital needs, service debt obligations, and fund capital expenditures. Barrick and Randgold use EBITDA for this purpose. EBITDA is also frequently used by investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or “EBITDA multiple” that is based on an observed or inferred relationship between EBITDA and market values to determine the approximate total enterprise value of a company.

Barrick also reports Adjusted EBITDA which removes the effect of impairment charges; acquisition/disposition gains/losses; foreign currency translation gains/losses; other expense adjustments; and unrealized gains on non-hedge derivative instruments. Barrick believes these items provide a greater level of consistency with the adjusting items included in Barrick’s adjusted net earnings reconciliation, with the exception that these amounts are adjusted to remove any impact on finance costs/income, income tax expense and/or depreciation as they do not affect EBITDA. Barrick and Randgold believe this additional information will assist analysts, investors and other stakeholders in better understanding Barrick’s ability post-Merger to generate liquidity from operating cash flow, by excluding these amounts from the calculation as they are not indicative of the performance of its core mining business and not necessarily reflective of the underlying operating results for the periods presented.

EBITDA and Adjusted EBITDA are intended to provide additional information to investors and analysts and do not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA and Adjusted EBITDA exclude the impact of cash costs of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA and Adjusted EBITDA differently.

Set out below is a reconciliation of Barrick and Randgold Adjusted EBITDA to net earnings of each of Barrick and Randgold, respectively:

 

Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA  
  ($ millions)    For the year ended December 31, 2017  
      Barrick1      Randgold2      Combined  

  Net earnings (loss)

     $1,516        $335        $1,851  

Income tax expense

     1,231        146        1,377  

Finance costs, net

     624        (3)        621  

Depreciation

     1,647        183        1,830  

  EBITDA

     $5,018        $661        $5,679  

  Impairment charges (reversals) of long-lived assets

     (212)        -        (212)  

  Merger/disposition (gains)/losses

     (911)        -        (911)  

  Foreign currency translation (gains)/losses

     72        (10)        62  

  Other expense adjustments

     51        -        51  

  Unrealized gains on non-hedge derivative instruments

     (1)        -        (1)  

  Adjusted EBITDA

     $4,017        $651        $4,668  

 

1

Barrick’s EBITDA and Adjusted EBITDA figures can be found on page 82 of the MD&A accompanying the Barrick financial statements for the year ended December 31, 2017.

2

Randgold’s EBITDA and Adjusted EBITDA figures are calculated using figures from the Consolidated Statement of Comprehensive Income on page F-2 and note 20 on page F-37 of the Randgold 20-F. The Randgold foreign currency translation gain is set out on page 3 of the Randgold report for the fourth quarter and year ended December 31, 2017.

 

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Adjusted EBITDA Margin

Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by revenue. Barrick and Randgold use Adjusted EBITDA margin because they believe that this non-GAAP financial performance measure is an important indicator of recurring operations, as it excludes items that may not be indicative of, or are unrelated to, their core operating results, and provides a measure of profitability. Adjusted EBITDA margin is a non-GAAP financial performance measure with no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Set out below is a calculation of Adjusted EBITDA Margin for each of Barrick and Randgold:

 

Calculation of Adjusted EBITDA Margin  
  ($ millions)    For the year ended December 31, 2017  
      Barrick1      Randgold2      Combined  

  Revenue

     $8,374        $1,280        $9,654  

  Adjusted EBITDA

     $4,017        $651        $4,668  

  Adjusted EBITDA Margin

                       48%  

 

1

Barrick’s revenue can be found on page 42 of the MD&A accompanying the Barrick financial statements for the year ended December 31, 2017 and Adjusted EBITDA for the year ended December 31, 2017 is calculated above.

2

Randgold’s revenue can be found on page F-2 of the Randgold 20-F and the Adjusted EBITDA figure for the year ended December 31, 2017 is calculated above.

Total Cash Costs and Total Cash Costs Per Ounce

Randgold uses the term “total cash costs”, which is a non-GAAP financial performance measure, calculated using guidance issued by the Gold Institute. The Gold Institute was a non-profit industry association comprising leading gold producers, refiners, bullion suppliers and manufacturers. This institute has now been incorporated into the National Mining Association. The guidance was first issued in 1996 and revised in November 1999. Total cash costs, as defined in the Gold Institute’s guidance, include mine production, transport and refinery costs, general and administrative costs, movement in production inventories and ore stockpiles, and royalties. Total cash costs exclude costs associated with capitalized stripping activities.

Total cash costs are calculated on a consistent basis for the periods presented. Total cash costs should not be considered by investors as an alternative to operating profit or net profit attributable to shareholders, as an alternative to other IFRS measures. The data does not have a meaning prescribed by IFRS and therefore amounts presented may not be comparable to data presented by gold producers who do not follow the guidance provided by the Gold Institute. In particular depreciation and amortization would be included in a measure of total costs of producing gold under IFRS, but are not included in total cash costs under the guidance provided by the Gold Institute. Furthermore, while the Gold Institute has provided a definition for the calculation of total cash costs, the calculation of these numbers may vary from company to company and may not be comparable to other similarly titled measures of other companies. However, Barrick and Randgold believe that total cash costs is a useful indicator to investors and management of a mining company’s performance as it provides an indication of a company’s profitability and efficiency, the trends in cash costs as the company’s operations mature, and a benchmark of performance to allow for comparison against other companies.

Below is a reconciliation of Randgold’s total cash costs to the most directly comparable IFRS measure.

 

Reconciliation of Randgold’s Total Cash Costs and Total Cash Costs Per Ounce to Gold Sales  
  ($ millions)    For the year ended December 31, 2017  
          

  Gold sales per IFRS

     $1,280  

  Gold sales adjustments for joint ventures

     $374  

  Gold sales

     1,654  

  Mine production costs

     474  

  Movement in production inventory and ore stockpiles

     (12)  

  Royalties

     82  

  Royalty adjustment for joint ventures

     (16)  

  Total royalties

     66  

  Other mining and processing costs

     63  

  Cash cost adjustments for joint ventures

     225  

  Total cash costs

     $815  
          

  Consolidated ounces sold (000s)

     1,315  

  Total cash costs per ounce

     $620  

Barrick uses the term “cash costs per ounce” for the most comparable measure to “total cash costs”. Cash costs per ounce is a non-GAAP financial performance measure which is calculated based on the definition published by the World Gold Council (WGC) (a market development organization for the gold industry comprised of and funded by 24 gold mining companies from around the world, including Barrick). The WGC is not a regulatory organization. Barrick uses this measure to monitor the performance of its gold mining operations and its ability to generate positive cash flow, both on an individual site basis and an overall company basis.

Cash costs start with Barrick’s cost of sales related to gold production and removes depreciation, the non-controlling interest of cost of sales and includes by-product credits. Barrick believes that its use of cash costs will assist analysts, investors and other stakeholders of Barrick in understanding

 

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the costs associated with producing gold, understanding the economics of gold mining, assessing its operating performance and also its ability to generate free cash flow from current operations and to generate free cash flow on an overall company basis. Due to the capital-intensive nature of the industry and the long useful lives over which these items are depreciated, there can be a significant timing difference between net earnings calculated in accordance with IFRS and the amount of free cash flow that is being generated by a mine and therefore Barrick believes this measure is a useful non-GAAP operating metric and supplements its IFRS disclosure. This measure is not representative of all of Barrick’s cash expenditures as it does not include income tax payments, interest costs or dividend payments. This measure does not include depreciation or amortization.

Cash costs per ounce is intended to provide additional information only and does not have a standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. This measure is not equivalent to net income or cash flow from operations as determined under IFRS. Although the WGC has published a standardized definition, other companies may calculate this measure differently.

Below is a reconciliation of Barrick’s cash costs per ounce to the most directly comparable IFRS measure:

 

Reconciliation of Barrick’s Cash Costs per Ounce  
  ($ millions)    For the year ended December 31, 2017  
          

  Cost of sales related to gold production

     $4,836  

  Depreciation

     (1,529)  

  By-product credits

     (135)  

  Realized (gains)/losses on hedge and non-hedge derivatives

     23  

  Non-recurring items

     -  

  Other (Pierina COS)

     (106)  

  Non-controlling interests (Pueblo Viejo and Acacia)

     (299)  

  Cash costs

     $2,790  
          

  Ounces sold - attributable basis (000s)

     5,302  

  Cash costs per ounce

     $526  

For the purposes of presenting a combined total cash costs figure for Barrick post-Merger, a reconciliation of Barrick’s cash costs per ounce to total cash costs was undertaken. The reconciliation calculation is set out below.

 

Reconciliation of Barrick’s Cash Costs to Total Cash Costs and Calculation of Total Cash Costs and Total Cash Costs Per Ounce  
  ($ millions)    For the year ended December 31, 2017  
          

  Barrick’s cash costs1

     $2,790  

  Add back Barrick non-controlling interest

     299  

  Barrick’s total cash costs

     $3,089  

  Randgold’s total cash costs2

     815  

  Combined total cash costs

     $3,904  
          

  Barrick ounces sold – (attributable basis)1 (000s)

     5,302  

  Add back Barrick non-controlling interest ounces sold3 (000s)

     639  

  Barrick consolidated ounces sold (000s)

     5,941  

  Randgold consolidated ounces sold2 (000s)

     1,315  

  Combined consolidated ounces sold

     7,256  

  Combined total cash cost per ounce4

     $538  

 

1

Barrick reports cash costs per ounce. See the table above for a full reconciliation of cash costs per ounce to the most directly comparable IFRS measure. Barrick cash costs per ounce are reported on an attributable ounce basis whereas Randgold reports total cash costs on a consolidated ounce basis. In order to convert Barrick’s cash costs to total cash costs, the cash costs have been grossed up to include the non-controlling interest portion of costs and ounces for Barrick’s non-wholly owned subsidiaries.

2

Randgold reports total cash costs. See the table above for a full reconciliation of total cash costs to the most directly comparable IFRS measure.

3

Ounces attributable to non-controlling interests at Pueblo Viejo and Acacia calculated assuming non-controlling interest of 40% at Pueblo Viejo and 36.1% at Acacia according to page 79 of the MD&A accompanying the Barrick financial statements for the year ended December 31, 2017. Ounces attributable to Barrick can be found on page 76 of the MD&A accompanying the Barrick financial statements for the year ended December 31, 2017.

4

The combined total cash costs per ounce is calculated by taking the combined total cash costs and dividing such figure by the combined ounces sold.

Comparative Measures Based on Third Party Data

Highest Adjusted EBITDA and Highest Adjusted EBITDA Margin

These non-GAAP financial performance measures are based on data from Factset as of August 31, 2018 with no standardized meaning under IFRS, and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Factset which may not be calculated in the same manner as Barrick and Randgold

 

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calculate comparable measures. See “– Use of Non-GAAP Financial Performance Measures – Adjusted EBITDA and “– Use of Non-GAAP Financial Performance Measures – Adjusted EBITDA Margin above for an explanation of why we have used these measures.

Highest Return on Capital

This non-GAAP financial performance measure is based on data from Bloomberg as of August 31, 2018 with no standardized meaning under IFRS, and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Bloomberg which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. This measure is typically used by investors and equity research analysts in the mining industry to provide a closer like-for-like comparison of the financial performance of market participants than using IFRS measures such as profit before tax, as it takes into account the return on both debt and equity invested, net of cash. Barrick uses “return on capital” because it believes that this non-GAAP financial performance measure is an important indicator of its long-term ability to generate a return on capital and provide useful information for analyzing the prospects of their business.

Lowest Gross Debt to Adjusted EBITDA Ratio

This non-GAAP financial performance measure is based on data from Factset (as of June 30, 2018 for gross debt and as of August 31, 2018 for Adjusted EBITDA) with no standardized meaning under IFRS, and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Factset which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. Barrick uses “gross debt to Adjusted EBITDA ratio” because it believes that this non-GAAP financial performance measure is an important indicator of a company’s capital structure and balance sheet strength relative to the profitability of its business.

Lowest Total Cash Cost

This non-GAAP financial performance measure is based on data from Wood Mackenzie as of August 31, 2018 with no standardized meaning under IFRS, and therefore may not be comparable to similar measures presented by other companies. Financial comparisons between Barrick post-Merger and its Senior Gold Peers are made on the basis of the data presented by Wood Mackenzie which may not be calculated in the same manner as Barrick and Randgold calculate comparable measures. See “– Use of Non-GAAP Financial Performance Measures – Total Cash Costs and Total Cash Costs Per Ounce above for an explanation of why we have used this measure.

 

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